10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

(Mark One)

þ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for quarterly period ended
March 31, 2015.

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

Commission file number:   000-54457

ADVANCED CANNABIS SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

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

6565 East Evans Avenue

Denver, CO 80224

(Address of principal executive offices) (Zip Code)

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

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

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

Large accelerated filer  o	Accelerated filer     o
Non-accelerated filer    o	Smaller reporting company     þ

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

As of May 15, 2015, there were 14,458,002 issued and outstanding shares of the Company’s common stock.

ADVANCED CANNABIS SOLUTIONS, INC.

FORM 10-Q

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION		Page
Item 1.	Financial Statements	3
	Condensed consolidated balance sheets	3
	Condensed consolidated unaudited statements of operations	4
	Condensed consolidated unaudited statements of cash flows	5
	Notes to condensed consolidated unaudited financial statements	6-22
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	28
Item 4.	Controls and Procedures	28
PART II. OTHER INFORMATION		30
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Mine Safety Disclosures	30
Item 5.	Other Information	30
Item 6.	Exhibits	31
	Signatures	32

ADVANCED CANNABIS SOLUTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

		March 31, 2015		December 31, 2014
		(unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	99,688	$	165,536
Accounts receivable		17,381		18,319
Prepaid expenses and other current assets		49,206		22,402
Inventory		81,577		70,341
Total current assets		247,852		276,598
Property and equipment, net		1,716,476		1,707,410
Intangible assets, net		1,400,000		-
Goodwill		487,000		-
Deferred financing costs, net		73,472		83,056
Total Assets	$	3,924,800	$	2,067,064
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accrued stock payable, current portion	$	1,496,000	$	385,917
Derivative liability		601,617		3,893,904
Related party line of credit		239,000		-
Accounts payable and accrued expenses		133,387		99,655
Deferred rental revenue		18,244		-
Convertible notes payable (net of debt discount), current portion		6,473		6,337
Total current liabilities		2,494,721		4,385,813
Convertible notes payable (net of debt discount), less current portion		997,173		1,055,797
Accrued stock payable, less current portion		221,000		138,125
Tenant deposits		8,854		8,854
Total Liabilities		3,721,748		5,588,589
Commitments and Contingencies				-
Stockholders' Equity (Deficiency)
Preferred stock, no par value; 5,000,000 share authorized; no shares issued and outstanding at March 31, 2015 and December 31, 2014		-		-
Common Stock, $0.001 par value; 100,000,000 shares authorized; 13,268,409 shares and 12,499,933 shares issued and outstanding on March 31, 2015 and December 31, 2014, respectively		13,268		12,500
Additional paid-in capital		8,659,378		4,107,076
Accumulated deficit		(8,469,594)		(7,641,101)
Total Stockholders' Equity (Deficiency)		203,052		(3,521,525)
Total Liabilities and Stockholders' Equity	$	3,924,800	$	2,067,064

See Notes to condensed consolidated unaudited financial statements.

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ADVANCED CANNABIS SOLUTIONS. INC.

CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS

		Three months ended March 31, 2015		Three months Ended March 31, 2014
REVENUES
Security services revenue	$	17,382	$	-
Cost of security services revenue		(14,137)		-
Security services revenue, net		3,245		-
Wholesale sales, net		12,798		-
Tenant rentals		26,677		28,765
Consulting revenue, net		-		20,000
Net revenues		42,720		48,765
OPERATING EXPENSES
General and administrative		82,941		54,476
Payroll and related		89,199		105,135
Share-based compensation		248,625		-
Professional fees		94,107		82,516
Office expense		13,264		7,689
Depreciation and amortization		9,007		3,116
Total operating expenses		537,143		252,932
OPERATING LOSS		(494,423)		(204,167)
OTHER (EXPENSE)
Amortization of debt discount and deferred financing costs		(242,630)		(304,841)
Interest expense		(69,207)		(49,274)
Loss on change in fair value of derivative liability		(22,233)		(647,640)
Total other (expense)		(334,070)		(1,001,755)
NET LOSS	$	(828,493)	$	(1,205,922)
PER SHARE DATA
Net loss per share – basic and diluted	$	(0.06)	$	(0.09)
Weighted average number of common shares outstanding - basic and diluted		13,095,465		13,659,997

See Notes to condensed consolidated unaudited financial statements.

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ADVANCED CANNABIS SOLUTIONS. INC.

CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS

		Three Months Ended March 31, 2015		Three Months Ended March 31, 2014
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net loss	$	(828,493)	$	(1,205,922)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities
Depreciation and amortization		9,007		3,116
Amortization of debt discount		233,046		304,841
Amortization of deferred financing costs		9,584		6,000
Gain (loss) on derivative liability, net		22,233		647,640
Issuance of common stock for services		248,625		-
Changes in operating assets and liabilities
(Increase) / decrease in accounts receivable		938		(65,624)
(Increase) in prepaid expenses and other assets		(26,804)		(7,304)
(Increase) in inventory		(11,236)		-
Increase (decrease) in accounts payable and accrued expenses		34,795		(12,730)
Increase in deferred rental revenue		18,244		-
Increase in tenant deposits		-		-
Net cash provided by (used in) operating activities		(290,061)		(329,983)
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchase of property and equipment		(13,253)		(8,250)
Net cash used in investing activities		(13,253)		(8,250)
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES
Increase in short-term financing with related party		239,000		-
Proceeds from sale of warrants, net		-		400,000
Principal repayment on convertible notes payable		(1,534)		(1,737)
Proceeds from issuance of convertible notes payable, net of cash expenses		-		1,412,400
Deferred financing costs		-		(15,000)
Net cash provided by financing activities		237,466		1,795,663
NET (DECREASE) INCREASE IN CASH		(65,848)		1,457,430
CASH, BEGINNING OF PERIOD		165,536		427,436
CASH, END OF PERIOD	$	99,688	$	1,884,866
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Cash paid for interest	$	46,938	$	46,476
Supplemental disclosure on non-cash financing activities*
Value of common stock and warrants issuable in acquisition of IPG	$	1,887,000	$	-
Non-cash financing costs	$	-	$	100,000
Convertible notes payable settled in stock	$	290,000	$	255,000
Interest on convertible notes payable settled in stock	$	1,063	$	3,669
Warrants issued in connection with debt recorded as debt discount	$	-	$	92,600
Issuance of common stock upon cashless conversion of warrants by Full Circle	$	3,314,520	$	-
Stock and warrants issued in satisfaction of accrued stock payable	$	109,667	$	-
Stock and warrants issued and capitalized into construction in progress	$	4,820	$	-

See Notes to condensed consolidated unaudited financial statements.

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ADVANCED CANNABIS SOLUTIONS, INC.

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014

1.   NATURE OF OPERATIONS, HISTORY AND PRESENTATION

Nature of Operations

Advanced Cannabis Solutions, Inc. (“ACS,” or the “Company,”), dba General Cannabis Corporation, was incorporated on June 3, 2013 (Inception) and provides products and services to the regulated cannabis industry.  The Company’s primary operations include real estate leasing, shared office space, networking and event services, security and cash management services, industry finance, and wholesale supply.

The Company’s real estate leasing business primarily includes the acquisition and leasing of cultivation space and related facilities to licensed marijuana growers and dispensary owners for their operations.  As of the date of this report, the Company owns one cultivation property that is located in a suburb of Pueblo, Colorado.  The property consists of approximately three acres of land, which includes a 5,000 square foot steel building, and parking lot. The property is zoned for cultivating cannabis and is leased to a medical cannabis grower until December 31, 2022 (the “Pueblo West Property”).

In October 2014, the Company purchased a former retail bank located at 6565 East Evans Avenue, Denver, Colorado 80224, which has been branded as The Greenhouse (“The Greenhouse”).  The building is a 16,056 square-foot facility which will be converted to serve as a leading shared workspace for entrepreneurs, professionals and others serving the cannabis industry.  Clients will be able to lease space to use as offices, meeting rooms, lecture, educational and networking facilities, and individual workstations.

In March 2015, the Company’s wholly owned subsidiary, GC Security, LLC (“GCS”), acquired substantially all of the assets of Iron Protection Group, LLC, a Colorado limited liability company (See Note 4).  GCS, which will continue to do business as “Iron Protection Group,” provides advanced security, including on-site professionals and video surveillance, to licensed cannabis cultivators and retail shops.

The Company leases cultivation equipment and facilities to customers in the cannabis industry. The Company expects it will enter into sale lease-back transactions of grow lights, tenant improvements and other grow equipment. The Company’s finance strategy will include providing customized finance, direct term loans and revolving lines of credit to businesses involved in the cultivation and sale of cannabis and related products.

The Company’s wholesale supply business, ACS Wholesale, is a reseller of supplies to the cannabis market. ACS Wholesale works with industry leaders and innovators to deliver high-quality products that are compliant with applicable regulations and with a focus on products that are manufactured in the United States.   ACS Wholesale operates out of a leased, 1,800 square-foot warehouse located in Colorado Springs, Colorado.

The Company delivers comprehensive consulting services that include design and construction to approved and licensed cannabis operators, as well as assistance with licensure and related applications for potential cannabis operators.  The Company’s business plan is based on the future growth of the regulated cannabis market in the United States. The Company will provide general advisory services for business development, facilities design and construction, cultivation and retail operations, marketing and the improvement and expansion of existing operations.

While ACS does not grow, harvest, distribute or sell cannabis or any substances that violate United States law or the Controlled Substances Act, nor does it intend to do so in the future, ACS may be irreparably harmed by a change in enforcement by the federal or state governments.

Principles of Consolidation

The condensed consolidated financial statements include the results of ACS, and its five wholly-owned subsidiary companies, ACS Colorado Corp., a Colorado corporation formed in 2013; Advanced Cannabis Solutions Corporation, a Colorado corporation formed in 2013, 6565 E. Evans Avenue LLC (“6565 Evans”), a Colorado limited liability company formed in 2014, General Cannabis Capital Corporation (“GCCC”), a Colorado corporation formed in 2015 and GCS, a Colorado limited liability company formed in 2015.  

Advanced Cannabis Solutions Corporation has one wholly-owned subsidiary company, ACS Corp., which was formed in the State of Colorado on June 6, 2013.

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Basis of Presentation

The accompanying (a) condensed consolidated balance sheet at December 31, 2014 has been derived from audited statements and (b) the condensed consolidated unaudited financial statements as of and for the periods ended March 31, 2015 and 2014, have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements, and should be read in conjunction with the audited consolidated financial statements and related footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 (the “2014 Annual Report”), filed with the Securities and Exchange Commission (the “SEC”) on April 15, 2015.  It is management’s opinion, however, that all material adjustments (consisting of normal recurring adjustments), have been made which are necessary for a fair financial statements presentation. The financial statements include all material adjustments (consisting of normal recurring accruals) necessary to make the financial statements not misleading as required by Regulation S-X, Rule 10-01. Operating results for the three months ended March 31, 2015 are not necessarily indicative of the results of operations expected for the year ending December 31, 2015.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies is presented to assist the reader in understanding and evaluating the Company's financial statements. The consolidated financial statements and notes are the representation of the Company's management, which is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles and have been consistently applied to the preparation of the financial statements.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions about future events that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and the related notes at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  The Company’s balances requiring management to make estimates and assumptions about future events include equity and debt transactions and the Company’s derivative liability. Actual results could differ from those estimates.

Reclassifications

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

Business Combinations

Amounts paid for acquisitions are allocated to the tangible assets acquired and liabilities assumed based on their estimated fair value at the date of acquisition. The Company then allocates the purchase price in excess of net tangible assets acquired to identifiable intangible assets. The fair value of identifiable intangible assets is based on detailed valuations that use information and assumptions provided by management. The Company allocates any excess purchase price over the fair value of the net tangible and intangible assets acquired to goodwill. Identifiable intangible assets with finite lives are amortized over their useful lives. Acquisition-related costs, including advisory, legal, accounting, valuation and other costs, are expensed in the periods in which the costs are incurred. The results of operations of acquired businesses are included in the consolidated financial statements from the acquisition date.

Intangible Assets and Goodwill

Intangible assets are stated at cost and consist primarily of customer base, non-compete agreements with key employees, and marketing related intangibles.  The Company’s intangible assets are being amortized on a straight-line basis over a period of three to ten years. The life assigned to customer relationships acquired is based on management's estimate of expected customer attrition rate. The attrition rate is estimated based on historical contract longevity and management's operating experience.

Management evaluates the remaining useful life of intangible assets on a periodic basis to determine whether events and circumstances warrant a revision to the remaining useful life. If the estimate of an intangible asset’s remaining useful life is changed, the remaining carrying value of the intangible asset is amortized prospectively over the revised remaining useful life.  Any potential impairment is evaluated based on anticipated undiscounted future cash flows and actual customer attrition in accordance with Financial Accounting Standards Board (“FASB”), Accounting Standards Codification (“ASC”) 360, Property, Plant and Equipment.

Management monitors the recoverability of goodwill recorded in connection with acquisitions, by reporting unit, annually, or more often if events or changes in circumstances indicate that the carrying amount may not be recoverable.

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If it is determined that sufficient indicators of potential impairment exists to require an interim goodwill impairment analysis for a reporting unit, the Company compares reporting unit’s carrying value to its estimated fair value and, accordingly, performs a second phase of the goodwill impairment test (“Step 2”). Under Step 2, the fair value of the reporting unit’s assets and liabilities are estimated, including tangible assets and intangible assets for the purpose of deriving an estimate of the implied fair value of goodwill. The implied fair value of the goodwill is then compared to the carrying value of the goodwill to determine the amount of the impairment, if any.  There were no impairments to goodwill recorded during the three months ended March 31, 2015.

Long-Lived Assets

The Company accounts for long-lived assets in accordance with ASC 360-10, Property, Plant and Equipment.  The Company tests for impairment losses on long-lived assets used in operations, including property, plant and equipment, and identifiable intangible assets, excluding goodwill, whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. Recoverability of an asset to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying value of the asset exceeds its fair value. Impairment evaluations involve management’s estimates on asset useful lives and future cash flows. Actual useful lives and cash flows could be different from those estimated by management which could have a material effect the Company’s operating results and financial positions. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. Through the date of this report, the Company had not experienced impairment losses on its long-lived assets. However, there can be no assurances that the demand for the Company’s products and services will continue, which could result in an impairment of long-lived assets in the future.

Conventional Convertible Debt

The Company records conventional convertible debt in accordance with ASC 470-20, Debt with Conversion and Other Options (“ASC 470-20”). Conventional convertible debt is a financial instrument in which the holder may only realize the value of the conversion option by exercising the option and receiving the entire proceeds in a fixed number of shares or the equivalent amount of cash. Conventional convertible debt with a non-detachable conversion feature that does not contain a cash settlement option, and is not accounted for as a derivative, is recorded as a debt instrument in its entirety. The Company has accounted for the December 2013 debt issuance and an 8 ½% Convertible Note Payable as conventional convertible debt (see Note 10).

Fair Value Measurements

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

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

Level 2 – Pricing inputs are other than quoted prices in active markets, but are either directly or indirectly observable as of the reporting date. The types of assets and liabilities in Level 2 are typically either comparable to actively traded securities or contracts, or priced with models using highly observable inputs.

Level 3 – Significant inputs to pricing that are unobservable as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation, such as complex and subjective models and forecasts used to determine the fair value of financial transmission rights.

Our financial instruments consist of cash, accounts receivable, other receivables, prepaid expenses, deferred financing costs, accounts payables and accrued expenses, notes payable and tenant deposits. The carrying values of these financial instruments approximate their fair value due to their short maturities. The Company's derivative liability is a Level 3 estimated fair market value instrument (see Note 11).

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Revenue Recognition

Revenue is recognized on an accrual basis as earned under contract terms. Specifically, revenue from tenant rentals is recognized on a straight-line basis over the reasonably assured lease term, and when collectability is reasonably assured. Consulting revenue is recognized based upon the payment terms within the contracts, and collectability is reasonably assured. Revenue relating to our wholesale business is recognized at the time goods are sold.  Security services revenue is recognized as earned and billed to customers on terms agreed upon with the individual customer, usually weekly or bi-monthly.

Income Tax

The Company accounts for income taxes pursuant to ASC 740, Income Taxes (“ASC 740”).  The provision for income taxes, income taxes payable and deferred income taxes are determined using the asset and liability method. Deferred tax assets and liabilities are determined based on temporary differences between the financial carrying amounts and the tax basis of assets and liabilities using enacted tax rates in effect in the years in which the temporary differences are expected to reverse. On a periodic basis, the Company assesses the probability that its net deferred tax assets, if any, will be recovered. If after evaluating all of the positive and negative evidence, a conclusion is made that it is more likely than not that some portion or all of the net deferred tax assets will not be recovered, a valuation allowance is provided by a charge to tax expense to reserve the portion of the deferred tax assets which are not expected to be realized.

When there are uncertainties related to potential income tax benefits, in order to qualify for recognition, the position the Company takes has to have at least a “more likely than not” chance of being sustained (based on the position’s technical merits) upon challenge by the respective authorities. The term “more likely than not” means a likelihood of more than 50 percent. Otherwise, the Company may not recognize any of the potential tax benefit associated with the position. The Company recognizes a benefit for a tax position that meets the “more likely than not” criterion at the largest amount of tax benefit that is greater than 50 percent likely of being realized upon its effective resolution. Unrecognized tax benefits involve management’s judgment regarding the likelihood of the benefit being sustained. The final resolution of uncertain tax positions could result in adjustments to recorded amounts and may affect the Company’s results of operations, financial position and cash flows.

The Company reviews its filing positions for all open tax years in all U.S. federal and state jurisdictions where the Company is required to file. The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense.  The tax years subject to examination by major tax jurisdictions include the 2013 Fiscal Period and forward by the U.S. Internal Revenue Service, and the 2013 Fiscal Period and forward for various states.

Net Income (Loss) Per Share

The Company computes net income (loss) per share by dividing the net income (loss) by the weighted average number of common shares outstanding in accordance with ASC 260, Earnings Per Share.  Diluted earnings per share is computed using the weighted average common shares and diluted potential common shares outstanding. Warrants and common stock issuable upon the conversion of the Company's convertible notes payable have not been included in the computation as the effect would be anti-dilutive and would decrease the loss per share as the Company has incurred losses in all periods reported.  As of March 31, 2015, there are potential dilutive shares of 2,722,700, of which 2,450,700 represent shares underlying warrants outstanding at March 31, 2015.   The Company’s outstanding convertible notes payable balance of approximately $1,524,000 at March 31, 2015 is convertible to approximately 305,000 shares of the Company’s stock.  

Business Segments

At March 31, 2015, the Company reported three business segments in accordance with ASC 280, Segment Reporting (“ASC 280”).  As of the date of this filing, all of the Company’s operations were conducted within the state of Colorado.  As of the date of this filing, the Company’s operations are divided into three operating segments: (i) Finance and Real Estate; (ii) Wholesale Supply; and (iii) Security.  

The Company’s Finance and Real Estate operating segment provides participants in the cannabis industry with industry finance and leasing services, shared space, as well as networking and event services, as discussed above.  The Company’s Wholesale Supply operating segment, ACS Wholesale, provides customers with nutrients and other supplies for growing and customizable specialty products.  Acquired in March 2015, the Company’s Security operating segment provides protection and security services to licensed and approved operators in the cannabis industry.

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Recently Issued Accounting Standards

Consolidation Reporting

In February 2015, the FASB issued ASU 2015-02, "Consolidation: Amendments to the Consolidation Analysis" (“ASU 2015-02”). This standard update is intended to improve targeted areas of consolidation guidance for reporting organizations that are required to evaluate whether they should consolidate certain legal entities. This ASU simplifies consolidation accounting by reducing the number of consolidation models and improves current U.S. GAAP by (1) placing more emphasis on risk of loss when determining a controlling financial interest; (2) reducing the frequency of the application of related-party guidance when determining a controlling financial interest in a variable interest entity; and (3) changing consolidation conclusions for public and private companies in several industries that typically make use of limited partnerships or variable interest entities. The amendments in ASU 2015-02 are effective for reporting periods beginning after December 15, 2015, with early adoption permitted. Entities can transition to the standard either retrospectively or as a cumulative effect adjustment as of the date of adoption. The adoption of ASU 2015-02 is not expected to have an impact on the Company’s consolidated financial statements.

Debt Issuance Costs

In April 2015, the FASB issued ASU 2015-03, "Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs". This standard update requires an entity to present debt issuance costs on the balance sheet as a direct deduction from the related debt liability as opposed to an asset. Amortization of the costs will continue to be reported as interest expense. The update is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2015. Early adoption is permitted for financial statements that have not been previously issued, and the new guidance would be applied retrospectively to all prior periods presented.  If the Company adopts this standard update on its effective date, management expects that approximately $31,900 will be reclassified from assets to being presented as contra-liability.

3.    GOING CONCERN

The financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future.  The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and, or, obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management believes that actions presently being taken to further implement its business plan and generate additional revenues provide the opportunity for the Company to continue as a going concern.  While the Company believes in the viability of its strategy to generate additional revenues and its ability to raise additional funds, there can be no assurances to that effect.  The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate additional revenues.

The Company had an accumulated deficit of approximately $8,470,000 and $7,641,000 as of March 31, 2015 and December 31, 2014, respectively, and further losses are anticipated in the development of its business. Accordingly, there is substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

On April 10, 2014, quotation of the Company’s common stock resumed on the OTCBB after having been suspended by the SEC on March 27, 2014.  On April 28, 2015, the Company’s stock began quotation on the OTC Market’s Pink Sheets.

4.   BUSINESS ACQUISITION

On March 26, 2015, GCS, a wholly-owned subsidiary of the Company, entered into an Asset Purchase Agreement (the “IPG APA”) by and among the Company, GCS and Iron Protection Group, LLC, a Colorado limited liability company (“IPG” or the “Seller”), whereby GCS agreed to acquire substantially all of the assets of Seller (the “IPG Acquisition”).  Acquiring IPG is consistent with the Company’s strategy to capitalize on synergies between the Company’s growth-oriented leadership team and IPG’s successful sales and delivery techniques.

Pursuant to the terms of the IPG APA, the Company will deliver to the sole shareholder of the Seller 500,000 restricted shares of the Company’s common stock, which will vest over a one-year period. In addition, the Company delivered to the sole shareholder of the Seller three year warrants (the “IPG Warrants”) to purchase an aggregate of 500,000 shares of the Company’s common stock at an exercise price of: (i) $4.50 for warrants to purchase 250,000 shares of the Company’s common stock, and (i) $5.00 for warrants to purchase another 250,000 shares of the Company’s common stock. The IPG APA contains certain provisions that require Seller to forfeit a portion of the Stock Consideration in the event that Seller violates its obligations under the IPG APA relating to non-competition and non-disclosure. The closing date of the Acquisition was March 26, 2015 and the Company has initially calculated the purchase price of the IPG Acquisition to be approximately $1,887,000.  

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Calculation of Purchase Price

The total purchase price for IPG was approximately $1,887,000 and was comprised of stock and warrants (see Note 12 for the Company’s calculation of fair values below):

Stock consideration	$	1,054,000
Warrants issued with $4.50 exercise price		421,000
Warrants issued with $5.00 exercise price		412,000
Total purchase price	$	1,887,000

The $1,054,000 value of stock consideration has been included in accrued stock payable as of March 31, 2015.  Through March 31, 2015, the Company had incurred and expensed approximately $25,000 in costs in connection with the IPG Acquisition.

Preliminary Allocation of Purchase Price

The purchase price allocation continues to be preliminary as of March 31, 2015 due to its accounting significance. Management anticipates completing the Company’s purchase price allocation as soon as reasonably possible not to exceed one year from the acquisition date. The preliminary purchase price allocation as of the date of the acquisition is set forth in the table below and reflects various fair value estimates and analysis. These estimates were determined through established and generally accepted valuation techniques:

Intangible assets:
Customer base	$	1,000,000
Marketing related intangibles		200,000
Non-compete agreements		200,000
Goodwill		487,000
Total intangible assets	$	1,887,000

Given that the timing of the IPG Acquisition occurred close to the Company’s quarter ended March 31, 2015, pro-forma information was not available.

Contingent Consideration

On October 29, 2014, the Board authorized the adoption of the Company's 2014 Equity Incentive Plan (the “Incentive Plan”), which, subject to stockholder approval, is designed to provide an additional incentive to executives, employees, directors and key consultants, aligning the long term interests of participants in the Incentive Plan with those of the Company and the Company's stockholders. The Incentive Plan provides that up to 10 million shares of the Company's common stock may be issued under the Plan.  In connection with the Company’s acquisition of IPG, the Company granted certain Plan participants approximately 250,000 non-qualified options to purchase share of the Company’s common stock pursuant to the Incentive Plan (the “IPG Option Grant”).  

As the Incentive Plan has not yet been approved by the Company's stockholders, the options are not considered to have been approved and therefore not granted.  If approved by the shareholders, the options will vest over a period of six months and will be valued and recorded as stock-based compensation on such date.  If stockholder approval of the Incentive Plan is not obtained, the options will be cancelled and deemed void.   Had stockholder approval of the Incentive Plan not been necessary, the Company estimated that the amount of stock based compensation that would have been recorded during the period April 27, 2015 through October 27, 2015 would have increased by approximately $650,000.  This amount was not included in the purchase price of IPG as of March 31, 2015.

In connection with the Company’s acquisition of IPG, the Company will deliver to the sole shareholder of the Seller 100,000 fully vested warrants to purchase shares of the Company’s common stock if sales of the Security business segment exceed $3,000,000 for the year ended December 31, 2015.  The warrants have an exercise price of $2.48, which was the Company’s closing share price on March 26, 2015.  Should the sole shareholder of the Seller cease employment with the Company, the warrants will be forfeited.  At March 26, 2015, the fair value of the warrants was calculated to be approximately $188,000. This amount was not included in the purchase price of IPG as of March 31, 2015.

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5.   INTANGIBLE ASSETS AND GOODWILL

Intangible Assets

The useful lives of amortizable intangible assets are as follows:

Asset	Life
Customer base	10 years
Marketing related intangibles	10 years
Non-compete agreements	2 years

The following table represents the estimated future amortization expense of intangible assets as of March 31, 2015:

Fiscal Year		Amount
Remainder of 2015	$	165,000
2016		220,000
2017		145,000
2018		120,000
2019		120,000
2020		120,000
Thereafter		510,000
Total intangible assets	$	1,400,000

6.   PROPERTY AND EQUIPMENT

The following table summarizes property and equipment and related accumulated depreciation:

	March 31, 2015		December 31, 2014
Land	$	812,340	$	812,340
Buildings		724,284		724,284
Leasehold improvements		45,000		45,000
Furniture, fixtures and equipment		15,792		15,792
Construction in progress		156,129		138,056
Property and Equipment, gross		1,753,545		1,735,472
Less: Accumulated Depreciation		(37,069)		(28,062)
Property and Equipment, net	$	1,716,476	$	1,707,410

Depreciation expense was $9,007 and $3,116 for the three months ended March 31, 2015 and 2014, respectively.

Construction in progress (“CIP”) includes land development costs, pre-construction costs, construction costs, interest incurred on financing, property taxes, insurance and overhead costs related to development. Included in pre-construction costs are architectural fees and site, soil, and engineering costs. Included in land development costs are on-site construction costs and other direct and indirect expenditures.  Interest and property taxes are capitalized to CIP when development activities commence, and end when the qualifying assets are ready for their intended use. Sales and marketing costs are expensed as incurred.  No interest or property taxes have been capitalized to CIP. Capitalized project costs are allocated to specific venues within the property using specific identification where feasible. Costs that are not specifically attributable to a particular venue will be allocated using methodologies deemed appropriate to the cost and areas benefited at the completion of the project.  CIP of approximately $156,000 at March 31, 2015 was capitalized in conjunction with the Company’s renovation of The Greenhouse.  CIP includes approximately $114,000 relating to the value of common stock and warrants issued to Spector Group II, LLP, a New York limited liability partnership (“Spector Group”), to act as the design architect for The Greenhouse.  Management of the Company anticipates that costs to complete The Greenhouse will approximate $420,000.

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7.   DEFERRED FINANCING COSTS, NET

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

The deferred financing costs of $115,000 are being amortized over the estimated term of the long-term financing agreement of three years (see Note 10). Amortization expense was approximately $9,600 and $6,000 for the three months ended March 31, 2015 and 2014, respectively.  The unamortized deferred financing balance was approximately $73,000 and $83,000 at March 31, 2015 and December 31, 2014, respectively.

8.   RECEIVABLES

The Company’s Finance and Real Estate segment owns, operates, and leases warehouse and office space to tenants (See Note 9).  At March 31, 2015 and December 31, 2014, tenant rental receipts exceeded revenue recognized by $18,244 and $0, respectively, which was recorded as deferred rental revenue at period end.  The following discloses scheduled tenant receipts for the remainder of 2015, the next five fiscal years, and thereafter:

2015	$	101,196
2016		110,536
2017		112,753
2018		115,008
2019		117,308
2020		119,655
Thereafter		126,548
Total scheduled rental receipts	$	803,004

9.   BUSINESS SEGMENTS

At March 31, 2015, the Company reported three business segments in accordance with ASC 280: (i) Finance and Real Estate; (ii) Wholesale Supply; and (iii) Security.

As of and for the three months ended March 31, 2015:

		Finance and Real Estate	Wholesale Supply	Security	Corporate and Other	Total
Net revenue	$	26,677	12,798	3,245	-	42,720
Operating expenses and other	$	77,530	24,653	13,333	755,697	871,213
Income (loss) from continuing operations	$	(50,853)	(11,855)	(10,088)	(755,697)	(828,493)
Property and equipment, net	$	1,710,814	-	-	5,662	1,716,476
Other assets	$	18,319	81,577	1,887,000	221,428	2,208,324
Depreciation expense	$	9,007	-	-	-	9,007

As of and for the three months ended March 31, 2014:

		Finance and Real Estate	Wholesale Supply	Security	Corporate and Other	Total
Net revenue	$	28,765	-	-	20,000	48,765
Operating expenses and other	$	22,718	-	-	1,231,969	1,254,687
Income (loss) from continuing operations	$	6,047	-	-	(1,211,969)	(1,205,922)
Depreciation expense	$	3,116	-	-	-	3,116

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10.   LONG TERM DEBT

Long-term debt consists of the following:
		Mar. 31, 2015			Dec. 31, 2014
12.0% convertible notes, due October 31, 2018, issued December 2013	$	380,000		$	530,000
8.5% convertible note payable, due December 31, 2018 (Pueblo West Property)		163,110			164,644
12.0% convertible notes, due October 31, 2018, issued January 2014		980,000			1,120,000
14.0% mortgage payable, due October 21, 2016 (The Greenhouse)		600,000			600,000
Unamortized discount		(1,119,464	)		(1,352,510	)
Long-term debt, net of unamortized discount	$	1,003,646		$	1,062,134
Debt maturing within one year		(6,473	)		(6,337	)
Debt maturing after one year	$	997,173		$	1,055,797

12% Convertible Notes

December 2013 Issuance

In December 2013, the Company entered into various convertible promissory notes with various third parties totaling $530,000 (the “December 2013 Issuance”), of which $380,000 and $530,000 was outstanding at March 31, 2015 and December 31, 2014, respectively.  The principal amounts of these notes range between $10,000 and $150,000. Under the terms of these notes, they mature on October 31, 2018, accrue interest at 12.0% per annum, and are convertible into shares of the Company’s common stock at a conversion rate of $5.00 per share, with standard dilution clauses (i.e. dividends, stock splits, etc.). These notes are convertible at the election of the noteholder at any time on or before maturity date at $5.00 per common share. These notes are secured by a first lien on all of the Company’s assets, which the Company acquires with the proceeds from the sale of these notes.

The Company paid approximately $66,000 to a placement agent for finder’s fees, which the Company recorded as a debt discount as of March 31, 2015 and December 31, 2014. In addition, the Company granted the placement agent warrants to purchase 10,600 shares of common stock at a price of $5.00 per share, (with standard dilution clause for dividends, stock splits, etc.) which vest immediately, and expire October 31, 2018. The value of the warrants was approximately $20,000 based on the Black-Scholes pricing model. The Company recorded the value of warrants as additional debt discount at issuance. The debt discount is being amortized to interest expense over the life of the notes. Amounts amortized to interest expense were approximately $17,000 and $4,000 for the three months ended March 31, 2015 and 2014, respectively. The unamortized debt discount balance was approximately $40,000 and $57,000 at March 31, 2015 and December 31, 2014, respectively.

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

January 2014 Issuance

In January 2014, the Company entered into various convertible promissory notes with various third parties totaling $1,605,000 (the “January 2014 Issuance”), of which $980,000 and $1,120,000 was outstanding at March 31, 2015 and December 31, 2014, respectively. The principal amounts of these notes range between $10,000 and $200,000. Under the terms of these notes, they mature on October 31, 2018, accrue interest at 12.0% per annum, and are convertible into shares of the Company’s common stock at a conversion rate of $5.00 per share, with standard dilution clauses (i.e. dividends, stock splits, etc.). These notes are convertible at the election of the noteholder at any time on or before maturity date at $5.00 per common share. These notes are secured by a first lien on all of the Company’s assets which the Company acquires with the proceeds from the sale of these notes.

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The Company paid approximately $165,000 in debt issuance costs and $32,100 to a placement agent for finder’s fees which the Company had initially recorded as a debt discount as of December 31, 2014. In addition, the Company granted the placement agent warrants to purchase 32,100 shares of common stock at a price of $5.00 per share, (with standard dilution clause for dividends, stock splits, etc.) which vest immediately, and expire October 31, 2018. The value of the warrants was approximately $84,000 based on the Black-Scholes pricing model.

To properly account for the January 2014 Issuance, the Company evaluated the debt instruments pursuant to ASC 815, to identify whether any equity-linked features in the convertible debt are freestanding or embedded. The January 2014 Issuance was issued availing the option for note holders to convert debt to common stock at fixed conversion price of $5.00 per share. The Company determined that the conversion feature was embedded in the January 2014 Issuance, but did not meet the definition of a derivative pursuant to ASC 815 and therefore should not be bifurcated. The Company concluded that the January 2014 Issuance was conventional debt and assessed under ASC 470-20 whether the January 2014 Issuance had a beneficial conversion feature. Since the initial conversion price of the security was less than the market value of the common stock at the time of issuance, it was determined that a beneficial conversion feature existed. The Company calculated the value of the beneficial conversion feature using the intrinsic value method. The stock price on the date of issuance was $13.75 and the conversion price was $5.00.

The calculated value of the beneficial conversion feature and the combined value of the debt discount resulted in a value greater than the value of the debt and as such, the total discount was limited to the value of the debt balance of $1,605,000. The debt discount is being amortized to interest expense over the life of the notes. The amount amortized to interest expense was approximately $164,000 and $300,000 for the three months ended March 31, 2015 and 2014, respectively. The unamortized discount balance was approximately $739,000 and $903,000 at March 31, 2015 and December 31, 2014, respectively.

Conversion of 12% Convertible Notes

Through March 31, 2015, one of the December 2013 Issuance note holders converted notes with principal balances totaling $150,000 and into 30,000 shares of the Company’s common stock at a conversion price of $5.00 per share.  Through March 31, 2015, ten of the January 2014 Issuance note holders converted notes with principal balances totaling $625,000, and accrued interest of approximately $4,700 into 125,946 shares of the Company’s common stock at a conversion price of $5.00 per share.  

Upon conversion, any remaining unamortized portions of debt discount relating to converted notes is immediately expensed to amortization expense.  Amortization expense immediately expensed to amortization expense relating to converted notes was approximately $124,000 and $0 for the three months ended March 31, 2015 and 2014, respectively.

After December 1, 2015, the remaining convertible notes in the December 2013 Issuance and the January 2014 Issuance (collectively, the “Convertible Notes”) will automatically convert to shares of the Company’s stock if the trading stock price has exceeded $10 for twenty consecutive trading days and the daily volume for those twenty consecutive trading days exceeds 25,000 shares.  As of April 24, 2014, these parameters have been met and the Company expects that the Convertible Notes will automatically convert to shares of the Company’s stock on December 1, 2015.  The Company’s 12% Convertible Notes gross balance of $1,360,000 at March 31, 2015 is convertible to 272,000 shares of the Company’s stock.  

8 ½% Convertible Note Payable (Pueblo West Property)

In December 2013, the Company executed a mortgage on its Pueblo West Property in the amount of $170,000 at 8 ½% interest amortized over 15 years with a maturity date of December 31, 2028 (the “Pueblo Mortgage”). This note is convertible at any time at $5.00 per share of common stock.

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

14% Mortgage Note Payable (The Greenhouse)

In October 2014, the Company executed a mortgage on The Greenhouse in the amount of $600,000 at 14.0% interest with a maturity date of October 21, 2016 (the “Greenhouse Mortgage”).  

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

In addition, the Company granted 600,000 warrants to Evans Lendco, the note holder of the Greenhouse Mortgage, which expire on October 21, 2016.  The warrants vest immediately and allow for Evans Lendco to purchase 600,000 shares of the Company’s common stock at a price of $4.40 per share, (with standard dilution clause for dividends, stock splits, etc.). The relative fair value of the warrants was approximately $418,000 based on the Black-Scholes pricing model. The Company recorded the relative fair value of warrants as debt discount at issuance. The debt discount is being amortized to interest expense over the life of the notes. The amount amortized to interest expense was approximately $52,000 for the three months ended March 31, 2015. The unamortized debt discount balance at March 31, 2015 and December 31, 2014 was approximately $325,000 and $377,000, respectively.

The tables below summarize the Company’s convertible notes activity during the three months ended March 31, 2015:

	Principal		Debt		Accrued
	Balance		Discount		Interest		Total
Balance at December 31, 2014		2,414,644		(1,352,510)		16,470		1,078,604
Converted into shares of common stock		(290,000)		—		(1,063)		(291,063)
Amortization of debt discount to interest expense		—		233,046		—		233,046
Payment of loan principal		(1,534)		—		—		(1,534)
Interest accrued during period		—		—		69,207		69,207
Interest paid during period		—		—		(46,938)		(46,938)
Balance at March 31, 2015		2,123,110		(1,119,464)		37,676		1,041,322
Less: Current portion  (1)		(6,473)		—		—		(6,473)
Long-term debt	$	2,116,637	$	(1,119,464)	$	37,676	$	1,034,849

(1)

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

Annual maturities of long-term debt (excluding unamortized discount) for the next five years ending December 31, and thereafter, consist of:

Remainder of 2015	$	4,803
2016		606,898
2017		7,507
2018		1,503,902
2019		-
2020		-
Thereafter		-
	$	2,123,110

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11.   COMMITMENTS AND CONTINGENCIES

Long-Term Financing Commitment

On January 21, 2014, the Company signed a Securities Purchase Agreement (the “SPA”) with Full Circle. The SPA provides that Full Circle will initially provide $7.5 million to the Company in the form of Senior Secured Convertible Notes, subject to certain named conditions. The Company can borrow an additional $22.5 million with the mutual agreement of Full Circle and the Company.  At least 95% of any loan proceeds will be used to acquire properties, which the Company will lease to licensed cannabis cultivators.  Full Circle will provide the Company with the initial $7.5 million when:

·

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

·

The specified property’s appraised value is satisfactory to Full Circle;

·

A Phase I environmental inspection is completed to the satisfaction of Full Circle; and

·

The Company is able to provide a first priority lien on the property in favor of Full Circle.

The six-year loan(s) will be secured by real estate acquired with the loan proceeds and will require interest-only payments at a rate of 12% a year, payable monthly. The funding of the loan(s) is subject to the execution of additional documents between the parties.  The initial loan can, at any time, be converted into shares of the Company’s common stock at a conversion price of $5.00 per common share. It is contemplated that further advances will be convertible at 110% of the market price of the Company’s common stock on the day of any advance, or the ten-day volume-weighted average price prior to the day of advance, whichever is lower. As of March 31, 2015, no amounts have been funded to the Company pursuant to the SPA.  In connection with the SPA, Full Circle purchased warrants from the Company for $500,000 (see Note 12).

Operating Leases

The Company rents office space for its corporate needs. The Company entered into a month-to-month lease agreement in July 2013 to lease 2,000 square feet for an annual rate of $12,000, paid monthly. This lease was terminated effective April 1, 2014.  On April 2, 2014, the Company entered into a three-year lease agreement to lease 3,000 square feet for its corporate offices.  The Company’s lease for office space at 4445 Northpark Avenue, Colorado Springs, Colorado, 80907 was cancelled without penalty, effective November 1, 2014.

The Company entered into a three-year agreement effective April 21, 2014 for a warehouse supply and distribution facility. The facility leased is 1,800 square feet and expires April 30, 2017. Lease expense was approximately $3,200 and $0 for the three months ended March 31, 2015 and 2014, respectively.  The future obligations under this lease amount to approximately $9,700 for the remainder of 2015, $13,200 for 2016, and $4,500 for 2017.

Legal

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

12.   STOCKHOLDERS’ EQUITY

Common Stock

From January 1, 2015 to March 31, 2015, three of the January 2014 Issuance note holders and one of the December 2013 Issuance note holders converted loan notes with principal balances totaling $290,000 and accrued interest of $1,063 into 58,213 shares of the Company’s common stock at a conversion price of $5.00 per share.

On January 21, 2015, Full Circle executed its option to cashlessly exercise 1,215,000 warrants in exchange for 660,263 common shares of the Company’s stock (see Note 13).

In January, 2015, the Company issued 50,000 shares to Spector Group in satisfaction of architectural services performed for The Greenhouse.  The shares were valued at approximately $114,000 and had been included in accrued stock payable at December 31, 2014.

On March 26, 2015 the Company agreed to purchase IPG.   Pursuant to the terms of the IPG APA, the Company will deliver to Seller 500,000 restricted shares of the Company’s common stock, which will vest over a one-year period.  On the date of the agreement, the 500,000 shares had an initial fair value of $1,240,000, based on a closing price per share of the Company of $2.48 on March 26, 2015.  Due to restrictions in the ability to trade the Company’s shares, a discount of fifteen percent (15%) was applied to the fair value of the shares the Company issued and anticipates issuing to Infinity Capital and the net amount is being amortized over the relative service periods. Approximately $1,054,000 and was recorded to accrued stock payable as a component of the purchase price of the IPG Acquisition (see Note 4).  

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Warrants

Warrants consist of the following at March 31, 2015:

	Exercise Price		Warrants Outstanding	Weighted Average Life of Outstanding Warrants in Months	Date of Expiration
Series A Warrants	$	10.00	973,000	16	7/31/2016
Series B Warrants		5.00	42,700	43	10/31/2018
Series C Warrants		4.00	185,000	22	1/21/2017
Evans Warrants		4.40	600,000	19	10/21/2016
Spector Warrants		4.40	150,000	21	12/12/2016
IPG $4.50 Warrants		4.50	250,000	36	3/26/2018
IPG $5.00 Warrants		5.00	250,000	36	3/26/2018
	$	6.68	2,450,700	21.92

Series C Warrants

On January 21, 2014, the Company issued to Full Circle, for $500,000, fully-vested warrants which allow Full Circle to purchase up to 1,000,000 shares of the Company’s common stock at any time on or prior to January 21, 2017 at a price of $5.50 per share. As part of the $500,000 proceeds from the warrant being issued to Full Circle, $100,000 was retained by Full Circle to cover legal and deal related expenses of future financing transactions, which was recorded as deferred financing costs (See Note 7). On September 24, 2014, the Company and Full Circle entered into Amendment No. 1 to the SPA, which changed the exercise price of the warrants issuable to $4.00 per share of the Company’s common stock, and increased the amount of warrants issuable to 1,400,000 warrants to purchase shares of the Company’s common stock.  On January 21, 2015, Full Circle executed its option to cashlessly exercise 1,215,000 warrants in exchange for 660,263 shares of the Company’s common stock (see Note 13).  At March 31, 2015, there were Series C warrants representing 185,000 of the Company’s common stock outstanding.  As of May 4, 2015, Full Circle had exercised the remainder of its 185,000 warrants (see Note 17).

IPG Warrants

In connection with the IPG APA, the Company issued to IPG fully-vested warrants to purchase 250,000 shares of the Company’s common stock at a conversion price of $4.50 per share (the “IPG $4.50 Warrants”), and 250,000 shares of the Company’s common stock at a conversion price of $5.00 per share (the “IPG $5.00 Warrants”) (collectively, the “IPG Warrants”).  The IPG Warrants are subject to customary adjustments in the event of reclassification of the Company, consolidation of the Company, merger, subdivision of shares of the Company’s common stock, combination of shares of the Company’s common stock or payment of dividends in the form of the Company’s common stock. The IPG Warrants expire three years after their initial issuance date.  On the date of grant, the IPG $4.50 Warrants and the IPG $5.00 Warrants had fair values of approximately $421,000 and $412,000, respectively, based on the Black-Scholes pricing model, which was included in the purchase price of IPG (See Note 4).

The following tables summarize the changes in warrants issued and outstanding for the three months ended March 31, 2015 and 2014, respectively:

	2015	2014
Beginning balance	3,165,700	983,600
Warrants issued to placement agent – Series B Warrants	-	32,100
Warrants issued to Full Circle for $500,000 consideration – Series C Warrants	-	1,000,000
Warrants issued to IPG in connection with IPG Acquisition	500,000	-
Warrants converted by Full Circle via cashless conversion option	(1,215,000)	-
Ending balance, March 31	2,450,700	2,015,700

Fair Value of Warrants

Fair value is generally based on independent sources such as quoted market prices or dealer price quotations. To the extent certain financial instruments trade infrequently or are non-marketable securities, they may not have readily determinable fair values. The Company estimated the fair value of the warrants using a Black-Scholes option pricing model and available information that management deems most relevant. The stock price is the closing price of the Company’s stock on the valuation date; the risk-free interest rate is based on the U.S. Government Securities average rate for five or two-year maturities on the date of issuance; the

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volatility is a statistical measure (standard deviation) of the tendency of the Company’s common stock price to change over time; the exercise price is the price at which the Warrants can be purchased by exercising prior to expiration; the dividend yield is not applicable due to the Company not intending to declare dividends; the expected term is based on the contractual life of the warrants; and the fair market value is value of the warrants based on the Black Scholes model on the valuation date.  The following assumptions were used to derive the value of the warrants issued during the three months ended March 31, 2015:

	IPG $4.50 Warrants	IPG $5.00 Warrants
Grant date	3/26/2015	3/26/2015
Stock price on Grant date	$2.48	$2.48
Exercise price of warrant	$4.50	$5.00
Risk-free interest rate	0.98%	0.98%
Expected dividend yield	0.00%	0.00%
Expected term (in years)	3.0	3.0
Expected volatility	134%	134%

13.   DERIVATIVE WARRANT LIABILITY

The Series C Warrants issued in connection with the agreements, as amended, with the Full Circle private placement offering initially provided Full Circle with the opportunity to purchase 1,000,000 shares of the Company’s common stock at the exercise price of $5.50 per share. In September 2014, through amendment, the shares of common stock were increased to 1,400,000 and the exercise price reduced to $4.00 per share. The Series C Warrants have non-standard anti-dilution protection provisions and, under certain conditions, grant the right to the holder to require the Company to adjust the warrant’s exercise price to a lower price. Accordingly, through December 31, 2014, these warrants were accounted for as derivative liabilities.

On January 21, 2014, the value of the initial warrant derivative liability was calculated to be $1,368,908. The Company received $500,000 in cash of which $100,000 was identified as deferred financing costs, resulting in an initial loss on the fair value of the derivative liability of $868,908 on the grant date. The price of $5.00 per share of the Series A and Series B Warrants granted in conjunction with the December 2013 Issuance and the January 2014 Issuance resulted in the revaluation of the Series C Warrants granted to Full Circle and an increase to the derivative liability of $153,994.

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

On January 21, 2015, Full Circle executed its option to cashlessly exercise 1,215,000 warrants in exchange for 660,263 common shares of the Company’s stock.  At the time of the cashless exercise, the fair value of the common shares was determined to be $3,314,520 based on the Company’s closing share price of $5.02 on January 21, 2015.  Accordingly, the Company decreased the derivative liability by $3,314,520 and increased common stock by $660 and additional paid-in capital by $3,313,860. In determining the value of Full Circle’s remaining 185,000 warrants, the Company used the binomial pricing model and a stock price of $5.00 per share and utilized initial scenario stock prices of $3.00, $4.00, $6.00, and $7.00.  The Company utilized an expected term of 1.81 years, which is the remaining term of Full Circle’s 185,000 warrants, and an early exercise factor of 1.33 to factor in an anticipation of early exercise of in-the-money warrants.  The underlying assumptions used in our value of the derivative warrant liability at March 31, 2015 were:

	2014
Risk-free interest rate	0.56	%
Expected dividend yield	0	%
Expected term (in years)	1.81	years
Expected volatility	135	%
Early exercise factor	1.33

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Changes in fair value of the derivative financial instruments are recognized in the Company’s consolidated statements of operations as a derivative gain or loss and are included in other income (expense). The warrant derivative gains (losses) are non-cash income (expenses); and loss on derivative liability, net, was included in other income (expense) in the Company’s consolidated statements of operations. The primary underlying risk exposure pertaining to the warrants is the change in fair value of the underlying common stock for each reporting period.

Changes in the derivative warrant liability for the three-months ended March 31, 2015 and 2014 are as follows:

		2015	2014
Balance at beginning of period	$	3,893,904	-
Fair value of warrants issued			1,368,908
Increase in derivative liability resulting from anti-dilution provision in agreement with Full Circle			153,994
Increase (decrease) in the fair value of warrant liability, net		22,233	(375,262)
Reclassification to APIC for shares issued for Full Circle as a result of cashless exercise of 1,215,000 warrants		(3,314,520)
Balance at March 31	$	601,617	1,147,640

Change in Aggregate Loss on Derivative Liability		2015		2014
Balance at beginning of period	$	3,393,904	$	—
Initial loss on recognition of derivative liability				868,908
Loss (gain) in estimated fair market value		22,233		(221,268)
Reclassification to APIC for shares issued for Full Circle as a result of cashless exercise of 1,215,000 warrants		(3,314,520)
Balance at March 31	$	101,617	$	647,640

As of May 4, 2015, Full Circle had exercised the remainder of its 185,000 warrants (see Note 17).

14.   INCOME TAXES

The Company accounts for income taxes in accordance with ASC 740. Deferred income taxes reflect the net effect of (i) temporary difference between carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax reporting purposes, and (ii) net operating loss carry-forwards. No net provision for refundable federal income tax has been made in the accompanying statement of loss because no recoverable taxes were paid previously.  No provision was made for income taxes for the three months ended March 31, 2015 and 2014. The Company, from the date of Inception, has incurred net operating losses for tax purposes of approximately $8,470,000. The net operating loss carry-forward may be used to reduce taxable income through the year 2033.

The Company recognizes interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest or penalties at March 31, 2015 and December 31, 2014, and has not recognized interest and/or penalties during the three months ended March 31, 2015 and 2014, since there are no material unrecognized tax benefits. Management believes no material change to the amount of unrecognized tax benefits will occur within in the next 12 months.  The tax years subject to examination by major tax jurisdictions include the years 2013 and forward by the U.S. Internal Revenue Service, and the years 2013 and forward for various states.

There was no significant difference between reportable income tax and statutory income tax, as the Company does not have significant temporary or permanent differences.  For those years in which the Company has filed taxes, the Company’s sales have occurred within the State of Colorado, book depreciation expense approximates tax depreciation expense, and the Company did not incur any tax consequences for issuing warrants. Based on losses incurred since inception and an estimated federal tax rate of 35%, the Company calculated that it had a federal deferred tax asset of approximately $2,965,000 and $2,674,000 at March 31, 2015 and December 31, 2014, respectively.  Based on an estimated Colorado state tax of 4.63% (flat tax rate applied to net income of corporation), the Company calculated that it had a state deferred tax asset of approximately $392,000 and $354,000 at March 31, 2015 and December 31, 2014, respectively.  A 100% valuation allowance has been established against these deferred tax asset, as the utilization of the loss carry-forwards cannot be reasonably assured.

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15.   RELATED PARTY TRANSACTIONS

On February 19, 2015, the Company completed the closing of a private placement financing transaction with Infinity Capital, LLC (“Infinity Capital”), an investment management company founded by Michael Feinsod in 1999, which purchased a senior secured note (the “Infinity Note”) from the Company in the principal amount of up to $300,000. Michael Feinsod, who is a director of the Company, is deemed to be the beneficial owner of Infinity Capital. Infinity Capital agreed to make advances to the Company from time to time in amounts not to exceed the aggregate principal amount of the Infinity Note of $300,000.  The balance of the Infinity Note was approximately $239,000 on March 31, 2015.  For the three months ended March 31, 2015, interest expense was approximately $1,000, all of which was interest payable at March 31, 2015.

Interest on the Infinity Note accrues at 5.0% on the then-outstanding principal amount is payable monthly in arrears commencing June 30, 2015, until the note’s maturity date on August 31, 2015.  The Infinity Note may be prepaid at any time upon 5 business days’ notice to Infinity Capital.  As collateral for payment of the Infinity Note, the Company granted Infinity Capital a lien and security interest in substantially all of the Company’s business assets and property.  The Company believes that the arrangement was on terms that were at least as favorable as it could have obtained from third parties.  The terms of the Infinity Note were updated subsequent to March 31, 2015 (see Note 17).

16.   STOCK-BASED COMPENSATION

On August 4, 2014, pursuant to an agreement with Michael Feinsod, the Company’s Board of Directors (the “Board”) appointed Michael Feinsod as Chairman of the Board and approved the issuance of common stock to Infinity Capital (the “Feinsod Agreement”).  The Board approved the issuance of 200,000 shares of the Company’s common stock, with a par value of $0.001 per share to Infinity Capital.  The Board also approved terms that may result in the issuance of additional common stock to Infinity Capital, provided Mr. Feinsod meets specific performance criteria, which could include:  (i) the issuance of 1,000,000 shares of the Company’s common stock to Infinity Capital upon the uplisting of the Company’s common stock (see Note 17); (ii) the issuance of 150,000 shares of common stock to Infinity Capital on August 4, 2015, provided that Mr. Feinsod remains a member of the Board on that date, and (iii) the issuance of 150,000 shares of common stock to Infinity Capital on August 4, 2016, provided that Mr. Feinsod remains a member of the Board on that date.  The Feinsod Agreement requires the issuance of a number of shares of common stock to Infinity Capital equal to 10% of any new issuance not to exceed 600,000 shares of common stock in the aggregate during the time that Mr. Feinsod remains a member of the Board, which will not be triggered upon issuances relating to convertible securities existing as of the date hereof.

Pursuant to the Feinsod Agreement, for accounting purposes, shares issued to Mr. Feinsod have been accounted for as compensation for his services performed as a member of the Board (See Note 15).  On the date of issue, the 200,000 shares issued to Infinity Capital had an initial fair value of $1,040,000, based on a closing price per share of the Company of $5.20 on August 4, 2014.  The 150,000 shares the Company believes it will issue to Mr. Feinsod on both August 4, 2015 and August 4, 2016 had a total fair value of $1,560,000, based on a closing price per share of the Company of $5.20 on August 4, 2014.  Due to restrictions in the ability to trade the Company’s shares, a discount of fifteen percent (15%) was applied to the fair value of the shares the Company issued and anticipates issuing to Infinity Capital and the net amount is being amortized over the relative service periods.

In connection with the 200,000 shares issued to Infinity Capital on August 4, 2014, approximately $884,000 and was recorded to stock-based compensation for the year ended December 31, 2014.  In connection with the 300,000 shares the Company anticipates it will issue to Mr. Feinsod to remain as a member of the Board through at least August 4, 2016, approximately $249,000 and $0 was added to accrued stock payable and recorded to stock compensation expense for the three months ended March 31, 2015 and 2014, respectively. At March 31, 2015 and December 31, 2014, the Company’s accrued stock payable related to these shares was $663,000 and $414,000, respectively, and the estimated unrecognized compensation expense in connection with the Feinsod Agreement was approximately $663,000 and $912,000, respectively.  In connection with the Feinsod Agreement, the Company anticipates that it will record stock compensation expense of approximately $470,000 during the remaining quarters in 2015 and $194,000 in 2016.  

On October 29, 2014, the Board granted certain Incentive Plan participants 175,000 non-qualified options to purchase shares of the Company's common stock pursuant to the Incentive Plan (the “2014 Option Grant”).   As the Incentive Plan has not yet been approved by the Company's stockholders, the options are not considered to have been approved and therefore not granted.  If approved by the shareholders, the options will vest immediately and will be valued and recorded as stock-based compensation on such date.  If stockholder approval of the Incentive Plan is not obtained, the options will be cancelled and deemed void.   Had stockholder approval of the Incentive Plan not been necessary, the Company estimated that stock compensation expense relating to the 2014 Option Grant would have increased by approximately $375,000 for the three months ended March 31, 2015.  

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17.   SUBSEQUENT EVENTS

On April 28, 2015, pursuant to the Feinsod Agreement, the Company issued 1,000,000 shares of its stock to Infinity Capital as a result of the uplisting of the Company’s stock to the OTC Market’s Pink Sheets on April 28, 2015.   In connection with the Feinsod Agreement (see Note 16), the Company expects to record accrued stock payable and stock compensation expense of approximately $3,490,000, based on a closing price per share of $3.49 at April 27, 2015.

On April 30, 2015, Infinity Capital amended the Infinity Note with the Company (see Note 15).  The aggregate principal amount of the Infinity Note was increased to $300,000, interest will continue to accrue on the then-outstanding principal amount and will be payable monthly in arrears commencing June 30, 2015, until the Infinity Note’s maturity date on August 31, 2015.  Interest on the Infinity Note will continue to accrue at 5.0%.  As of May 15, 2015, the balance of the Infinity Note was $239,000. Pursuant to the amended agreement, the Company shall use any proceeds in excess of $750,000 from any incremental capital raises to pay any outstanding principal and interest due under the Infinity Note.

On May 1, 2015, the Company and Robert L. Frichtel entered into an Executive Employment Agreement (the “Frichtel Agreement”) in order to secure Mr. Frichtel’s continued employment as the Company’s President and Chief Executive Officer.  Under the terms of the Frichtel Agreement, Mr. Frichtel will receive a base salary of $150,000 per year, which may be increased (but not decreased) subject to annual review by the Board.  Mr. Frichtel will be eligible for an annual bonus pursuant to the Company’s Executive Bonus Plan and is entitled to participate in any employee benefit plan that Company has adopted or may adopt. The term of the Frichtel Agreement expires on December 31, 2018.

In addition, the Company and Mr. Frichtel entered into an Option Agreement (the “Frichtel Option Agreement”), pursuant to which Mr. Frichtel will receive options to purchase 300,000 shares of the Company’s common stock at a price of $3.75 per share (which price was based on the closing price of the Company’s common stock on May 1, 2015), 100,000 of which vested upon execution of the Frichtel Agreement, and provided that Mr. Frichtel remains an employee of the Company on each date, 100,000 of which will vest on May 1, 2016, and the remaining 100,000 will vest on May 1, 2017.  

On May 1, 2015, the Company and Full Circle entered into Amendment No. 2 to the Series C Warrants, pursuant to which Full Circle cashlessly exercised 160,000 warrants and received 100,000 shares of the Company’s common stock.  On May 4, 2015, Full Circle exercised its remaining warrants under the Series C Warrants to purchase 25,000 shares of the Company’s common stock for $4.00 per share.  There are no more warrants under the Series C Warrants outstanding. Immediately preceding Full Circle’s exercise of its 185,000 warrants, the fair value of the warrants was determined to be $593,530.  The fair values of the 25,000 restricted shares and 100,000 unrestricted shares issued were determined to be approximately $80,000 and $375,000, respectively, based on a closing price per share of $3.75 on May 1, 2015.

On May 7, 2015, the Company completed closing on a private placement of $200,000 pursuant to a Promissory Note and Warrant Purchase Agreement (the “10% Agreement”).  Under the 10% Agreement, the Company can sell up to $2,000,000 of notes to investors, each note with a denomination of a minimum of $50,000 (each such note, a “10% Note,” and collectively the “10% Notes”).  The 10% Notes mature on May 1, 2016 and carry an interest rate of 10% per annum, with interest payable quarterly beginning on June 30, 2015.   Subject to the terms and conditions of the 10% Agreement, each investor is granted warrants equal to their 10% Note principal divided by 2 (the “10% Warrants”).  The 10% Warrants shall be exercisable for a period of one year after grant date and have an exercise price of $3.30, which was the Company’s closing price per share on the date the 10% Warrants were granted.  In connection with the balance of the 10% Notes issued at May 7, 2015, the Company granted 100,000 10% Warrants, which had a fair value of approximately $90,000 on the grant date.  The Company expects to record the fair value of the warrants as a debt discount and amortize the value through interest expense through the maturity date of these notes.  The Company’s agreements with each of the investors are separate agreements, and the sales of the 10% Notes and the 10% Warrants to each of the investors are separate sales.  

On May 14, 2015, the Company hired and appointed two individuals as vice-presidents of General Cannabis Consulting (the “GC Consultants”), a wholly-owned subsidiary of Advanced Cannabis Solutions, Inc.  The GC Consultants were previously with a Colorado-based cannabis consulting firm specializing in license competition, compliance advising services, cultivation operation & logistical support design/build services and ongoing cultivation management services.  Total annual cash salaries for the GC Consultants is currently estimated to be approximately. The Company intends to issue equity compensation to the GC Consultants during the second quarter of 2015.  A third individual was hired by the Company to provide consulting services on a temporary basis.  

In accordance with ASC Topic 855, Subsequent Events, the Company has evaluated events that occurred subsequent to the balance sheet date through April 27, 2015, the date of available issuance of these unaudited financial statements. The Company determined that other than as disclosed above, there were no material reportable subsequent events to be disclosed.

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PART I

ITEM 2.

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

This discussion should be read in conjunction with the Condensed Consolidated Unaudited Financial Statements contained in this quarterly report and the Consolidated Financial Statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of operations appearing in the Company’s Annual Report on Form 10-K as of December 31, 2014 and 2013 and for the year ended December 31, 2014 and for the period from June 5, 2013 (Inception) to December 31, 2013 (the “2013 Fiscal Period”). The results of operations for an interim period may not give a true indication of results for future interim periods or the year.

Cautionary Statement Regarding Forward Looking Statements

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

When this report uses the words “ACS,” and the “Company,” they refer to Advanced Cannabis Solutions, Inc., dba “General Cannabis Corporation.”

Products, Services and Customers

Advanced Cannabis Solutions, Inc. provides products and services to the regulated cannabis industry, which include the following:

Real Estate Leasing

The Company’s real estate business primarily includes the acquisition and leasing of cultivation space and related facilities to licensed marijuana growers and dispensary owners for their operations. Management anticipates that these facilities will range in size from 5,000 to 50,000 square feet. These facilities will only be leased to tenants that possess the requisite state licenses to operate cultivation facilities. The leases with the tenants will provide certain requirements that permit the Company to continually evaluate its tenants’ compliance with applicable laws and regulations.

The Company has a credit facility to finance the acquisition of real estate.

As of the date of this report, the Company owned one cultivation property that is located in a suburb of Pueblo, Colorado.  The property consists of approximately three acres of land, which includes a 5,000 square foot steel building, and parking lot. The property is zoned for cultivating cannabis and is leased to a medical cannabis grower until December 31, 2022 (the “Pueblo West Property”).

The Company has identified other properties that are currently under review for purchase and leaseback to licensed cannabis cultivators in Colorado. These projects include the purchase and leaseback of existing, currently operating facilities, as well as proposed new construction projects. These opportunities are in Denver and Pueblo counties in Colorado and can be purchased and/or constructed for amounts ranging from $750,000 to $5 million for each project. There can be no assurance that the Company will be able to complete any of these transactions.

Shared Office Space, Networking and Event Services

In October 2014, the Company purchased a former retail bank located at 6565 East Evans Avenue, Denver, Colorado 80224, which has been branded as The Greenhouse (“The Greenhouse”).  The building is a 16,056 square-foot facility, which will be converted to serve as the largest shared workspace for entrepreneurs, professionals and others serving the cannabis industry.  Clients will be able to lease space to use as offices, meeting rooms, lecture, educational and networking facilities, and individual workstations.

The Greenhouse has approximately 2,000 square feet on its ground floor that is dedicated to a consumer banking design.  

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The Company plans to continue to acquire commercial real estate and lease office space to non-regulated participants in the cannabis industry. These participants include media, internet, packaging, lighting, cultivation supplies, and financial services. In exchange for certain services that may be provided to these tenants, the Company expects to receive rental income in the form of cash. In certain cases, the Company may acquire equity interests or provide debt capital to these non-regulated businesses.

Security and Cash Management Services

In March 2015, GC Security, LLC, a Colorado limited liability company incorporated in 2015 and wholly-owned subsidiary of the Company (“GCS”), acquired substantially all of the assets of Iron Protection Group, LLC (“IPG”), a Colorado limited liability company (the “IPG APA”).  GCS, which will continue to do business as “Iron Protection Group,” provides advanced security, including on-site professionals and video surveillance, to licensed cannabis cultivators and retail shops. Iron Protection Group has approximately fifty static guards who service fifteen clients throughout Colorado.  The acquisition is anticipated to add annualized revenue of approximately $1.5 million in 2015.  

Industry Finance and Equipment Leasing Services

The Company leases cultivation equipment and facilities to customers in the cannabis industry. The Company expects it will enter into sale lease-back transactions of grow lights, tenant improvements and other grow equipment. Since Colorado State law does not allow entities operating under a cannabis license to pledge the assets or the license of the cannabis operation for any type of general borrowing activity, the Company intends to provide loans to individuals and businesses in the cannabis industry on an unsecured basis.  Equipment will only be leased to tenants that possess the requisite state licenses to operate such facilities. The leases with the tenants will provide certain requirements that permit the Company to continually evaluate its tenants’ compliance with applicable laws and regulations.  

The Company is exploring lending opportunities in Oregon, Washington, and Colorado. The Company’s finance strategy will include making direct term loans and providing revolving lines of credit to businesses involved in the cultivation and sale of cannabis and related products.  These loans will generally be secured to the maximum extent permitted by law.  The Company believes there is a significant demand for this financing.  The Company is pursuing the prospects surrounding other finance services including customized finance, capital formation, and banking, for participants in the cannabis industry.

Wholesale Supply

The Company’s wholesale supply business, ACS Wholesale, is a reseller of supplies to the cannabis market. ACS Wholesale works with industry leaders and innovators to deliver high-quality products that are compliant with applicable regulations and with a focus on products that are manufactured in the United States.   ACS Wholesale operates out of a leased, 1,800 square-foot warehouse located in Colorado Springs, Colorado.

Consulting and Advisory

The Company delivers comprehensive consulting services that include design and construction to approved and licensed cannabis operators, as well as assistance with licensure and related applications for potential cannabis operators.  The Company’s business plan is based on the future growth of the regulated cannabis market in the United States. The Company will provide general advisory services for business development, facilities design and construction, cultivation and retail operations, marketing and the improvement and expansion of existing operations.

Operating Segments

As of the date of this filing, all of the Company’s operations were conducted within the state of Colorado.  As of the date of this filing, the Company’s operations are divided into three operating segments: (i) Finance and Real Estate; (ii) Wholesale Supply; and (iii) Security.  

The Company’s Finance and Real Estate operating segment provides participants in the cannabis industry with industry finance and leasing services, shared space, as well as networking and event services, as discussed above.  The Company’s Wholesale Supply operating segment, ACS Wholesale, provides customers with nutrients and other supplies for growing and customizable specialty products.  Acquired in March 2015, the Company’s Security operating segment provides protection and security services to licensed and approved operators in the cannabis industry.

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Subsidiary Structure

The Company has five wholly-owned subsidiaries, ACS Colorado Corp., a Colorado corporation formed in 2013; Advanced Cannabis Solutions Corporation, a Colorado corporation formed in 2013, 6565 E. Evans Avenue LLC (“6565 Evans”), a Colorado limited liability company formed in 2014, General Cannabis Capital Corporation (“GCCC”), a Colorado corporation formed in 2015 and GC Security LLC (“GCS”), a Colorado limited liability company formed in 2015.

Advanced Cannabis Solutions Corporation has one wholly-owned subsidiary company, ACS Corp., which was formed in the State of Colorado on June 6, 2013.

Results of Operations

The following discussion analyzes the Company’s financial condition and summarizes the results of operations for the three months ended March 31, 2015 and 2014. This discussion and analysis should be read in conjunction with the Company’s financial statements included as part of this report.

Net Revenues

Net revenues of $42,720 and $48,765 for the three months ended March 31, 2015 and 2014, respectively, were primarily comprised of tenant rental revenue, wholesale net sales, security services revenue, and consulting fee revenue. Tenant rental revenue, which relates to real estate leasing of the Company’s property in Pueblo, Colorado to a licensed medical cannabis cultivator, was $26,677 and $28,765 for March 31, 2015 and 2014, respectively. Net wholesale sales were $12,798 and $0 for the three months ended March 31, 2015 and 2014, respectively.  The Company’s wholesale business commenced operations in May 2014 and its performance is a result of the Company’s ability to penetrate a difficult segment of the cannabis industry.  Net security services revenue was $3,245 and $0 for the three months ended March 31, 2015 and 2014, respectively.  The Company’s security services business was acquired on March 26, 2015 and includes on-site guard services, cash transport services, and remote video surveillance.  Consulting revenue, net was $0 and $20,000 for the three months ended March 31, 2015 and 2014, respectively. Consulting revenue, net for the three months ended March 31, 2014 relates to revenue earned on a consulting contract that was mutually cancelled during the third quarter of 2014.

Operating Expense

Operating expenses, which consist of general and administrative expenses, payroll and related expenses, share-based compensation, professional fees, office expense and depreciation and amortization expense, were $537,143 and $252,932 for the three months ended March 31, 2015 and 2014, respectively.  Operating expenses were similar for the comparable periods, with the exception of share-based compensation of $248,625 and $0 for the three months ended March 31, 2015 and 2014, respectively.

General and administrative expense, which is primarily comprised of corporate expenses, insurance premiums, travel and promotion, and website maintenance, was $82,941 and $54,476, for the three months ended March 31, 2015 and 2014, respectively. The increase in general and administrative expenses is primarily due to increased insurance premiums and travel and conference expenses, as the Company continues to build its presence in the industry.  The increase in general and administrative expenses is also a result of costs relating to the Company’s purchase of The Greenhouse, as well as expenses incurred in preparing for the Company’s acquisition of IPG at the end of March 2015. Payroll and related expense, which is primarily comprised of management and staff salaries and the Company’s share of health benefit premiums was $89,199 and $105,135 for the three months ended March 31, 2015 and 2014, respectively. This decrease is primarily due to lower executive compensation during the first quarter 2015 as compared with the same period 2014.  Share-based compensation expense was $248,625 and $0 for the three months ended March 31, 2015 and 2014, respectively.  Share-based compensation expense in 2015 was primarily due to issued and accrued stock payable to Infinity Capital.  On August 4, 2014, pursuant to an agreement with Michael Feinsod, the Company’s Board of Directors (the “Board”) appointed Michael Feinsod as Chairman of the Board and approved the issuance of common stock to Infinity Capital, LLC (“Infinity Capital”), an investment management company Mr. Feinsod founded in 1999 (the “Feinsod Agreement”).

Professional fees, which are primarily comprised of legal, accounting and audit fees, and filing fees, were $94,107 and $82,516 for the three months ended March 31, 2015 and 2014, respectively. Professional fees incurred during 2015 were primarily related to the Company’s acquisition of IPG and fees incurred by the Company in its pursuit to be quoted on the OTC Markets Pink Sheets, which occurred on April 28, 2015. Professional fees during 2014 primarily relate to legal and accounting fees after the Company’s reverse merger during fourth quarter 2013. Office expense, which is primarily comprised of rent expense and office supplies, was $13,264 and $7,689 for the three months ended March 31, 2015 and 2014, respectively. The increase in office expense was primarily due to the Company’s change in its headquarters location to 6565 East Evans Avenue, Denver, CO 80224, which is a larger facility than the office space that the Company previously rented in Colorado Springs. Depreciation and amortization expense was $9,007 and $3,116 for the three months ended March 31, 2015 and 2014, respectively. The increase in depreciation and amortization expense is due to an increase in the Company’s depreciable asset base in 2015 compared with 2014.

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Other Expense

Other expense consists of amortization of debt discount and deferred financing costs, interest expense, and change in the fair value of derivative liability. Other expense was $334,070 and $1,001,755 for the three months ended March 31, 2015 and 2014, respectively. Amortization expense of debt discount and deferred financing costs was $242,630 and $304,841 for the three months ended March 31, 2015 and 2014, respectively.  The decrease in amortization of debt discount relates primarily to the accelerated amortization expense as a result of debt conversions that occurred during first quarter 2014. Interest expense was $69,207 and $49,274 for the three months ended March 31, 2015 and 2014, respectively.  Interest expense increased in 2015 primarily as a result of mortgage interest on The Greenhouse, which was purchased in October 2014.  The derivative loss relates to the change in the value of the derivative liability recorded during the first quarter 2014.  The decrease in the loss on the change in the fair value of the derivative liability from $647,640 for the three months ended March 31, 2014 to $22,233 for the three months period ended March 31, 2015 is primarily due to the decrease in Series C Warrants outstanding from 1,000,000 at March 31, 2014 to 185,000 at March 31, 2015.  On January 21, 2015, Full Circle executed its option to cashlessly exercise approximately 85% of its outstanding warrants in exchange for 660,263 shares of the Company’s common stock.  

Net Loss and Per Share Data

Net loss was $828,493 and $1,205,922 for the three months ended March 31, 2015 and 2014, respectively. Based on the weighted average number of common shares outstanding for the three months ended March 31, 2015 and 2014 of 13,095,465 and 13,659,997, respectively, net loss per share was $0.06 and $0.09 for the three months ended March 31, 2015 and 2014, respectively.  The Company’s net loss included approximately $522,000 and $956,000 for the three months ended March 31, 2015 and 2014, respectively, relating to non-cash items, primarily resulting from amortization of debt discount and deferred financing costs, loss in fair value of derivative liability and stock-based compensation expense.   

The Company, which was incorporated on June 3, 2013 (Inception), has incurred a loss since Inception resulting in an accumulated deficit of approximately $8,470,000 as of March 31, 2015 and further losses are anticipated in the development of its business. Accordingly, there is substantial doubt about the Company’s ability to continue as a going concern.  The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and, or, obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. There is no guarantee that the Company will be successful in achieving these objectives.

Liquidity and Capital Resources

The Company discusses its liquidity and capital resources below for the three months ended March 31, 2015 and 2014:

		2015		2014
Net cash used in operating activities	$	290,061	$	329,983
Amortization of debt discount and deferred financing costs (non-cash)		242,630		310,841
Issuance of stock for services (non-cash)		248,625		-
Changes in fair value of derivative liability, net (non-cash)		22,233		647,640
Net cash used in investing activities		13,253		8,250
Net cash provided by financing activities		237,466		1,795,663
Proceeds from short-term financing from related party		239,000		-
Proceeds from sale of common stock and warrants		-		400,000
Proceeds from sale of convertible notes		-		1,412,400

Operating Activities

During the three months ended March 31, 2015, cash flows used in operating activities were $290,061. During the first quarter 2015, the Company incurred net loss of $828,493, of which approximately $522,000 relates to non-cash items, primarily resulting from amortization of debt discount and deferred financing costs of $242,630, loss in fair value of derivative liability of $22,233 and stock-based compensation expense of $248,625.  Approximately $15,900 was used in a net of increases in inventory and prepayments and other assets, offset by an increase in accounts payable and accruals, an increase in deferred rental revenue and a decrease in accounts receivable, as the Company continues to improve its cash management procedures.  

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During the three months ended March 31, 2014, cash flows used in operating activities were $329,983. During the first quarter 2014, the Company incurred net loss of $1,205,922, of which approximately $956,000 related to non-cash items, primarily resulting from amortization of debt discount and deferred financing costs of $310,841 and loss in fair value of derivative liability of $647,640.  The Company used approximately $86,000 for increases in receivables, prepaid expenses and decreases in accounts payable and accruals.

Investing Activities

During the three months ended March 31, 2015, cash flows used in investing activities were $13,253 relating to construction in progress for The Greenhouse, which serves as the Company’s corporate headquarters and will be repurposed as a shared workspace and networking facility for companies who serve the cannabis industry.  During the three months ended March 31, 2014, cash flows used in investing activities were $8,250 relating to the purchase of office furniture, fixtures and equipment.

Financing Activities

During the three months ended March 31, 2015, cash provided by financing activities was $237,466, primarily as a result of an increase in short-term financing from Infinity Capital, LLC.  During the three months ended March 31, 2014, the Company raised net funding of $1,812,400 through its sale of warrants of $400,000, and issuance of convertible notes of $1,412,400.

Contractual Obligations

The Company had the following contractual obligations, including interest, as of March 31, 2015:

		Amounts Due in
Description		Total		2015		2016		2017		2018		2019		Thereafter
12% Convertible notes (3)	$	1,360,000	$	-	$	-	$	-	$	1,360,000	$	-	$	-
Mortgage on Pueblo Property	$	211,065	$	15,067	$	20,089	$	20,089	$	155,820	$	-	$	-
Mortgage on The Greenhouse, Denver, CO (1)	$	780,306	$	53,351	$	726,955	$	-	$	-	$	-	$	-
Senior secured note to Infinity Capital (2)	$	239,000	$	239,000	$	-	$	-	$	-	$	-	$	-
Office rental	$	27,333	$	9,639	$	13,238	$	4,456	$	-	$	-	$	-
TOTAL	$	2,617,704	$	317,057	$	760,282	$	24,545	$	1,515,820	$		$	-

(1)

Pursuant to the terms of the Company’s Greenhouse Mortgage with Evans Lendco.

(2)

Pursuant to the terms of the Company’s note with Infinity Capital.

(3)

As of December 1, 2015, all of the requirements for conversion of the Convertible Notes will have been met and the Company intends to elect its option to convert the remaining Convertible Notes on such date.

Critical Accounting Policies

Preparation of the Company’s financial statements requires us to make estimates and assumptions which affect the reported amounts of assets, liabilities, revenues and expenses. Note 1 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year-ended December 31, 2014 describes the significant accounting policies used in preparation of the Consolidated Financial Statements. On an ongoing basis, management evaluates the critical accounting policies used to prepare the Company’s consolidated financial statements, including, but not limited to, those related to:

·

revenue recognition;

·

conventional convertible debt;

·

derivative liabilities, beneficial conversion features and debt discounts;

·

fair value measurements;

·

use of estimates; and

·

going concern.

There have been no significant changes in these aforementioned critical accounting policies.

Off-Balance Sheet Arrangements

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

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ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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

The Company carried out an evaluation under the supervision and with the participation of management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of March 31, 2015, the end of the period covered by this report.  Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses discussed below.

Internal Control over Financial Reporting

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

·

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

·

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

·

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

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

Assessment of Internal Control over Financial Reporting

The Company’s management assessed the effectiveness of internal control over financial reporting as of March 31, 2015. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework (2013). Based on management’s assessment, management concluded that the above material weaknesses have not been remediated and exist at March 31, 2015.

Remediation of Material Weaknesses

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

·

Management is in the process of further enhancing the Company’s internal finance and accounting organizational structure, which includes engaging and hiring additional resources, and employing emerging technologies.

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·

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

·

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

Management understands that in order to remediate the material weaknesses, additional segregation of duties, changes in personnel, and technologies are necessary. The Company does not expect to have fully remediated these material weaknesses until management has tested those internal controls and found them to have been remediated.

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

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

Changes in Internal Control over Financial Reporting

There have been no changes in internal control over financial reporting identified in connection with the Company’s evaluation conducted of the effectiveness of internal control over financial reporting as of March 31, 2015 that occurred during the first fiscal quarter that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

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PART II

ITEM 1.

LEGAL PROCEEDINGS

None.

ITEM 1A.

RISK FACTORS

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

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In March 2015 the Company acquired IPG.  Pursuant to the terms of the IPG APA by and among the Company, GCS and IPG, the Company will deliver to the sole shareholder 500,000 restricted shares of the Company’s common stock, which will vest over a one year period. In addition, the Company delivered to IPG vested warrants to purchase an aggregate of 500,000 shares of the Company’s common stock for a term of three years.  The exercise prices are (i) $4.50 for warrants to purchase 250,000 shares of the Company’s common stock, and (i) $5.00 for warrants to purchase another 250,000 shares of the Company’s common stock.  

On May 1, 2015, the Company and Robert L. Frichtel entered into an Executive Employment Agreement (the “Frichtel Agreement”) and an Option Agreement (the “Frichtel Option Agreement”), pursuant to which Mr. Frichtel will receive options to purchase 300,000 shares of the Company’s common stock at a price of $3.75 per share (which price was based on the closing price of the Company’s common stock on May 1, 2015), 100,000 of which vested upon execution of the Frichtel Agreement, and provided that Mr. Frichtel remains an employee of the Company on each date, 100,000 of which will vest on May 1, 2016, and the remaining 100,000 will vest on May 1, 2017.  

On May 1, 2015, the Company and Full Circle entered into Amendment No. 2 to the Series C Warrants, pursuant to which Full Circle cashlessly exercised 160,000 warrants and received 100,000 shares of the Company’s common stock.  On May 4, 2015, Full Circle exercised its remaining warrants under the Series C Warrants to purchase 25,000 shares of the Company’s common stock for $4.00 per share.  There are no more warrants under the Series C Warrants outstanding.  

On May 7, 2015, the Company completed the closing on a private placement of $200,000 pursuant to a Promissory Note and Warrant Purchase Agreement (the “10% Agreement”) between the Company and certain accredited investors.  Under the 10% Agreement, the Company can sell up to $2,000,000 of notes to investors, each note with a denomination of a minimum of $50,000 (each such note, a “10% Note,” and collectively, the “10% Notes”).  The 10% Notes mature on May 1, 2016 and carry an interest rate of 10% per annum, with interest payable quarterly beginning on June 30, 2015.   Subject to the terms and conditions of the 10% Agreement, each investor is granted warrants equal to their Note principal divided by 2 (the “10% Warrants”).  The 10% Warrants shall be exercisable for a period of one year after grant date and have an exercise price of the Company’s closing price per share on the date of grant.  In connection with the balance of the 10% Notes issued at May 7, 2015, the Company granted 100,000 10% Warrants.  

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.

OTHER INFORMATION

None.

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Item 6.  Exhibits

Exhibits
10.1	Employment Agreement between the Company and Robert L. Frichtel
10.2	Incentive Stock Option Agreement between the Company and Robert L. Frichtel
31.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
32.2	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
101.INS	XBRL Instance Document*
101.SCH	XBRL Taxonomy Extension Schema Document*
101.CAL	XBRL Taxonomy Calculation Linkbase Document*
101.LAB	XBRL Taxonomy Label Linkbase Document*
101.PRE	XBRL Taxonomy Presentation Linkbase Document*
101.DEF	XBRL Taxonomy Definition Linkbase Document*
*	Filed herewith
**	This certification is being furnished solely to accompany this Quarterly Report pursuant to 18 U.S.C. Section 1350, and it is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934 and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

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SIGNATURES

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

	ADVANCED CANNABIS SOLUTIONS, INC.
Date: May 15, 2015	By:	/s/Robert Frichtel
		Robert Frichtel, Principal Executive Officer, and a Director
	By:	/s/ Brian Kozel
		Brian Kozel, Principal Financial and Accounting Officer

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EX-10.1

Exhibit 10.1

EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”), dated as of May 1, 2015 (the “Effective Date”), between Advanced Cannabis Solutions, a Colorado corporation (the “Company”), and ROBERT L. FRICHTEL(the “Executive”).

W I T N E S S E T H

WHEREAS, the Executive is currently employed by the Company as Chief Executive Officer; and

WHEREAS, the Company and the Executive desire to set forth the terms and conditions of the Executive’s continued employment with the Company as its President and Chief Executive Officer commencing as of the Effective Date.

NOW THEREFORE, in consideration of the foregoing, the mutual promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1. POSITION/DUTIES.

(a) During the Employment Term (as hereinafter defined), the Executive shall serve as the Chief Executive Officer of the Company.  In this capacity, the Executive shall have such duties, authorities and responsibilities commensurate with the duties, authorities and responsibilities of persons in similar capacities in similarly sized companies, and such other duties, authorities and responsibilities as the Board shall designate that are consistent with the Executive’s positions. The Executive shall report to the Board.

(b) During the Employment Term, the Executive shall devote all of his business time, energy and skill and his best efforts to the performance of his duties with the Company; provided, however, that the foregoing shall not prevent the Executive from (i) serving on the board of directors of non-profit organizations and, with the prior written approval of the Board, other companies, (ii) participating in charitable, civic, educational, professional, community or industry affairs or (iii) managing his and his family’s passive personal investments so long as such activities in the aggregate do not materially interfere or conflict with the performance of his duties hereunder or create a potential business conflict.

2. EMPLOYMENT TERM. The Executive’s term of employment under this Agreement (the “Employment Term”) shall be for a term commencing on the Effective Date and, unless terminated earlier as provided in Section 6, ending on December 31, 2018 (the “Expiration Date”).

3. BASE SALARY. The Company agrees to pay the Executive a base salary at an annual rate of not less than $150,000 payable in accordance with the regular payroll practices of the Company. The Executive’s base salary shall be subject to annual review by the Board (or a committee thereof) and may be increased, but not decreased, from time to time by the Board (or such committee). The base salary as determined herein from time to time shall constitute “Base Salary” for purposes of this Agreement.

4. BONUS. During the Employment Term, the Executive shall be eligible for an annual incentive payment (each an “Annual Bonus”) under the Company’s Executive 162(m) Bonus Plan, as amended or as may be amended from time to time, or any successor annual bonus plan (the “Bonus Plan”).

5. EMPLOYEE BENEFITS.

(a) Benefit Plans. The Executive shall be entitled to participate in any employee benefit plan that the Company has adopted or may adopt, maintain or contribute to for the benefit generally of its senior executives at a level commensurate with his position, subject to satisfying the applicable eligibility requirements. Notwithstanding the foregoing, the Company may modify or terminate any employee benefit plan at any time.

(b) Vacations. The Executive shall be entitled to an annual paid vacation of four weeks per calendar year (as prorated for partial years) in accordance with the Company’s policy on accrual and use applicable to senior executives.

(c) Business and Entertainment Expenses. Upon presentation of appropriate documentation, the Executive shall be reimbursed in accordance with the Company’s expense reimbursement policy for all reasonable and necessary business and entertainment expenses incurred in connection with the performance of his duties hereunder. In addition, within seventy-five (75) days following the Effective Date, upon presentation of appropriate documentation within forty-five (45) days after the Effective Date, the Company shall pay the reasonable (as determined by the Compensation Committee in its sole discretion) and documented attorneys’ and consultants’ fees and related costs incurred by the Executive in connection with the drafting, negotiation and execution of this Agreement.

1

6. TERMINATION. The Executive’s employment with the Company and the Employment Term shall terminate prior to the Expiration Date on the first of the following to occur prior to the Expiration Date:

(a) Disability. Upon 30 days’ prior written notice by the Company to the Executive of termination due to Disability if the Executive does not return to full-time continuous employment with the Company within such 30 days. For purposes of this Agreement, “Disability” shall be defined as the Executive’s becoming physically or mentally disabled, whether totally or partially, so that he has been unable to perform his material duties hereunder for a period of 180 days (including weekends and holidays) during any 365-day period.

(b) Death. Automatically on the date of death of the Executive.

(c) Cause. The Company, acting by the majority of the independent directors on the Board, may terminate the Executive’s employment hereunder for Cause immediately upon written notice by the Company to the Executive of a termination for Cause. “Cause” shall mean the Executive’s:

(i) refusal or willful failure to attempt in good faith to perform his duties for the Company (other than as a result of physical or mental incapacity);

(ii) gross negligence or willful misconduct with regard to the Company, its assets or employees of a material nature or any fraud, theft or material dishonesty with regard to the Company or in the performance of his duties for the Company;

(iii) willful misconduct which in the good faith judgment of the Board has or may materially damage the Company economically or reputation wise;

(iv) commission of any felony or any other crime involving fraud, dishonesty, securities law violations or moral turpitude, provided that any conviction for, or pleading guilty or nolo contendere to, any such felony or other crime shall conclusively be deemed acknowledgement by the Executive of commission thereof;

(v) failure to attempt in good faith to follow the legal written direction of the Board with regard to matters within the scope of his duties and responsibilities as chief executive officer; or

(vi) material breach of a material term of this Agreement or any other material agreement with the Company that is not cured within 15 days of the giving of written notice thereof.

The Executive may only be terminated for Cause by a vote of a majority of the independent directors on the Board and, prior to any termination for Cause, the Executive will be given 5 business days written notice specifying the alleged Cause event and will be entitled to appear (with counsel) before the independent directors on the Board to present information regarding his views on the Cause event. After providing the notice in foregoing sentence, the Board may suspend the Executive with pay until a final determination pursuant to this paragraph has been made. In the event of a Cause termination after a Change in Control, the Company shall bear the burden of proof by a preponderance of the evidence.

(d) Without Cause. Upon written notice by the Company to the Executive of an involuntary termination without Cause, other than for death or Disability.

(e) Good Reason. Upon written notice by the Executive to the Company of a termination for Good Reason provided that such notice is given within 60 days of the Good Reason event. “Good Reason” shall mean the occurrence of any of the following events, without the express written consent of the Executive, unless such events are cured by the Company within 30 days following written notification by the Executive to the Company that he intends to terminate his employment hereunder for one of the reasons set forth below:

(i) any reduction or diminution in the Executive’s title as Chief Executive Officer of the Company (for the avoidance of doubt, Executive’s not being elected as, or his removal from the position as a member of the Company’s board of directors shall not constitute Good);

(ii) any material reduction or diminution in the Executive’s then authorities, duties, or responsibilities with the Company;

(iii) a material reduction in the Executive’s Base Salary or benefits (but not including any reduction related to a broader compensation reduction by the Company that is not limited to any particular employee or executive);

2

 (iv) a material breach of this Agreement by the Company.

Notwithstanding the foregoing, the Executive agrees that, during any period of incapacity, the Company may appoint or temporarily assign his duties to another or others without such action resulting in Good Reason.

(f) Without Good Reason. Upon 60 days’ prior written notice by the Executive to the Company of the Executive’s voluntary termination of employment without Good Reason (which the Company may, in its sole discretion, make effective earlier than any notice date).

7. CONSEQUENCES OF TERMINATION.

(a) Disability. In the event the Executive’s employment is terminated due to Disability upon or prior to the Expiration Date, the Company shall pay or provide the Executive (i) any unpaid Base Salary through the date of termination paid in accordance with the Company’s normal payroll policies as if the Executive were an employee; (ii) any Annual Bonus earned but unpaid with respect to the fiscal year ending on or preceding the date of termination, paid when such Annual Bonus would have ordinarily been paid in accordance with the Bonus Plan; (iii) reimbursement for any unreimbursed expenses through the date of termination incurred and paid in accordance with the Company’s normal reimbursement procedures; (iv) any other amounts and benefits the Executive is entitled to receive under any employee benefit plan in accordance with the terms of the applicable plan (collectively items (i) through (iv) shall be hereafter referred to as the “Accrued Amounts”); (v) a pro-rata portion of the Executive’s Annual Bonus for the fiscal year in which the Executive’s termination occurs based on actual results for the fiscal year (determined by multiplying the amount of such bonus which would be due for the full fiscal year by a fraction, the numerator of which is the number of days during the fiscal year of termination that the Executive is employed by the Company and the denominator of which is 365), paid when such Annual Bonus would have ordinarily been paid in accordance with the Bonus Plan (the “Pro Rata Bonus”); (vi) full vesting of all equity awards granted to the Executive on or after the Effective Date; (vii) subject to Section 25(b) hereof and solely to the extent the Executive does not otherwise receive such coverage under any other medical benefits available to the Executive as a result of his Disability, if the Executive timely elects continuation coverage (“COBRA Coverage”) under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) for continuation of coverage under the Company’s group health insurance plans in which the Executive participated immediately prior to the date of termination (the “Health Plans”), the Company shall pay to the Executive monthly an amount equal to the difference of the Executive’s premium costs for such COBRA Coverage for the Executive and the Executive’s dependents minus the active employee rate under the Health Plans (excluding, for purposes of calculating cost, an employee’s ability to pay premiums with pre-tax dollars) being paid by the Executive at the time of termination of employment, if any, until the earliest of (x) 18 months from the date of termination, (y) the Executive’s ceasing to have a physical or mental disability that would have prevented him from performing his material duties hereunder and (z) the Executive and the Executive’s dependents otherwise ceasing to be eligible for COBRA Coverage (the “Disability COBRA Payments”); provided, that unless subject to further delay as set forth in Section 25(b), the first payment of the Disability COBRA Payments will made on the sixtieth (60^th) day after the date of termination and will include payment of any amounts that would otherwise be due prior thereto; and (viii) continued payment of the Make-Up Payments in accordance with Section 5(b) (including payment timing). Following a termination due to Disability all equity awards granted to the Executive prior to the Effective Date shall be governed in accordance with the terms of the applicable grant agreements.

(b) Death. In the event the Executive’s employment is terminated due to the Executive’s death upon or prior to the Expiration Date, the Company shall pay or provide to the Executive’s estate (i) the Accrued Amounts; (ii) the Pro Rata Bonus; (iii) full vesting of all equity awards granted to the Executive on or after the Effective Date; and (iv) subject to the Executive’s dependents timely election of COBRA Coverage under the Health Plans, the Company shall pay to the Executive’s dependents monthly an amount equal to the difference of the premium costs for such COBRA Coverage for the Executive’s dependents minus the active employee rate under the Health Plans (excluding, for purposes of calculating cost, an employee’s ability to pay premiums with pre-tax dollars) being paid by the Executive at the time of termination of employment, if any, until the earlier of (i) three (3) years from the date of the Executive’s death and (ii) the Executive’s dependents ceasing to be eligible for COBRA Coverage. Following a termination due to the Executive’s death all equity awards granted to the Executive prior to the Effective Date shall be governed in accordance with the terms of the applicable grant agreements.

(c) Termination For Cause Or Without Good Reason. In the event the Executive’s employment is terminated (i) by the Company for Cause, or (ii) by the Executive without Good Reason, the Company shall pay or provide to the Executive the Accrued Amounts. Following any such termination all equity awards granted to the Executive shall be governed in accordance with the terms of the applicable grant agreements.

(d) Termination Without Cause Or For Good Reason. In the event the Executive’s employment is terminated upon or prior to the Expiration Date (x) by the Company other than for Cause or (y) by the Executive for Good Reason, and Section 8(a) does not apply, the Company shall pay or provide to the Executive (i) the Accrued Amounts; and (ii) subject to Section 9:

3

(A) subject to Section 25(b), continued payments of Base Salary for twenty (20) months following the date of termination (the “Severance Payment”) paid in accordance with the Company’s normal payroll policies as if the Executive were an employee (but off employee payroll); provided, that unless subject to further delay as set forth in Section 25(b), the first payment of the Severance Payment will made on the sixtieth (60th) day after the date of termination and will include payment of any amounts that would otherwise be due prior thereto;

(B) the Pro Rata Bonus; and

(C) subject to Section 25(b) hereof, if the Executive timely elects COBRA Coverage under the Health Plans, the Company shall pay to the Executive monthly an amount equal to the difference of the Executive’s premium costs for such COBRA Coverage for the Executive and the Executive’s dependents minus the active employee rate under the Health Plans (excluding, for purposes of calculating cost, an employee’s ability to pay premiums with pre-tax dollars) being paid by the Executive at the time of termination of employment, if any, until the earliest of (I) eighteen (18) months from the date of termination, (II) the Executive becoming eligible for medical benefits from a subsequent employer, or (III) the Executive and the Executive’s dependents otherwise ceasing to be eligible for COBRA Coverage (the “Termination COBRA Payments”); provided, that unless subject to further delay as set forth in Section 25(b), the first payment of the Termination COBRA Payments will made on the sixtieth (60^th) day after the date of termination and will include payment of any amounts that would otherwise be due prior thereto.

Following any such termination all equity awards granted to the Executive shall be governed in accordance with the terms of the applicable grant agreements. Payments and benefits provided in this Section 7(d) shall be in lieu of any termination or severance payments or benefits for which the Executive may be eligible under any of the plans, policies or programs of the Company.

8. CHANGE IN CONTROL.

(a) Notwithstanding anything herein to the contrary, subject to Section 8(c), in the event a Change in Control occurs prior to the Expiration Date and the Executive’s employment is terminated by the Company without Cause or the Executive resigns for Good Reason within two (2) years following such Change in Control, then in lieu of the amounts and benefits under Section 7(d), the Company shall pay or provide to the Executive (i) the Accrued Amounts; and (ii) subject to Section 9:

(A) subject to Section 25(b), payment in an amount equal to twenty (20) months Base Salary, such payment to be made as follows: (x) if the Change in Control is not as a result of an event that constitutes a “change in control event” (a “409A Change in Control”) within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the regulations and guidance promulgated thereunder (collectively “Code Section 409A”), then such payment shall be paid to the Executive in equal installments for 20 months following the date of termination in accordance with the Company’s normal payroll policies as if the Executive were an employee (but off employee payroll); provided, that unless subject to further delay as set forth in Section 25(b), the first payment of such payment will made on the sixtieth (60^th) day after the date of termination and will include payment of any amounts that would otherwise be due prior thereto, and (y) if the Change in Control does result from an event that constitutes a 409A Change in Control, then the full amount of such payment shall be paid to the Executive in a lump sum on the 60^th day after the date of termination;

(B) the Pro Rata Bonus; and

(C) the Termination COBRA Payments; provided, that unless subject to further delay as set forth in Section 25(b), the first payment of the Termination COBRA Payments will made on the sixtieth (60^th) day after the date of termination and will include payment of any amounts that would otherwise be due prior thereto.

Following any such termination all equity awards granted to the Executive shall be governed in accordance with the terms of the applicable grant agreements.

(b) For purposes of this Agreement, “Change in Control” will mean the occurrence of one of the following events:

(i) any “person” (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes, after the Effective Date, a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company’s then outstanding securities eligible to vote for the election of the Board (the “Company Voting Securities”); provided, however, that an event described in this subsection (i) shall not be deemed to be a Change in Control if any of following becomes such a beneficial owner:

4

(A) the Company or any majority-owned subsidiary (provided, that this exclusion applies solely to the ownership levels of the Company or the majority-owned subsidiary),

(B) any tax-qualified, broad-based employee benefit plan sponsored or maintained by the Company or any majority-owned subsidiary,

(C) any underwriter temporarily holding securities pursuant to an offering of such securities, or

(D) any person pursuant to a Non-Qualifying Transaction (as defined below);

(ii) individuals who, on the Effective Date, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the Effective Date whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without objection to such nomination) shall be an Incumbent Director.

(iii) the consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its Subsidiaries that requires the approval of the Company’s stockholders, whether for such transaction or the issuance of securities in the transaction (a “Business Combination”), unless immediately following such Business Combination:

(A) 50% or more of the total voting power of:

(x) the corporation resulting from such Business Combination (the “Surviving Corporation”), or

(y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of 100% of the voting securities eligible to elect directors of the Surviving Corporation (the “Parent Corporation”),is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination;

(B) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation), is or becomes the beneficial owner, directly or indirectly, of 50% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation); and

(C) at least a majority of the members of the board of directors of the Parent Corporation (or if there is no Parent Corporation, the Surviving Corporation) following the consummation of the Business Combination were Incumbent Directors at the time of the Board’s approval of the execution of the initial agreement providing for such Business Combination

(any Business Combination which satisfies all of the criteria specified in (A), (B) and (C) above shall be deemed to be a “Non-Qualifying Transaction”); or

(iv) consummation of the sale of all or substantially all of the Company’s assets or stockholder approval of a liquidation or dissolution of the Company, unless the voting common equity interests of the acquirer of such assets or an ongoing entity (other than a liquidating trust), as the case may be, based on total voting power, are at least more than 50% beneficially owned, directly or indirectly, by the Company’s shareholders in substantially the same proportions as such shareholders owned the Company’s outstanding voting common equity interests immediately prior to such sale or liquidation and, if a plan of liquidation or dissolution, such ongoing entity assumes all existing obligations of the Company under this Plan.

Notwithstanding the foregoing, a Change in Control of the Company shall not be deemed to occur solely because any person acquires beneficial ownership of more than 50% of the Company Voting Securities, based on total voting power, as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding; provided, that, if after such acquisition by the Company such person becomes the beneficial owner of Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control of the Company shall then occur.

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 (c) Notwithstanding anything else herein, if any payment or benefit, within the meaning of Section 280G(b)(2) of the Code, to the Executive or for Executive’s benefit paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise in connection with, or arising out of, Executive’s employment with the Company or a change in ownership or effective control of the Company or of a substantial portion of its assets, would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), the amounts and benefits provided under this Agreement or otherwise that are subject to Section 280G of the Code as a result of the transaction will be automatically reduced to an amount that equals the product of 2.99 multiplied by the Executive’s “base amount” (as determined in accordance with Sections 280G and 4999 of the Code by the Company’s certified public accountants unless the Company and the Executive mutually agree to the appointment of an independent certified public accounting firm), such that the Executive will not be subject to the Excise Tax. Unless otherwise elected by the Executive, to the extent permitted under Code Section 409A, such reduction shall first be applied to any severance payments payable to the Executive under this Agreement in reverse order of receipt, then to the vesting on any equity, with underwater stock options first net withholding, and thereafter any in-the-money stock options starting from the stock options with smallest spread between fair market value and exercise price, and thereafter any restricted stock or restricted stock units.

9. RELEASE. Any and all amounts payable and benefits or additional rights provided pursuant to Sections 7(d)(iii) or 8(a)(iii) shall only be payable or provided if the Executive executes and delivers to the Company a general release of all claims against the Company in the form attached to the Agreement as Appendix A (the “Release”) (with such changes as the Company may request to support the legality and effectiveness of the Release). The Company shall provide the Executive with a copy of the Release within seven (7) days following the Executive’s date of termination and the Executive will be required to provide the Company with an executed copy of the Release that has become effective within sixty (60) days following the Executive’s date of termination.

10. RESTRICTIVE COVENANTS.

(a) Confidentiality. The Executive agrees that he shall not, directly or indirectly, use, make available, sell, disclose or otherwise communicate to any person, other than in the reasonable good faith performance of his duties and for the benefit of the Company, either during the period of the Executive’s employment or at any time thereafter, any nonpublic, proprietary or confidential information, knowledge or data relating to the Company, any of its subsidiaries, affiliated companies or businesses, which shall have been obtained by the Executive during the Executive’s employment by the Company. The foregoing shall not apply to information that (i) was known to the public prior to its disclosure to the Executive; (ii) becomes generally known to the public subsequent to disclosure to the Executive through no wrongful act of the Executive or any representative of the Executive; or (iii) the Executive is required to disclose by applicable law, regulation or legal process (provided that the Executive provides the Company with prior notice of the contemplated disclosure and reasonably cooperates with the Company at its expense in seeking a protective order or other appropriate protection of such information).

(b) Nonsolicitation. During the Executive’s employment with the Company and for the 12 month period thereafter, the Executive agrees that he will not, except in the furtherance of his duties hereunder, directly or indirectly, individually or on behalf of any other person, firm, corporation or other entity, (i) solicit or hire any employees, representatives or agents of the Company (or any of its affiliates) or (ii) solicit any of the Company’s customers.

(c) Noncompetition. The Executive acknowledges that he performs services of a unique nature for the Company that are irreplaceable, and that his performance of such services to a competing business will result in irreparable harm to the Company. Accordingly, during the Executive’s employment hereunder and for the 12 month period thereafter, the Executive agrees that the Executive will not, (i) enter the employ of (whether as an employee, consultant, independent contractor or otherwise, and whether or not for compensation), or render any services to, any person, firm, corporation or other entity, in whatever form, engaged or actively planning to be engaged in any Competitive Business, (ii) directly or indirectly, own, manage, operate, control or otherwise engage in such a Competitive Business for his own account, or (iii) directly or indirectly, become interested in a Competitive Business as an individual, partner, shareholder, director, officer, principal, agent, trustee or in any other relationship or capacity. “Competitive Business” will mean, as of any date, any business competitive with any business then being conducted by the Company and operating in some or all of the same geographic areas; provided that, upon the termination of the Executive’s employment such determinations shall thereafter be determined as of the date of the termination. The foregoing shall not be violated by the Executive’s providing services to a noncompetitive portion of a group of related businesses which noncompetitive portion consists of less than 20% of the overall revenues of such group of related businesses measured based on the fiscal year prior to the fiscal year in which the Executive had his initial relationship with such noncompetitive portion, nor by ownership of less than 2% of public company stock or debt or a passive interest of less than 2% in a pooled account, such as a hedge fund, private equity fund or mutual fund.

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(d) Nondisparagment. During the Employment Term and thereafter, the Executive agrees not to disparage or encourage or induce others to disparage the Company or any of its affiliates or any of its and their past and present officers, directors, employees, products or services. For purposes of this Agreement, the term “disparage” includes, without limitation, comments or statements to the press, to the Company or any of its affiliates or any of its or their officers, directors, or employees or to any individual or entity with whom the Company or any of its affiliates has a business relationship (including, without limitation, any vendor, supplier, customer or distributor of the Company or any of its affiliates) that would adversely affect in any manner: (i) the conduct of any business of the Company or any of its affiliates (including, without limitation, any business plans or prospects) or (ii) the business reputation of the Company or any of its affiliates or any of its and their officers, directors, employees, products or services. Notwithstanding the foregoing, this Section 10(d) shall not apply to truthful statements made in the course of sworn testimony in administrative, judicial or arbitral proceedings or normal competitive statements.

(e) Reformation. If it is determined by a court of competent jurisdiction in any state that any restriction in this Section 10 is excessive in duration or scope or is unreasonable or unenforceable under the laws of that state, it is the intention of the parties that such restriction may be modified or amended by the court to render it enforceable to the maximum extent permitted by the law of that state.

 (f) Survival of Provisions. The obligations contained in this Section 10 shall survive the termination or expiration of the Executive’s employment with the Company and shall be fully enforceable thereafter.

11. COOPERATION. Upon the receipt of reasonable notice from the Company (including outside counsel), the Executive agrees that while employed by the Company and thereafter, the Executive will respond and provide information with regard to matters in which he has knowledge as a result of his employment with the Company, and will provide reasonable assistance to the Company, its affiliates and their respective representatives in defense of any claims that may be made against the Company or its affiliates, and will assist the Company and its affiliates in the prosecution of any claims that may be made by the Company or its affiliates, to the extent that such claims may relate to the period of the Executive’s employment with the Company. The Executive agrees to promptly inform the Company if he becomes aware of any lawsuits involving such claims that may be filed or threatened against the Company or its affiliates. The Executive also agrees to promptly inform the Company (to the extent he is legally permitted to do so) if he is asked to assist in any investigation of the Company or its affiliates (or their actions), regardless of whether a lawsuit or other proceeding has then been filed against the Company or its affiliates with respect to such investigation, and shall not do so unless legally required. Upon presentation of appropriate documentation, the Company shall pay or reimburse the Executive for all reasonable out-of-pocket travel, duplicating or telephonic expenses incurred by the Executive in complying with this Section 11.

12. EQUITABLE RELIEF AND OTHER REMEDIES.

(a) The Executive acknowledges and agrees that the Company’s remedies at law for a breach or threatened breach of any of the provisions of Section 10 or Section 11 would be inadequate and, in recognition of this fact, the Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to obtain equitable relief in the form of specific performance, temporary restraining order, a temporary or permanent injunction or any other equitable remedy which may then be available.

(b) In the event of a violation of Section 10 or 11 of this Agreement, any severance being paid to the Executive by the Company pursuant to this Agreement (or any successor agreement) or otherwise shall immediately cease.

13. NO ASSIGNMENTS.

(a) This Agreement is personal to each of the parties hereto. Except as provided in Section 13(b) below, no party may assign or delegate any rights or obligations hereunder without first obtaining the written consent of the other party hereto.

(b) The Company may assign this Agreement to any successor to all or substantially all of the business and/or assets of the Company provided the Company shall require such successor to expressly assume and agree to perform this Agreement and, if applicable, any Change in Control Agreement (but without creating any rights on a second change in control), in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.

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14. NOTICE. For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given (i) on the date of delivery if delivered by hand, (ii) on the date of transmission, if delivered by confirmed facsimile, (iii) on the first business day following the date of deposit with the overnight delivery service if delivered by guaranteed overnight delivery service, or (iv) on the fourth business day following the date mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Executive:

Robert Frichtel

2516 Pathfinder Rd

Florissant, CO 80816

At the last address (or to the facsimile number) shown on the records of the Company;

If to the Company:

Advanced Cannabis Solutions’

6565 E. Evans Ave

Denver, CO, 80224

Attn: Chief Operating Officer

or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

15. SECTION HEADINGS; INCONSISTENCY. The section headings used in this Agreement are included solely for convenience and shall not affect, or be used in connection with, the interpretation of this Agreement. In the event of any inconsistency between the terms of this Agreement and any form, award, plan or policy of the Company, the terms of this Agreement shall control.

16. SEVERABILITY. The provisions of this Agreement shall be deemed severable and the invalidity of unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.

17. COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instruments.

18. ARBITRATION. Any dispute or controversy arising under or in connection with this Agreement or the Executive’s employment with the Company, other than injunctive relief under Section 12 hereof, shall be settled exclusively by arbitration, conducted before a single arbitrator in New York, New York (applying New York law) in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association then in effect. The decision of the arbitrator will be final and binding upon the parties hereto. Judgment may be entered on the arbitrator’s award in any court having jurisdiction. The parties acknowledge and agree that in connection with any such arbitration and regardless of outcome (a) each party shall pay all its own costs and expenses, including without limitation its own legal fees and expenses, and (b) joint expenses shall be borne equally among the parties; provided, however, in the event that the arbitrator determines that the Executive is the prevailing party, then the Company shall pay or reimburse all reasonable legal fees and expenses incurred by the Executive.

19. INDEMNIFICATION. The Company hereby agrees to indemnify the Executive and hold him harmless to the extent provided under the by-laws of the Company against and in respect to any and all actions, suits, proceedings, claims, demands, judgments, costs, expenses (including reasonable attorney’s fees), losses, and damages resulting from the Executive’s good faith performance of his duties and obligations with the Company. This obligation shall survive the termination of the Executive’s employment with the Company.

20. LIABILITY INSURANCE. The Company shall cover the Executive under directors and officers liability insurance both during and, while potential liability exists, after the term of this Agreement in the same amount and to the same extent as the Company covers its other officers and directors.

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21. MISCELLANEOUS. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer or director as may be designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement supersedes any and all other agreements, either oral or in writing, between the parties hereto (including without limitation the Prior Agreement) with respect to the employment of the Executive by the Company and, together with all exhibits hereto sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of New York without regard to its conflicts of law principles.

22. NO MITIGATION; TERMINATION CLAIM LIMIT. In no event shall the Executive be obliged to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, nor shall the amount of any payment hereunder be reduced by any compensation earned by the Executive as a result of employment by another employer, except as provided in Section 12(b) hereof. Any claim by the Executive for damages as a result of a termination based on Section 6(c)(iv) shall not be brought prior to resolution of the criminal case and the Executives damages shall be limited to (a) the monetary amounts the Executive would have received in the event of a termination without Cause and (b) the intrinsic value on the termination date of any equity vested at, or upon, such termination that the Executive forfeited or did not receive because of the classification of the termination for Cause (and the Executive shall have no right to the equity, which shall be cancelled upon the termination for Cause).

23. REPRESENTATIONS. The Executive represents and warrants to the Company that he has the legal right to enter into this Agreement and to perform all of the obligations on his part to be performed hereunder in accordance with its terms and that he is not a party to any agreement or understanding, written or oral, which could prevent him from entering into this Agreement or performing all of his obligations hereunder.

24. WITHHOLDING. The Company may withhold from any and all amounts payable under this Agreement such federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.

25. SECTION 409A COMPLIANCE.

(a) The intent of the parties is that payments and benefits under this Agreement comply with, or be exempt from, Code Section 409A and, accordingly, to the maximum extent permitted, this Agreement shall be limited, construed and interpreted in accordance with such intent. If the Executive notifies the Company (with specificity as to the reason therefore) that the Executive believes that any provision of this Agreement (or of any award of compensation, including equity compensation or benefits) would cause the Executive to incur any additional tax or interest under Code Section 409A and the Company concurs with such belief or the Company (without any obligation whatsoever to do so) independently makes such determination, and modifying such provision would avoid such additional tax or interest, the Company shall, after consulting with the Executive, reform such provision to try to comply with Code Section 409A through good faith modifications to the minimum extent reasonably appropriate to conform with Code Section 409A. To the extent that any provision hereof is modified in order to comply with Code Section 409A, such modification shall be made in good faith and shall, to the maximum extent reasonably possible, maintain the original intent and economic benefit to the Executive and the Company of the applicable provision without violating the provisions of Code Section 409A.

 (b) A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination is also a “Separation from Service” within the meaning of Code Section 409A and, for purposes of any such provision of this Plan, references to a “termination,” “termination of employment” or like terms shall mean Separation from Service. Notwithstanding any provision to the contrary in this Agreement, if the Executive is deemed on the date of his termination to be a “specified employee” within the meaning of that term under Code Section 409A(a)(2)(B) and using the identification methodology selected by the Company from time to time, or if none, the default methodology set forth in Code Section 409A, then with regard to any payment or the providing of any benefit that constitutes “non-qualified deferred compensation” pursuant to Code Section 409A that is payable due to the Executive’s Separation from Service, to the extent required to be delayed in compliance with Code Section 409A(a)(2)(B), such payment or benefit shall not be made or provided to the Executive (subject to the last sentence of this Section 25(b)) prior to the earlier of (i) the expiration of the six (6)-month period measured from the date of the Executive’s Separation from Service, and (ii) the date of the Executive’s death (the “Delay Period”). For avoidance of doubt, the Severance Payment shall not be treated as non-qualified deferred compensation that is required to be delayed in compliance with Code Section 409A(a)(2)(B) to the extent that it meets the exemption set forth in Department of Treasury Regulation Section 1.409A-1(b)(9)(iii) (for separation pay due to involuntary separation from service) and only that portion, if any, of the Severance Payment that exceeds the exempt amount shall be subject the delay, if any, required pursuant to the preceding sentence. On the first day of the seventh month following the date of the Executive’s Separation from Service or, if earlier, on the date of the Executive’s death, all payments delayed pursuant to this Section 25(b) (whether they

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would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to the Executive in a lump sum, and any remaining payments and benefits due to the Executive under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein. Notwithstanding the foregoing, to the extent that the provision of any welfare benefits provided to the Executive following his Separation from Service will be treated as non-qualified deferred compensation that is required to be delayed (after taking into account the exemption in Department of Treasury Regulation Section 1.409A-1(b)(9)(v)) but would not be required to be delayed if the premiums therefor were paid by the Executive, the Executive shall pay the full cost of the premiums for such welfare benefits during the Delay Period and the Company shall pay the Executive an amount equal to the amount of such premiums paid by the Executive during the Delay Period promptly after its conclusion.

(c) In no event whatsoever shall the Company be liable for any additional tax, interest or penalties that may be imposed on the Executive by Code Section 409A or any damages for failing to comply with Code Section 409A.

(d) To the extent any reimbursement of costs and expenses provided for under this Agreement constitutes taxable income to the Executive for Federal income tax purposes, such reimbursements shall be made no later than December 31 of the calendar year next following the calendar year in which the expenses to be reimbursed are incurred.

(e) With regard to any provision herein that provides for reimbursement of expenses or in-kind benefits, except as permitted by Code Section 409A, (i) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, provided that the foregoing clause (ii) shall not be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limit related to the period the arrangement is in effect.

(f) If under this Agreement, an amount is to be paid in two or more installments, for purposes of Code Section 409A, each installment shall be treated as a separate payment.

(g) Whenever a payment under the Agreement specifies a payment period with reference to a number of days, the actual date of payment within the specified period shall be within the sole discretion of the Company.

(h) To the extent that this Agreement provides for your indemnification by the Company and/or the payment or advancement of costs and expenses associated with indemnification, any such amounts shall be paid or advanced to the Executive only in a manner and to the extent that such amounts are exempt from the application of Code Section 409A in accordance with the provisions of Treasury Regulation 1.409A-1(b)(10) or that are provided in accordance with Code Section 409A.

26. CLAWBACKS. The Executive hereby acknowledges and agrees that he is subject to Section 304 of the Sarbanes-Oxley Act of 2002, and that pursuant thereto he may under certain circumstances be obligated to pay back to the Company certain amounts previously received by him. In addition, the Executive hereby acknowledges and agrees that he shall be subject to any clawback policy adopted or implemented by the Company in respect of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and such regulations as are promulgated thereunder from time to time to the extent required by the Act and the implementing regulations.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

Company:

Advanced Cannabis Solutions, Inc.

By: /s/ Michael Feinsod

Title: Chairman

Executive:

Robert L. Frichtel

By: /s/ Robert L. Frichtel

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EX-10.2

Exhibit 10.2

ADVANCED CANNABIS SOLUTIONS, INC.

2014 EQUITY INCENTIVE PLAN

Incentive Stock Option Agreement

This INCENTIVE STOCK OPTION AGREEMENT (this “Agreement”), made and entered into on the 1st day of May, 2015 (the “Grant Date”), by and between Robert L. Frichtel (the “Participant”) and Advanced Cannabis Solutions, Inc., a Colorado corporation (the “Company”), sets forth the terms and conditions of stock options issued to the Participant pursuant to the Company's 2014 Equity Incentive Plan (the “Plan”) and this Agreement, which options have been approved by the Company’s Board of Directors. Any capitalized terms used but not defined herein shall have the meaning prescribed in Annex A or in the Plan.

1.

Grant of Stock Option.

Subject to the provisions of this Agreement and the Plan, the Company hereby grants to the Participant 300,000 incentive stock options (the “Options”) to purchase up to 300,000 shares of the Company's common stock, $0.001 par value per share (the “Common Stock”). The Options are granted as of the Grant Date pursuant to, and subject to the terms and conditions of, the Plan.

2.

Exercise Price.

The exercise price per share of Common Stock subject to the Options is $3.75 (the “Exercise Price”).

3.

Vesting.

Subject to Section 4 hereof, the Options shall vest in equal annual installments over a period of three years with the first installment of 100,000 options to purchase 100,000 shares of Common Stock vesting upon execution of this Agreement, and each subsequent installment vesting annually thereafter so long as the Participant continuously remains an employee, officer, director, or consultant of the Company from the Grant Date through such date(s). The Options shall be exercisable on any date to the extent vested and outstanding on such date. For purposes of this Agreement, employment or service relationship with the Company shall include employment with or provision of services to the Company's affiliates (including Subsidiaries) and/or its successors. As set forth in Section 12 herein, nothing in this Agreement or the Plan shall confer upon the Participant any right to continue in the employ or service of the Company or any of its affiliates (including Subsidiaries) or interfere in any way with the right of the Company or any such affiliates (including Subsidiaries) to terminate the Participant's employment or service relationship at any time.

4.

Termination of Employment or Service.

(a)

In the event of the Participant's termination of employment or service relationship, whether as an employee, officer, director or consultant, by either the Company or its affiliates (including Subsidiaries) without Cause, or by the Participant, any portion of the Options that has not vested as of the date of such termination of employment or service relationship shall immediately expire, and the vested Options shall expire within 90 days after such termination of employment or service relationship. In the event of the Participant's termination of employment or service relationship by reason of the Participant's death or Disability, the vested Options shall expire within 180 days after such termination of employment or service relationship.

(b)

In the event of the Participant's termination of employment or service relationship, whether as an employee, officer, director or consultant, by the Company or its affiliates (including Subsidiaries) for Cause, any portion of the Options that is outstanding as of the date of such termination of employment or service relationship shall immediately be forfeited.

5.

Term of Options.

All unexercised Options shall expire as to all shares of Common Stock underlying the Options on May 1, 2019 (the “Expiration Date”), unless sooner terminated as provided in Section 4 hereof.

6.

Method of Stock Option Exercise.

(a)

The Options may be exercised during their term, in whole or in part, to the extent they have become vested and exercisable pursuant to Sections 3 and/or 4 and have not yet been forfeited or expired, by the Participant providing notice in writing to the Company, signifying the Participant’s election to exercise the Options (the “Notice of Exercise”). The Notice of Exercise shall be in such manner and on such form as designated by the Company and pursuant to procedures established by the Company.

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(b)

The payment of the Exercise Price shall be subject to the following:

(i)

Payment of Exercise Price. The Exercise Price shall be payable in cash or by wire transfer to the Company’s bank account, for the full purchase price of the shares being purchased, plus such amount, if any, as is required for withholding taxes and for fees related to any agent(s), if applicable.

(ii)

If requested by the Company, a written acknowledgement by the Participant, in the form contained in the Notice of Exercise that an investment in the Common Stock of the Company involves a high degree of risk, that the Participant has received a copy of the Company's financial statements for the most recently ended fiscal year for which such statement is available (which are available at www.sec.gov), and that the Participant has had the opportunity to ask questions of management concerning the Company prior to the exercise of the Options (the Company to provide such information as the Participant may reasonably request in writing, provided that such information has been disclosed to the public).

(iii)

The Exercise Price per share of Common Stock purchased upon the exercise of the Options shall be paid at the time of such exercise.

(c)

The Company may cause each certificate evidencing the purchased Common Stock to be endorsed with one or more legends setting forth the restrictions on transfer or otherwise of such Common Stock.

(d)

Certificates for shares of the Common Stock so purchased will be issued as soon as practicable. The Company, however, shall not be required to issue or deliver a certificate for any shares until it has complied with all requirements of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, any stock exchange on which the Company’s Common Stock may then be listed and all applicable state laws in connection with the issuance or sale of such shares or the listing of such shares on said exchange. Until the issuance of the certificate for such shares, the Participant, or such other person as may be entitled to exercise these Options, shall have none of the rights of a stockholder with respect to shares subject to the Options.

7.

Taxes. Participant understands that, upon the exercise of the Options, Participant may recognize income, for federal and state income tax purposes. The acceptance of the shares underlying the Options by the Participant shall constitute an agreement by the Participant to report such income in accordance with then applicable law and to cooperate with the Company in establishing the amount of such income and corresponding deduction to the Company for its income tax purposes. Withholding for federal or state income and employment tax purposes will be made, if and as required by law, from Participant’s then current compensation, or, if such current compensation is insufficient to satisfy withholding tax liability, the Company may require the Participant to make a cash payment to cover such liability as a condition of the exercise of the Option.

8.

Non-transferability. The Options shall not be transferable by the Participant (as defined below) other than by will or by the laws of descent and distribution. The Options shall be exercisable, subject to the terms of the Plan and this Agreement, only by the Participant, the Participant's estate or beneficiary, the guardian or legal representative of the Participant, or any person to whom such Options are transferred pursuant to this Section 8.  For purposes of this Section 8, the term “Participant” includes such guardian, legal representative and other permitted transferee.

9.

Successors, Assigns and Transferees. This Agreement shall be binding upon, and inure to the benefit of, the parties hereto and each of their respective successors, assigns and permitted transferees (including, upon the death of the Participant, the Participant's estate).

10.

Administration. The authority to manage and control the operation and administration of this Agreement shall be vested in the Committee, and the Committee shall have all powers with respect to this Agreement as it has with respect to the Plan.  In the event of any question or controversy relating to the terms of the Plan and this Agreement, the decision of the Committee shall be conclusive.

11.

Incorporation of Plan. Subject to the limitations contained in Section 10 of this Agreement, all terms and conditions of the Plan are incorporated herein and made part hereof as if stated herein. The Participant may obtain a copy of the Plan by contacting the Company's Chief Financial Officer.

12.

Not an Employment or Service Contract. Neither this Agreement nor any Options, or the Plan, shall confer on the Participant any right with respect to continuance of employment or other service with the Company or any of its affiliates (including Subsidiaries), nor shall they interfere in any way with any right(s) that the Company or any such affiliates (including Subsidiaries) would otherwise have to terminate or modify the terms of the Participant's employment or other service, at any time.  

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13.

Insider Trading Policy. The Participant hereby certifies as to his / her agreement to comply with any policies, instructions, guidelines or procedures covering trading in the Company’s securities that the Company adopts from time to time, as may relate to the Options and underlying shares issued hereunder.

14.

Exercise on Certain Record Dates. Notwithstanding anything to the contrary contained in this Agreement or the Plan, in the event the Company sets a record date (“Record Date”) in connection with a distribution of bonus shares or dividends, rights offering, stock split, reverse stock split or capital reduction (each an “Event”), the Participant shall not be eligible to exercise the Options on the Record Date.

15.

Integration. This Agreement and the other documents referred to herein, including without limitation the Plan, or delivered pursuant hereto, which form a part hereof contain the entire understanding of the parties with respect to their subject matter. There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth herein. This Agreement, including without limitation the Plan, supersedes all prior agreements and understandings between the parties with respect to its subject matter.

16.

Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but which together constitute one and the same instrument. Notwithstanding the foregoing, any duly authorized officer of the Company may execute this Agreement by providing an appropriate facsimile signature and any counterpart or amendment hereto containing such facsimile signature shall for all purposes be deemed an original instrument duly executed by the Company.

17.

Modification; Waiver. No provision of this Agreement may be amended, modified, or waived unless such amendment or modification is agreed to in writing and signed by the Participant and by a duly authorized officer of the Company, and such waiver is set forth in writing and signed by the party to be charged. No waiver by either party hereto at any time of any breach by the other party hereto of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

THIS AGREEMENT SHALL BE NULL AND VOID AB INITIO, AND THE GRANT OF OPTIONS REFLECTED HEREIN, SHALL BE DEEMED FORFEITED, UNLESS THE COMPANY RECEIVES, WITHIN TWO WEEKS OF ITS TENDER OF THIS AGREEMENT TO THE PARTICIPANT, ONE COPY HEREOF BEARING THE PARTICIPANT’S ORIGINAL COUNTERSIGNATURE BELOW.

3

IN WITNESS WHEREOF, the Participant has executed this Agreement on the Participant's own behalf, thereby representing that the Participant has carefully read and understands this Agreement and the Plan as of the day and year first written above, and the Company has caused this Agreement to be executed in its name and on its behalf, all as of the date first written above.

ADVANCED CANNABIS SOLUTIONS, INC.
By:	/s/ Michael Feinsod
Name:	Michael Feinsod
Title:	Chairman

Agreed to and Accepted

this 1st day of May, 2015

/s/ Robert L. Frichtel          

Robert L. Frichtel

4

Annex A

Certain Definitions

A.

“Cause” shall only mean

(i)

the willful and continued failure of the Participant to perform substantially the Participant’s duties (other than any such failure resulting from bodily injury or disease or any other incapacity due to mental or physical illness) after a written demand for substantial performance is delivered to the Participant by the Company, which specifically identifies the manner in which the Company believes the Participant has not substantially performed the Participant’s duties; or

(ii)

the willful engaging by the Participant in illegal conduct or gross misconduct that is materially and demonstrably detrimental to the Company and/or its affiliates (including Subsidiaries), monetarily or otherwise.

For purposes of this provision, no act, or failure to act, on the part of the Participant shall be considered “willful” unless done, or omitted to be done, by the Participant in bad faith or without reasonable belief that the Participant’s action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board, upon the instructions of the Chairman or another Board Member of the Company, upon the instructions of the Company's Chief Executive Officer or Chief Financial Officer, or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Participant in good faith and in the best interests of the Company and its affiliates (including Subsidiaries).

(iii)

the Participant’s conviction of, or plea of nolo contendere to, any felony of theft, fraud, embezzlement or violent crime.

B.

“Disability” shall mean the absence of the Participant from the Participant’s duties under his employment or service relationship on a full-time basis for an aggregate of 180 days within any given period of 270 consecutive days (in addition to any statutorily required leave of absence and any leave of absence approved by the Company) as a result of incapacity of the Participant, despite any reasonable accommodation required by law, due to bodily injury or disease or any other mental or physical illness, which will, in the opinion of a physician selected by the Company or its insurers and acceptable to the Participant or the Participant’s legal representative, be permanent and continuous during the remainder of the Participant’s life.

5

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Robert Frichtel, certify that;

1.      I have reviewed this quarterly report on Form 10-Q of Advanced Cannabis Solutions, Inc.;

2.      Based on my knowledge, this report, does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by the report;

3.      Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.      The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)      Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)      Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)      Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)      Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.      The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)      All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)      Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 15, 2015	By:	/s/ Robert Frichtel
		Robert Frichtel, Principal Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Brian Kozel, certify that;

1.      I have reviewed this quarterly report on Form 10-Q of Advanced Cannabis Solutions, Inc.;

2.      Based on my knowledge, this report, does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by the report;

3.      Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.      The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)      Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)      Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)      Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)      Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.      The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)      All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)      Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 15, 2015	By:	/s/ Brian Kozel
		Brian Kozel, Principal Financial and Accounting Officer

EX-32.1

EXHIBIT 32.1

In connection with the quarterly report of Advanced Cannabis Solutions, Inc., (the “Company”) on Form 10-Q for the quarter ended March 31, 2015 as filed with the Securities Exchange Commission on the date hereof (the “Report”), I, Robert Frichtel, the Principal Executive Officer of the Company, certify pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 15, 2015	By:	/s/ Robert Frichtel
		Robert Frichtel, Principal Executive Officer

EX-32.2

EXHIBIT 32.2

In connection with the quarterly report of Advanced Cannabis Solutions, Inc., (the “Company”) on Form 10-Q for the quarter ended March 31, 2015 as filed with the Securities Exchange Commission on the date hereof (the “Report”), I, Brian Kozel, the Principal Financial Officer of the Company, certify pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

Date: May 15, 2015	By:	/s/ Brian Kozel
		Brian Kozel, Principal Financial and Accounting Officer

XML

BUSINESS SEGMENTS (Details) (USD $)	3 Months Ended
	Mar. 31, 2015 segment	Mar. 31, 2014	Dec. 31, 2014
Segment Reporting Information [Line Items]
Net revenues	$ 42,720	$ 48,765
Net loss	(828,493)	(1,205,922)
Property, Plant and Equipment, Net	1,716,476		1,707,410
Other Assets	2,208,324
Depreciation	9,007	3,116
Number of Reportable Segments	3
Operating Segments [Member]
Segment Reporting Information [Line Items]
Net revenues	42,720	48,765
Property, Plant and Equipment, Net	1,722,138
Other Operating Income (Expense), Net	871,213	1,254,687
Income (Loss) from Continuing Operations Attributable to Parent	(828,493)	(1,205,922)
Finance And Real Estate [Member]
Segment Reporting Information [Line Items]
Other Assets	18,319
Depreciation	9,007	3,116
Finance And Real Estate [Member] | Operating Segments [Member]
Segment Reporting Information [Line Items]
Net revenues	26,677	28,765
Property, Plant and Equipment, Net	1,710,814
Other Operating Income (Expense), Net	77,530	22,718
Income (Loss) from Continuing Operations Attributable to Parent	(50,853)	6,047
Wholesale Supply [Member]
Segment Reporting Information [Line Items]
Other Assets	81,577
Depreciation	0	0
Wholesale Supply [Member] | Operating Segments [Member]
Segment Reporting Information [Line Items]
Net revenues	12,789	0
Property, Plant and Equipment, Net	0
Other Operating Income (Expense), Net	24,653	0
Income (Loss) from Continuing Operations Attributable to Parent	(11,855)	0
Security [Member]
Segment Reporting Information [Line Items]
Other Assets	1,887,000
Depreciation	0
Corporate and Other [Member]
Segment Reporting Information [Line Items]
Other Assets	215,766
Depreciation	0	0
Real Estate [Member] | Operating Segments [Member]
Segment Reporting Information [Line Items]
Net revenues	3,245	0
Property, Plant and Equipment, Net	0
Other Operating Income (Expense), Net	13,333	0
Income (Loss) from Continuing Operations Attributable to Parent	(10,088)	0
ConsultingServices [Member] | Operating Segments [Member]
Segment Reporting Information [Line Items]
Net revenues	0	20,000
Property, Plant and Equipment, Net	5,662
Other Operating Income (Expense), Net	755,697	1,231,969
Income (Loss) from Continuing Operations Attributable to Parent	$ (755,697)	$ (1,211,969)

XML

DERIVATIVE WARRANT LIABILITY (Details)	3 Months Ended
	Mar. 31, 2015
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Fair Value Assumptions, Risk Free Interest Rate	0.56%
Expected dividend yield	0.00%
Expected term (in years)	1 year 9 months 22 days
Expected volatility	135.00%

XML

STOCKHOLDERS' EQUITY (Details 1) (USD $)	3 Months Ended
	Mar. 31, 2015
Class of Warrant or Right [Line Items]
Exercise Price	$ 6.68
Warrants Outstanding	2,450,700
Weighted Average Life of Outstanding Warrants in Months	21 years 11 months 1 day
Series B Warrants
Class of Warrant or Right [Line Items]
Exercise Price	$ 5.00
Warrants Outstanding	42,700
Weighted Average Life of Outstanding Warrants in Months	43 months
Investment Warrants Expiration Date	Oct. 31, 2018
Series A Warrants
Class of Warrant or Right [Line Items]
Exercise Price	$ 10.00
Warrants Outstanding	973,000
Weighted Average Life of Outstanding Warrants in Months	16 months
Investment Warrants Expiration Date	Jul. 31, 2016
Series C Warrants
Class of Warrant or Right [Line Items]
Exercise Price	$ 4.00
Warrants Outstanding	185,000
Weighted Average Life of Outstanding Warrants in Months	22 months
Investment Warrants Expiration Date	Jan. 21, 2017

XML

BUSINESS ACQUISITION BUSINESS ACQUISITION (Details) (USD $)	3 Months Ended
	Mar. 31, 2015
Business Acquisition [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	10,000,000
IPG $4.50 Warrants [Member]
Business Acquisition [Line Items]
Class of Warrant or Right, Exercise Price of Warrants or Rights	$ 4.50
IPG $5.00 Warrants [Member]
Business Acquisition [Line Items]
Business Combination, Consideration Transferred, Equity Interests Issued and Issuable	250,000
Class of Warrant or Right, Exercise Price of Warrants or Rights	$ 5.00
IPG Incentive Warrants [Member]
Business Acquisition [Line Items]
Business Combination, Consideration Transferred, Equity Interests Issued and Issuable	100,000
Class of Warrant or Right, Exercise Price of Warrants or Rights	$ 2.48
Incentive Warrants Fair Value	$ 188,000
Iron Protection Group [Member]
Business Acquisition [Line Items]
Business Combination, Consideration Transferred, Equity Interests Issued and Issuable	1,887,000
Finite-lived Intangible Assets Acquired	1,887,000
Goodwill, Acquired During Period	487,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	250,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options	650,000
Target Revenue For Incentive Share Based Payment	3,000,000
Iron Protection Group [Member] | Customer Relationships [Member]
Business Acquisition [Line Items]
Finite-lived Intangible Assets Acquired	1,000,000
Iron Protection Group [Member] | Marketing-Related Intangible Assets [Member]
Business Acquisition [Line Items]
Finite-lived Intangible Assets Acquired	200,000
Iron Protection Group [Member] | Noncompete Agreements [Member]
Business Acquisition [Line Items]
Finite-lived Intangible Assets Acquired	200,000
Iron Protection Group [Member] | IPG $4.50 Warrants [Member]
Business Acquisition [Line Items]
Business Combination, Consideration Transferred, Equity Interests Issued and Issuable	421,000
Business Combination, Consideration Transferred, Equity Interests Issued and Issuable	250,000
Iron Protection Group [Member] | IPG $5.00 Warrants [Member]
Business Acquisition [Line Items]
Business Combination, Consideration Transferred, Equity Interests Issued and Issuable	412,000
Iron Protection Group [Member] | IPG Warrants [Member]
Business Acquisition [Line Items]
Business Combination, Consideration Transferred, Equity Interests Issued and Issuable	500,000
Iron Protection Group [Member] | Common Stock [Member]
Business Acquisition [Line Items]
Business Combination, Consideration Transferred, Equity Interests Issued and Issuable	$ 1,054,000
Business Combination, Consideration Transferred, Equity Interests Issued and Issuable	500,000
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	1 year

XML

PROPERTY AND EQUIPMENT (Tables)

3 Months Ended

Mar. 31, 2015

Property, Plant and Equipment [Abstract]

PROPERTY AND EQUIPMENT

The following table summarizes property and equipment and related accumulated depreciation:

	March 31, 2015			December 31, 2014
Land	$	812,340		$	812,340
Buildings	724,284			724,284
Leasehold improvements	45,000			45,000
Furniture, fixtures and equipment	15,792			15,792
Construction in progress	156,129			138,056
Property and Equipment, gross	1,753,545			1,735,472
Less: Accumulated Depreciation	(37,069		)	(28,062		)
Property and Equipment, net	$	1,716,475		$	1,707,410

XML

DERIVATIVE WARRANT LIABILITY (Details 2) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Derivative, Gain (Loss) on Derivative, Net [Abstract]
Beginning balance at beginning of period	$ 3,393,904
Initial loss on recognition of derivative liability		(868,908)
Balance at end of period	$ 101,617	$ 647,640

XML

LONG TERM DEBT (Details 2) (USD $)	Mar. 31, 2015
Debt Instrument [Line Items]
2015	$ 4,803
2016	606,898
2017	7,507
2018	1,495,731
2019	0
2020	0
Thereafter	0
Long-term debt, net of unamortized discount	$ 2,123,110

XML

DEFERRED FINANCING COSTS, NET (Details Narrative) (USD $)	0 Months Ended	3 Months Ended
	Jan. 21, 2014	Mar. 31, 2015	Mar. 31, 2014	Jan. 10, 2014
Nature of Expense [Line Items]
Deferred Finance Costs, Gross		$ 115,000
Proceeds from sale of warrants, net	500,000	0	400,000
Deferred Finance Costs, Gross		115,000
Amortization of deferred financing costs		9,584	6,000
Deferred Finance Costs, Net		73,000	83,000
Cash Payment [Member]
Nature of Expense [Line Items]
Deferred Finance Costs, Gross				15,000
Deferred Finance Costs, Gross				15,000
Retained By Full Circle [Member]
Nature of Expense [Line Items]
Deferred Finance Costs, Gross	100,000
Deferred Finance Costs, Gross	$ 100,000

XML

INCOME TAXES (Details Narrative) (USD $)	3 Months Ended
	Mar. 31, 2015
Income Tax Disclosure [Abstract]
Net operating losses	$ 8,466,000
Taxable income year	2033

XML

STOCKHOLDERS' EQUITY (Details 3) (USD $)	3 Months Ended
	Mar. 31, 2015
Class of Warrant or Right [Line Items]
Class of Warrant or Right, Outstanding	2,450,700
Risk-free interest rate	0.98%
Expected dividend yield	0.00%
Expected term (in years)	3 years
Expected volatility	134.00%
IPG $4.50 Warrants [Member]
Class of Warrant or Right [Line Items]
Class of Warrant or Right, Exercise Price of Warrants or Rights	4.50
IPG $5.00 Warrants [Member]
Class of Warrant or Right [Line Items]
Class of Warrant or Right, Exercise Price of Warrants or Rights	5.00
SeriesBWarrantsMember
Class of Warrant or Right [Line Items]
Stock price	2.48

XML

GOING CONCERN

3 Months Ended

Mar. 31, 2015

Going Concern

GOING CONCERN

GOING CONCERN

The financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future.  The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and, or, obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management believes that actions presently being taken to further implement its business plan and generate additional revenues provide the opportunity for the Company to continue as a going concern.  While the Company believes in the viability of its strategy to generate additional revenues and its ability to raise additional funds, there can be no assurances to that effect.  The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate additional revenues.

The Company had an accumulated deficit of approximately $8,469,594 and $7,641,000 as of March 31, 2015 and December 31, 2014, respectively, and further losses are anticipated in the development of its business. Accordingly, there is substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

On April 10, 2014, quotation of the Company’s common stock resumed on the OTCBB after having been suspended by the SEC on March 27, 2014. On April 28, 2015, the Company’s stock was uplisted to the OTC Market’s Pink Sheets on April 28, 2015.

XML

LONG TERM DEBT (Details Narrative) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014
Outstanding unsecured convertible promissory notes	$ 530,000
Debt discount	66,000		66,000
Unamortized debt discount	(1,119,463)		(1,352,510)
Debt issuance cost	160,500
Additional debt discount			84,000
January 2014 Issuance [Member]
Outstanding unsecured convertible promissory notes	980,000
Debt discount	32,100
Amortized to interest expense	164,000	300,000
Unamortized debt discount	739,000	903,000
12.0% convertible notes, due October 31, 2018, issued December 2013 [Member]
Unamortized debt discount	$ 40,000

XML

STOCKHOLDERS' EQUITY (Tables)

3 Months Ended

Mar. 31, 2015

Equity [Abstract]

Schedule of common stock and warrants issued and outstanding

The following tables summarize the changes in warrants issued and outstanding for the three months ended March 31, 2015 and 2014, respectively:

	2015		2014
Beginning balance	3,165,700		983,600
Warrants issued to placement agent - Series B Warrants	—		32,100
Warrants issued to Full Circle for $500,000 consideration - Series C Warrants	—		1,000,000
Warrants issued to IPG	500,000		—
Warrants converted by Full Circle via cashless conversion option	(1,215,000	)	—
Ending balance, March 31	2,450,700		2,015,700

XML

LONG TERM DEBT (Tables)

3 Months Ended

Mar. 31, 2015

Debt Disclosure [Abstract]

Schedule of long term debt

Long-term debt consists of the following:

	Mar 31, 2015		Dec 31, 2014
12.0% convertible notes, due October 31, 2018, issued December 2013	380,000		530,000
8.5% convertible note payable, due December 31, 2018 (Pueblo West Property)	163,110		164,644
12.0% convertible notes, due October 31, 2018, issued January 2014	980,000		1,120,000
14.0% mortgage payable, due October 21, 2016 (The Greenhouse)	600,000		600,000
Unamortized discount	(1,119,463	)	(1,352,510	)
Long-term debt, net of unamortized discount	1,003,646		1,062,134
Debt maturing within one year	(6,473	)	(6,337	)
Debt maturing after one year	997,173		1,055,797

Schedule of long-term convertible debt

The tables below summarize the Company's convertible notes activity during the three months ended March 31, 2015:

	Principal Balance			Debt Discount			Accrued Interest			Total
Balance at December 31, 2014	$	2,414,644		$	(1,352,510	)	$	16,470		$	1,078,604
Converted into shares of common stock	(290,000		)	—			(1,063		)	(291,063		)
Amortization of debt discount to interest expense	—			233,047			—			233,047
Payment of loan principal	(1,534		)	—			—			(1,534		)
Interest accrued during period	—			—			69,207			69,207
Interest paid during period	—			—			(46,938		)	(46,938		)
Balance at March 31, 2015	2,123,110			(1,119,463		)	37,676			1,041,322
Less: Current portion (1)	(6,473		)	—			—			(6,473		)
Long-term debt	2,116,637			(1,119,463		)	37,676			1,034,849

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

Schedule of maturities of long-term debt

Annual maturities of long-term debt (excluding unamortized discount) for the next five years ending December 31, and thereafter, consist of:

Remainder of 2015	$	4,803
2016	606,898
2017	7,507
2018	1,495,731
2019	—
2020	—
Thereafter	—
	$	2,123,110

XML

COMMITMENTS AND CONTINGENCIES (Details Narrative) (USD $)	0 Months Ended	3 Months Ended
	Jan. 21, 2014	Mar. 31, 2015	Mar. 31, 2014
Operating Leased Assets [Line Items]
Oil and Gas Property, Lease Operating Expense		$ 0	$ 3,200
Long-term Debt, Gross		2,123,110
Proceeds from sale of warrants, net	$ 500,000	$ 0	$ 400,000

XML

DERIVATIVE WARRANT LIABILITY (Tables)

3 Months Ended

Mar. 31, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

The underlying assumptions used in our value of the derivative warrant liability at March 31, 2015 were:

	Three Months Ended March 31, 2015 (unaudited)
Risk-free interest rate	0.56	%
Expected dividend yield	—	%
Expected term (in years)	1.81 years
Expected volatility	135	%
Early exercise factor	1.33

Schedule of Share-based Compensation, Activity [Table Text Block]

Changes in the derivative warrant liability for the three-months ended March 31, 2015 and 2014 are as follows:

	2015			2014
Balance at beginning of period	3,893,904			—
Fair value of warrants issued				$	1,368,908
Increase in derivative liability resulting from anti-dilution provision in agreement, with Full Circle				153,994
Increase (decrease) in the fair value of warrant liability, net	22,233			(375,262		)
Reclassification to APIC for shares issued for Full Circle as a result of cashlessly exercise of 1,250,000 warrants	(3,314,520		)
Balance at end of period	$	601,617		$	1,147,640

Derivative Instruments, Gain (Loss) [Table Text Block]

Change in Aggregate Loss on Derivative Liability	2015		2014
Beginning balance at beginning of period	3,393,904		$	—
Initial loss on recognition of derivative liability			868,908
Loss (gain) in estimated fair market value	22,233		$	(221,268	)
Reclassification to APIC for shares issued for Full Circle as a result of cashlessly exercise of 1,250,000 warrants	(3,314,520	)
Balance at end of period	101,617		$	647,640

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $)	3 Months Ended
	Mar. 31, 2015 segment
Number of business segments	3
Potential dilutive shares	2,722,700
Notes Payable, Current	$ 1,524,000
Convertible Debt [Member]
Potential dilutive shares	305,000
Warrant [Member]
Potential dilutive shares	2,450,700
Maximum [Member]
Finite-Lived Intangible Asset, Useful Life	10 years
Minimum [Member]
Finite-Lived Intangible Asset, Useful Life	2 years

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Mar. 31, 2015

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies is presented to assist the reader in understanding and evaluating the Company's financial statements. The consolidated financial statements and notes are the representation of the Company's management, which is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles and have been consistently applied to the preparation of the financial statements. 

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions about future events that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and the related notes at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s balances requiring management to make estimates and assumptions about future events include equity and debt transactions and the Company’s derivative liability. Actual results could differ from those estimates.

Reclassifications

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

Business Combinations

Amounts paid for acquisitions are allocated to the tangible assets acquired and liabilities assumed based on their estimated fair value at the date of acquisition. The Company then allocates the purchase price in excess of net tangible assets acquired to identifiable intangible assets. The fair value of identifiable intangible assets is based on detailed valuations that use information and assumptions provided by management. The Company allocates any excess purchase price over the fair value of the net tangible and intangible assets acquired to goodwill. Identifiable intangible assets with finite lives are amortized over their useful lives. Acquisition-related costs, including advisory, legal, accounting, valuation and other costs, are expensed in the periods in which the costs are incurred. The results of operations of acquired businesses are included in the consolidated financial statements from the acquisition date.

Intangible Assets and Goodwill

Intangible assets are stated at cost and consist primarily of customer relationships, non-compete agreements with key employees, and separately identified workforce. The Company’s intangible assets are being amortized on a straight-line basis over a period of two to ten years. The life assigned to customer relationships acquired is based on management's estimate of our expected customer attrition rate. The attrition rate is estimated based on historical contract longevity and management's operating experience.

Management evaluates the remaining useful life of intangible assets on a periodic basis to determine whether events and circumstances warrant a revision to the remaining useful life. If the estimate of an intangible asset’s remaining useful life is changed, the remaining carrying value of the intangible asset is amortized prospectively over the revised remaining useful life.  Any potential impairment is evaluated based on anticipated undiscounted future cash flows and actual customer attrition in accordance with Financial Accounting Standards Board (“FASB”), Accounting Standards Codification (“ASC”) 360, Property, Plant and Equipment.

Management monitors the recoverability of goodwill recorded in connection with acquisitions, by reporting unit, annually, or more often if events or changes in circumstances indicate that the carrying amount may not be recoverable.

If it is determined that sufficient indicators of potential impairment exists to require an interim goodwill impairment analysis for a reporting unit, the Company compares reporting unit’s carrying value to its estimated fair value and, accordingly, performs a second phase of the goodwill impairment test (“Step 2”). Under Step 2, the fair value of the reporting unit’s assets and liabilities are estimated, including tangible assets and intangible assets for the purpose of deriving an estimate of the implied fair value of goodwill. The implied fair value of the goodwill is then compared to the carrying value of the goodwill to determine the amount of the impairment, if any. There were no impairments to goodwill recorded during the three months ended March 31, 2015.

Long-Lived Assets

The Company accounts for long-lived assets in accordance with ASC 360-10, Property, Plant and Equipment. The Company tests for impairment losses on long-lived assets used in operations, including property, plant and equipment, and identifiable intangible assets, excluding goodwill, whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. Recoverability of an asset to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying value of the asset exceeds its fair value. Impairment evaluations involve management’s estimates on asset useful lives and future cash flows. Actual useful lives and cash flows could be different from those estimated by management which could have a material effect the Company’s operating results and financial positions. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. Through the date of this report, the Company had not experienced impairment losses on its long-lived assets. However, there can be no assurances that the demand for the Company’s products and services will continue, which could result in an impairment of long-lived assets in the future.

Conventional Convertible Debt

The Company records conventional convertible debt in accordance with ASC 470-20, Debt with Conversion and Other Options (“ASC 470-20”). Conventional convertible debt is a financial instrument in which the holder may only realize the value of the conversion option by exercising the option and receiving the entire proceeds in a fixed number of shares or the equivalent amount of cash. Conventional convertible debt with a non-detachable conversion feature that does not contain a cash settlement option, and is not accounted for as a derivative, is recorded as a debt instrument in its entirety. The Company has accounted for the December 2013 debt issuance and an 8 ½% Convertible Note Payable as conventional convertible debt (see Note 10).

Fair Value Measurements

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

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

Level 2 - Pricing inputs are other than quoted prices in active markets, but are either directly or indirectly observable as of the reporting date.  The types of assets and liabilities in Level 2 are typically either comparable to actively traded securities or contracts, or priced with models using highly observable inputs.

Level 3 - Significant inputs to pricing that are unobservable as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation, such as complex and subjective models and forecasts used to determine the fair value of financial transmission rights.

Our financial instruments consist of cash, accounts receivable, other receivables, prepaid expenses, deferred financing costs, accounts payables and accrued expenses, notes payable and tenant deposits. The carrying values of these financial instruments approximate their fair value due to their short maturities. The Company's derivative liability is a Level 3 estimated fair market value instrument (see Note 11).

Revenue Recognition

Revenue is recognized on an accrual basis as earned under contract terms. Specifically, revenue from tenant rentals is recognized on a straight-line basis over the reasonably assured lease term, and when collectability is reasonably assured. Consulting revenue is recognized based upon the payment terms within the contracts, and collectability is reasonably assured. Revenue relating to our wholesale business is recognized at the time goods are sold. Security services revenue is recognized as earned and billed to customers on terms agreed upon with the individual customer, usually weekly or bi-monthly.

Income Tax

The Company accounts for income taxes pursuant to ASC 740, Income Taxes ("ASC 740"). The provision for income taxes, income taxes payable and deferred income taxes are determined using the asset and liability method. Deferred tax assets and liabilities are determined based on temporary differences between the financial carrying amounts and the tax basis of assets and liabilities using enacted tax rates in effect in the years in which the temporary differences are expected to reverse. On a periodic basis, the Company assesses the probability that its net deferred tax assets, if any, will be recovered. If after evaluating all of the positive and negative evidence, a conclusion is made that it is more likely than not that some portion or all of the net deferred tax assets will not be recovered, a valuation allowance is provided by a charge to tax expense to reserve the portion of the deferred tax assets which are not expected to be realized.

When there are uncertainties related to potential income tax benefits, in order to qualify for recognition, the position the Company takes has to have at least a “more likely than not” chance of being sustained (based on the position’s technical merits) upon challenge by the respective authorities. The term “more likely than not” means a likelihood of more than 50 percent. Otherwise, the Company may not recognize any of the potential tax benefit associated with the position. The Company recognizes a benefit for a tax position that meets the “more likely than not” criterion at the largest amount of tax benefit that is greater than 50 percent likely of being realized upon its effective resolution. Unrecognized tax benefits involve management’s judgment regarding the likelihood of the benefit being sustained. The final resolution of uncertain tax positions could result in adjustments to recorded amounts and may affect the Company's results of operations, financial position and cash flows.

The Company reviews its filing positions for all open tax years in all U.S. federal and state jurisdictions where the Company is required to file. The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The tax years subject to examination by major tax jurisdictions include the 2013 Fiscal Period and forward by the U.S. Internal Revenue Service, and the 2013 Fiscal Period and forward for various states.

Net Income (Loss) Per Share

The Company computes net income (loss) per share by dividing the net income (loss) by the weighted average number of common shares outstanding in accordance with ASC 260, Earnings Per Share. Diluted earnings or loss per share is computed using the weighted average common shares and diluted potential common shares outstanding. Warrants and common stock issuable upon the conversion of the Company's convertible notes payable have not been included in the computation as the effect would be anti-dilutive and would decrease the loss per share as the Company has incurred losses in all periods reported. As of March 31, 2015, there are potential dilutive shares of 2,722,700, of which 2,450,700 shares represent warrants outstanding at March 31, 2015. The Company’s outstanding convertible notes payable balance of $1,524,000 at March 31, 2015 is convertible to approximately 305,000 shares of the Company’s stock.

Business Segments

At March 31, 2015, the Company reported two business segments in accordance with ASC 280, Segment Reporting ("ASC 280"). As of the date of this filing, all of the Company's operations were conducted within the state of Colorado. As of the date of this filing,the Company's operations are divided into three operating segments: (i) Finance and Real Estate; (ii) Wholesale Supply; and (iii) Security.

The Company’s Finance and Real Estate operating segment provides participants in the cannabis industry with industry finance and leasing services, shared space, as well as networking and event services, as discussed above. The Company’s Wholesale Supply operating segment, ACS Wholesale, provides customers with nutrients and other supplies for growing and customizable specialty products. Acquired in March 2015, the Company’s Security operating segment provides protection and security services to licensed and approved operators in the cannabis industry.

Recently Issued Accounting Standards

Consolidation Reporting

In February 2015, the FASB issued ASU 2015-02, "Consolidation: Amendments to the Consolidation Analysis" ("ASU 2015-02"). This standard update is intended to improve targeted areas of consolidation guidance for reporting organizations that are required to evaluate whether they should consolidate certain legal entities. This ASU simplifies consolidation accounting by reducing the number of consolidation models and improves current U.S. GAAP by (1) placing more emphasis on risk of loss when determining a controlling financial interest; (2) reducing the frequency of the application of related-party guidance when determining a controlling financial interest in a variable interest entity; and (3) changing consolidation conclusions for public and private companies in several industries that typically make use of limited partnerships or variable interest entities. The amendments in ASU 2015-02 are effective for reporting periods beginning after December 15, 2015, with early adoption permitted. Entities can transition to the standard either retrospectively or as a cumulative effect adjustment as of the date of adoption. The adoption of ASU 2015-02 is not expected to have an impact on the Company's consolidated financial statements.

Debt Issuance Costs

In April 2015, the FASB issued ASU 2015-03, "Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs". This standard update requires an entity to present debt issuance costs on the balance sheet as a direct deduction from the related debt liability as opposed to an asset. Amortization of the costs will continue to be reported as interest expense. The update is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2015. Early adoption is permitted for financial statements that have not been previously issued, and the new guidance would be applied retrospectively to all prior periods presented. The adoption of this standard update is not expected to have a material impact on the Company's consolidated financial statements.

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GOING CONCERN (Details Narrative) (USD $)	Mar. 31, 2015	Dec. 31, 2014	Mar. 31, 2014
Going Concern
Accumulated deficit	$ 8,469,594	$ 7,641,101	$ 7,641,000

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LONG TERM DEBT (Details) (USD $)	Mar. 31, 2015	Dec. 31, 2014
Debt Instrument [Line Items]
Long-term Debt, Gross	$ 2,123,110
Long-term debt, net of unamortized discount	1,003,646	1,062,134
Unamortized discount	(1,119,463)	(1,352,510)
Debt maturing within one year	(6,473)	(6,337)
Debt maturing after one year	997,173	1,055,797
12.0% convertible notes, due October 31, 2018, issued December 2013 [Member]
Debt Instrument [Line Items]
Long-term Debt, Gross	380,000	530,000
Unamortized discount	40,000
8.5% convertible note payable, due December 31, 2018 (Pueblo West Property) [Member]
Debt Instrument [Line Items]
Long-term Debt, Gross	163,110	164,644
12.0% convertible notes, due October 31, 2018, issued January 2014 [Member]
Debt Instrument [Line Items]
Long-term Debt, Gross	980,000	1,120,000
14.0% mortgage payable, due October 21, 2016 (The Greenhouse) [Member]
Debt Instrument [Line Items]
Long-term Debt, Gross	$ 600,000	$ 600,000

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RELATED PARTY TRANSACTIONS (Details Narrative) (USD $)	3 Months Ended
	Mar. 31, 2015
Related Party Transactions [Abstract]
Notes Payable, Related Parties	$ 239,000
Note payable Related party maximum	300,000
Interest Expense, Related Party	$ 1,000
Debt Instrument, Interest Rate Terms	0.05

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CONSOLIDATED BALANCE SHEETS (USD $)	Mar. 31, 2015	Dec. 31, 2014
Current Assets
Cash and cash equivalents	$ 99,688	$ 165,536
Accounts receivable	17,381	18,319
Prepaid expenses and other current assets	49,206	22,402
Inventory	81,577	70,341
Total Current Assets	247,852	276,598
Property and equipment, net	1,716,476	1,707,410
Intangible assets, net	1,400,000	0
Goodwill	487,000	0
Deferred financing costs, net	73,472	83,056
Total Assets	3,924,800	2,067,064
Current Liabilities
Accrued stock payable, current portion	1,496,000	385,917
Derivative liability	601,617	3,893,904
Related party line of credit	239,000	0
Accounts payable and accrued expenses	133,387	99,655
Deferred Rent Credit, Current	18,244	0
Convertible notes payable (net of debt discount), current portion	6,473	6,337
Total Current Liabilities	2,494,721	4,385,813
Convertible notes payable (net of debt discount), less current portion	997,173	1,055,797
Accrued stock payable, less current portion	221,000	138,125
Tenant deposits	8,854	8,854
Total Liabilities	3,721,748	5,588,589
Commitments and Contingencies
Stockholders' Equity (Deficiency)
Preferred stock, no par value; 5,000,000 share authorized; no shares issued and outstanding at March 31, 2015 and December 31, 2014	0	0
Common Stock, $0.001 par value; 100,000,000 shares authorized; 13,268,409 shares and 12,499,933 shares issued and outstanding on March 31, 2015 and December 31, 2014, respectively	13,268	12,500
Additional paid-in capital	8,659,378	4,107,076
Accumulated deficit	(8,469,594)	(7,641,101)
Total Stockholders' Equity (Deficiency)	203,052	(3,521,525)
Total Liabilities and Stockholders' Equity	$ 3,924,800	$ 2,067,064

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STOCKHOLDERS' EQUITY (Details Narrative)	Mar. 31, 2015
Series A [Member]
Warrants outstanding	973,000
Series B [Member]
Warrants outstanding	42,700
Series C [Member]
Warrants issued	185,000
Warrants outstanding	1,400,000

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NATURE OF OPERATIONS, HISTORY AND PRESENTATION NATURE OF OPERATIONS, HISOTRY AND PRESENTATION (Notes)

3 Months Ended

Mar. 31, 2015

NATURE OF OPERATIONS, HISTORY AND PRESENTATION [Abstract]

Nature of Operations [Text Block]

NATURE OF OPERATIONS, HISTORY AND PRESENTATION

Nature of Operations

Advanced Cannabis Solutions, Inc. (“ACS,” or the “Company,”), dba General Cannabis Corporation, was incorporated on June 3, 2013 (Inception) and provides products and services to the regulated cannabis industry. The Company’s primary operations include real estate leasing, shared office space, networking and event services, security and cash management services, industry finance, and wholesale supply.

The Company's real estate leasing business primarily includes the acquisition and leasing of cultivation space and related facilities to licensed marijuana growers and dispensary owners for their operations. As of the date of this report, the Company owns one cultivation property that is located in a suburb of Pueblo, Colorado. The property consists of approximately three acres of land, which includes a 5,000 square foot steel building, and parking lot. The property is zoned for cultivating cannabis and is leased to a medical cannabis grower until December 31, 2022 (the “Pueblo West Property”).

In October 2014, the Company purchased a former retail bank located at 6565 East Evans Avenue, Denver, Colorado 80224, which has been branded as The Greenhouse (“The Greenhouse”). The building is a 16,056 square-foot facility which will be converted to serve as a leading shared workspace for entrepreneurs, professionals and others serving the cannabis industry. Clients will be able to lease space to use as offices, meeting rooms, lecture, educational and networking facilities, and individual workstations.

In March 2015, the Company's wholly owned subsidiary, GC Security, LLC (“GCS”), acquired substantially all of the assets of Iron Protection Group, LLC, a Colorado limited liability company (See Note 4). GCS, which will continue to do business as “Iron Protection Group,” provides advanced security, including on-site professionals and video surveillance, to licensed cannabis cultivators and retail shops.

The Company leases cultivation equipment and facilities to customers in the cannabis industry. The Company expects it will enter into sale lease-back transactions of grow lights, tenant improvements and other grow equipment. The Company's finance strategy will include providing customized finance, direct term loans and revolving lines of credit to businesses involved in the cultivation and sale of cannabis and related products.

The Company’s wholesale supply business, ACS Wholesale, is a reseller of supplies to the cannabis market. ACS Wholesale works with industry leaders and innovators to deliver high-quality products that are compliant with applicable regulations and with a focus on products that are manufactured in the United States. ACS Wholesale operates out of a leased, 1,800 square-foot warehouse located in Colorado Springs, Colorado.

The Company delivers comprehensive consulting services that includes design and construction to approved and licensed cannabis operators, as well as assistance with licensure and related applications for potential cannabis operators.  The Company’s business plan is based on the future growth of the regulated cannabis market in the United States. The Company will provide general advisory services for business development, facilities design and construction, cultivation and retail operations, marketing and the improvement and expansion of existing operations.

While ACS does not grow, harvest, distribute or sell cannabis or any substances that violate United States law or the Controlled Substances Act, nor does it intend to do so in the future, ACS may be irreparably harmed by a change in enforcement by the federal or state governments.

Principles of Consolidation

The condensed consolidated financial statements include the results of ACS, and its five wholly-owned subsidiary companies, ACS Colorado Corp., a Colorado corporation formed in 2013; Advanced Cannabis Solutions Corporation, a Colorado corporation formed in 2013, 6565 E. Evans Avenue LLC (“6565 Evans”), a Colorado limited liability company formed in 2014, General Cannabis Capital Corporation (“GCCC”), a Colorado corporation formed in 2015 and GCS, a Colorado limited liability company formed in 2015.

Advanced Cannabis Solutions Corporation has one wholly-owned subsidiary company, ACS Corp., which was formed in the State of Colorado on June 6, 2013.

Basis of Presentation

The accompanying (a) condensed consolidated balance sheet at December 31, 2014 has been derived from audited statements and (b) the condensed consolidated unaudited financial statements as of March 31, 2015 and 2014, have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements, and should be read in conjunction with the audited consolidated financial statements and related footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 (the “2014 Annual Report”), filed with the Securities and Exchange Commission (the “SEC”) on April 15, 2015. It is management’s opinion, however, that all material adjustments (consisting of normal recurring adjustments), have been made which are necessary for a fair financial statements presentation. The financial statements include all material adjustments (consisting of normal recurring accruals) necessary to make the financial statements not misleading as required by Regulation S-X, Rule 10-01. Operating results for the three months ended March 31, 2015 are not necessarily indicative of the results of operations expected for the year ending December 31, 2015.

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PROPERTY AND EQUIPMENT (Details) (USD $)	Mar. 31, 2015	Dec. 31, 2014
Property, Plant and Equipment [Line Items]
Property and Equipment, gross	$ 1,753,545	$ 1,735,472
Less: Accumulated Depreciation	(37,069)	(28,062)
Property and Equipment, net	1,716,475	1,707,410
Land [Member]
Property, Plant and Equipment [Line Items]
Property and Equipment, gross	812,340	812,340
Building and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and Equipment, gross	724,284	724,284
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property and Equipment, gross	45,000	45,000
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Property and Equipment, gross	15,792	15,792
Construction in Progress [Member]
Property, Plant and Equipment [Line Items]
Property and Equipment, gross	$ 156,129	$ 138,056

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Mar. 31, 2015

Accounting Policies [Abstract]

Use of Estimates, Policy

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions about future events that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and the related notes at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s balances requiring management to make estimates and assumptions about future events include equity and debt transactions and the Company’s derivative liability. Actual results could differ from those estimates.

Reclassification, Policy [Policy Text Block]

Reclassifications

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

Business Combinations Policy [Policy Text Block]

Business Combinations

Amounts paid for acquisitions are allocated to the tangible assets acquired and liabilities assumed based on their estimated fair value at the date of acquisition. The Company then allocates the purchase price in excess of net tangible assets acquired to identifiable intangible assets. The fair value of identifiable intangible assets is based on detailed valuations that use information and assumptions provided by management. The Company allocates any excess purchase price over the fair value of the net tangible and intangible assets acquired to goodwill. Identifiable intangible assets with finite lives are amortized over their useful lives. Acquisition-related costs, including advisory, legal, accounting, valuation and other costs, are expensed in the periods in which the costs are incurred. The results of operations of acquired businesses are included in the consolidated financial statements from the acquisition date.

Goodwill and Intangible Assets, Policy [Policy Text Block]

Intangible Assets and Goodwill

Intangible assets are stated at cost and consist primarily of customer relationships, non-compete agreements with key employees, and separately identified workforce. The Company’s intangible assets are being amortized on a straight-line basis over a period of two to ten years. The life assigned to customer relationships acquired is based on management's estimate of our expected customer attrition rate. The attrition rate is estimated based on historical contract longevity and management's operating experience.

Management evaluates the remaining useful life of intangible assets on a periodic basis to determine whether events and circumstances warrant a revision to the remaining useful life. If the estimate of an intangible asset’s remaining useful life is changed, the remaining carrying value of the intangible asset is amortized prospectively over the revised remaining useful life.  Any potential impairment is evaluated based on anticipated undiscounted future cash flows and actual customer attrition in accordance with Financial Accounting Standards Board (“FASB”), Accounting Standards Codification (“ASC”) 360, Property, Plant and Equipment.

Management monitors the recoverability of goodwill recorded in connection with acquisitions, by reporting unit, annually, or more often if events or changes in circumstances indicate that the carrying amount may not be recoverable.

If it is determined that sufficient indicators of potential impairment exists to require an interim goodwill impairment analysis for a reporting unit, the Company compares reporting unit’s carrying value to its estimated fair value and, accordingly, performs a second phase of the goodwill impairment test (“Step 2”). Under Step 2, the fair value of the reporting unit’s assets and liabilities are estimated, including tangible assets and intangible assets for the purpose of deriving an estimate of the implied fair value of goodwill. The implied fair value of the goodwill is then compared to the carrying value of the goodwill to determine the amount of the impairment, if any. There were no impairments to goodwill recorded during the three months ended March 31, 2015.

Property, Plant and Equipment, Impairment [Policy Text Block]

Long-Lived Assets

The Company accounts for long-lived assets in accordance with ASC 360-10, Property, Plant and Equipment. The Company tests for impairment losses on long-lived assets used in operations, including property, plant and equipment, and identifiable intangible assets, excluding goodwill, whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. Recoverability of an asset to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying value of the asset exceeds its fair value. Impairment evaluations involve management’s estimates on asset useful lives and future cash flows. Actual useful lives and cash flows could be different from those estimated by management which could have a material effect the Company’s operating results and financial positions. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. Through the date of this report, the Company had not experienced impairment losses on its long-lived assets. However, there can be no assurances that the demand for the Company’s products and services will continue, which could result in an impairment of long-lived assets in the future.

Debt, Policy

Conventional Convertible Debt

The Company records conventional convertible debt in accordance with ASC 470-20, Debt with Conversion and Other Options (“ASC 470-20”). Conventional convertible debt is a financial instrument in which the holder may only realize the value of the conversion option by exercising the option and receiving the entire proceeds in a fixed number of shares or the equivalent amount of cash. Conventional convertible debt with a non-detachable conversion feature that does not contain a cash settlement option, and is not accounted for as a derivative, is recorded as a debt instrument in its entirety. The Company has accounted for the December 2013 debt issuance and an 8 ½% Convertible Note Payable as conventional convertible debt (see Note 10).

Fair Value Measurement, Policy

Fair Value Measurements

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

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

Level 2 - Pricing inputs are other than quoted prices in active markets, but are either directly or indirectly observable as of the reporting date.  The types of assets and liabilities in Level 2 are typically either comparable to actively traded securities or contracts, or priced with models using highly observable inputs.

Level 3 - Significant inputs to pricing that are unobservable as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation, such as complex and subjective models and forecasts used to determine the fair value of financial transmission rights.

Our financial instruments consist of cash, accounts receivable, other receivables, prepaid expenses, deferred financing costs, accounts payables and accrued expenses, notes payable and tenant deposits. The carrying values of these financial instruments approximate their fair value due to their short maturities. The Company's derivative liability is a Level 3 estimated fair market value instrument (see Note 11).

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

Revenue is recognized on an accrual basis as earned under contract terms. Specifically, revenue from tenant rentals is recognized on a straight-line basis over the reasonably assured lease term, and when collectability is reasonably assured. Consulting revenue is recognized based upon the payment terms within the contracts, and collectability is reasonably assured. Revenue relating to our wholesale business is recognized at the time goods are sold. Security services revenue is recognized as earned and billed to customers on terms agreed upon with the individual customer, usually weekly or bi-monthly.

Income Tax, Policy

Income Tax

The Company accounts for income taxes pursuant to ASC 740, Income Taxes ("ASC 740"). The provision for income taxes, income taxes payable and deferred income taxes are determined using the asset and liability method. Deferred tax assets and liabilities are determined based on temporary differences between the financial carrying amounts and the tax basis of assets and liabilities using enacted tax rates in effect in the years in which the temporary differences are expected to reverse. On a periodic basis, the Company assesses the probability that its net deferred tax assets, if any, will be recovered. If after evaluating all of the positive and negative evidence, a conclusion is made that it is more likely than not that some portion or all of the net deferred tax assets will not be recovered, a valuation allowance is provided by a charge to tax expense to reserve the portion of the deferred tax assets which are not expected to be realized.

When there are uncertainties related to potential income tax benefits, in order to qualify for recognition, the position the Company takes has to have at least a “more likely than not” chance of being sustained (based on the position’s technical merits) upon challenge by the respective authorities. The term “more likely than not” means a likelihood of more than 50 percent. Otherwise, the Company may not recognize any of the potential tax benefit associated with the position. The Company recognizes a benefit for a tax position that meets the “more likely than not” criterion at the largest amount of tax benefit that is greater than 50 percent likely of being realized upon its effective resolution. Unrecognized tax benefits involve management’s judgment regarding the likelihood of the benefit being sustained. The final resolution of uncertain tax positions could result in adjustments to recorded amounts and may affect the Company's results of operations, financial position and cash flows.

The Company reviews its filing positions for all open tax years in all U.S. federal and state jurisdictions where the Company is required to file. The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The tax years subject to examination by major tax jurisdictions include the 2013 Fiscal Period and forward by the U.S. Internal Revenue Service, and the 2013 Fiscal Period and forward for various states.

Earnings Per Share, Policy

Net Income (Loss) Per Share

The Company computes net income (loss) per share by dividing the net income (loss) by the weighted average number of common shares outstanding in accordance with ASC 260, Earnings Per Share. Diluted earnings or loss per share is computed using the weighted average common shares and diluted potential common shares outstanding. Warrants and common stock issuable upon the conversion of the Company's convertible notes payable have not been included in the computation as the effect would be anti-dilutive and would decrease the loss per share as the Company has incurred losses in all periods reported. As of March 31, 2015, there are potential dilutive shares of 2,722,700, of which 2,450,700 shares represent warrants outstanding at March 31, 2015. The Company’s outstanding convertible notes payable balance of $1,524,000 at March 31, 2015 is convertible to approximately 305,000 shares of the Company’s stock.

Segment Reporting, Policy

Business Segments

At March 31, 2015, the Company reported two business segments in accordance with ASC 280, Segment Reporting ("ASC 280"). As of the date of this filing, all of the Company's operations were conducted within the state of Colorado. As of the date of this filing,the Company's operations are divided into three operating segments: (i) Finance and Real Estate; (ii) Wholesale Supply; and (iii) Security.

The Company’s Finance and Real Estate operating segment provides participants in the cannabis industry with industry finance and leasing services, shared space, as well as networking and event services, as discussed above. The Company’s Wholesale Supply operating segment, ACS Wholesale, provides customers with nutrients and other supplies for growing and customizable specialty products. Acquired in March 2015, the Company’s Security operating segment provides protection and security services to licensed and approved operators in the cannabis industry.

New Accounting Pronouncements, Policy

Recently Issued Accounting Standards

Consolidation Reporting

In February 2015, the FASB issued ASU 2015-02, "Consolidation: Amendments to the Consolidation Analysis" ("ASU 2015-02"). This standard update is intended to improve targeted areas of consolidation guidance for reporting organizations that are required to evaluate whether they should consolidate certain legal entities. This ASU simplifies consolidation accounting by reducing the number of consolidation models and improves current U.S. GAAP by (1) placing more emphasis on risk of loss when determining a controlling financial interest; (2) reducing the frequency of the application of related-party guidance when determining a controlling financial interest in a variable interest entity; and (3) changing consolidation conclusions for public and private companies in several industries that typically make use of limited partnerships or variable interest entities. The amendments in ASU 2015-02 are effective for reporting periods beginning after December 15, 2015, with early adoption permitted. Entities can transition to the standard either retrospectively or as a cumulative effect adjustment as of the date of adoption. The adoption of ASU 2015-02 is not expected to have an impact on the Company's consolidated financial statements.

Debt Issuance Costs

In April 2015, the FASB issued ASU 2015-03, "Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs". This standard update requires an entity to present debt issuance costs on the balance sheet as a direct deduction from the related debt liability as opposed to an asset. Amortization of the costs will continue to be reported as interest expense. The update is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2015. Early adoption is permitted for financial statements that have not been previously issued, and the new guidance would be applied retrospectively to all prior periods presented. The adoption of this standard update is not expected to have a material impact on the Company's consolidated financial statements.

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PROPERTY AND EQUIPMENT (Details Narrative) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Public Utilities, Property, Plant and Equipment, Net	$ 420,000
Public Utilities, Property, Plant and Equipment, Construction Work in Progress	156,000
Proceeds From Issuance Of Common Stock And Warrants	110,000
Depreciation expense	9,007	3,116
Issuance of common stock for services	$ 248,625	$ 0

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INTANGIBLE ASSETS AND GOODWILL INTANGIBLE ASSETS AND GOODWILL (Tables)

3 Months Ended

Mar. 31, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets and Goodwill [Table Text Block]

The useful lives of amortizable intangible assets are as follows:

Asset	Life
Customer base	10 years
Marketing related intangibles	10 years
Non-compete agreements	2 years

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

The following table represents the estimated future amortization expense of intangible assets as of March 31, 2015:

Fiscal Year	Amount
Remainder of 2015	$	165,000
2016	220,000
2017	145,000
2018	120,000
2019	120,000
2020	120,000
Thereafter	510,000
Total intangible assets	$	1,400,000

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NATURE OF OPERATIONS, HISTORY AND PRESENTATION	3 Months Ended
	Mar. 31, 2015
Real Estate Properties [Line Items]
Number Of Wholly Owned Subsidiary	5
The Greenhouse [Member]
Real Estate Properties [Line Items]
Area of Real Estate Property	16,056
Pueblo West Property [Member]
Real Estate Properties [Line Items]
Area of Real Estate Property	5,000
ACS Wholesale [Member]
Real Estate Properties [Line Items]
Area of Real Estate Property	1,800

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Mar. 31, 2015	Dec. 31, 2014
Statement of Financial Position [Abstract]
Preferred stock, par value	$ 0	$ 0
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	13,268,409	12,499,933
Common stock, shares outstanding	13,268,409	12,499,933

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STOCKHOLDERS' EQUITY

3 Months Ended

Mar. 31, 2015

Equity [Abstract]

STOCKHOLDERS' EQUITY

STOCKHOLDERS’ EQUITY

Common Stock

From January 1, 2015 to March 31, 2015, three of the January 2014 Issuance note holders and one of the December 2013 Issuance note holders converted loan notes with principal balances totaling $290,000 and accrued interest of $1,063 into 58,213 shares of the Company’s common stock at a conversion price of $5.00 per share.

On January 21, 2015, Full Circle executed its option to cashlessly exercise 1,215,000 warrants in exchange for 660,263 common shares of the Company’s stock (see Note 13).

On January XX, 2015, the Company issued 50,000 shares to Spector Group in satisfaction of architectural services performed for The Greenhouse.

On March 26, 2015, pursuant to the terms of the IPG APA, the Company will deliver to Seller 500,000 restricted shares of the Company’s common stock, which will vest over a one-year period. On the date of the agreement, the 500,000 shares had an initial fair value of $1,240,000, based on a closing price per share of the Company of $2.48 on March 26, 2015. Due to restrictions in the ability to trade the Company’s shares, a discount of fifteen percent (15%) was applied to the fair value of the shares the Company issued and anticipates issuing to Infinity Capital and the net amount is being amortized over the relative service periods. Approximately $1,054,000 and was recorded to accrued stock payable as a component of the purchase price of the IPG Acquisition (see Note 4).

Warrants

Warrants consists of the following at March 31, 2015:

	Exercise Price		Warrants Outstanding	Weighted Average Life of Outstanding Warrants in Months	Date of Expiration
Series A Warrants	$	10.00	973,000	16	7/31/2016
Series B Warrants	5.00		42,700	43	10/31/2018
Series C Warrants	4.00		185,000	22	1/21/2017
Evans Warrants	4.40		600,000	19	10/21/2016
Spector Warrants	4.40		150,000	21	12/12/2016
IPG Warrants	4.50		250,000	36	3/26/2018
IPGa Warrants	5.00		250,000	36	3/26/2018
	$	6.68	2,450,700	21.92

Series C Warrants

On January 21, 2014, the Company issued to Full Circle, for $500,000, fully-vested warrants which allow Full Circle to purchase up to 1,000,000 shares of the Company’s common stock at any time on or prior to January 21, 2017 at a price of $5.50 per share. As part of the $500,000 proceeds from the warrant being issued to Full Circle, $100,000 was retained by Full Circle to cover legal and deal related expenses of future financing transactions, which was recorded as deferred financing costs (See Note 7).  On September 24, 2014, the Company and Full Circle entered into Amendment No. 1 to the SPA, which changed the exercise price of the warrants issuable to $4.00 per share of the Company’s common stock, and increased the amount of warrants issuable to 1,400,000 warrants to purchase shares of the Company’s common stock. On January 21, 2015, Full Circle executed its option to cashlessly exercise 1,215,000 warrants in exchange for 660,263 common shares of the Company’s stock (see Note 13). At March 31, 2015, there were Series C warrants representing 185,000 of the Company's common stock outstanding. As of May 4, 2015, Full Circle had exercised the remainder of its 185,000 warrants (see Note 17).

IPG Warrants

In connection with the IPG APA, the Company issued to IPG fully-vested warrants to purchase 250,000 shares of the Company’s common stock at a conversion price of $4.50 per share, (the "IPG $4.50 Warrants"), and 250,000 shares of the Company’s common stock at a conversion price of $5.00 per share (the "IPG $5.00 Warrants")(collectively, the "IPG Warrants"). The IPG Warrants are subject to customary adjustments in the event of reclassification of the Company, consolidation of the Company, merger, subdivision of shares of the Company’s common stock, combination of shares of the Company’s common stock or payment of dividends in the form of the Company’s common stock. The IPG Warrants expire three years after their initial issuance date. On the date of grant, the IPG $4.50 Warrants and the IPG $5.00 Warrants had fair values of approximately $421,000 and $412,000 based on the Black-Scholes pricing model, which was included in the purchase price of IPG (See Note 4).

The following tables summarize the changes in warrants issued and outstanding for the three months ended March 31, 2015 and 2014, respectively:

	2015		2014
Beginning balance	3,165,700		983,600
Warrants issued to placement agent - Series B Warrants	—		32,100
Warrants issued to Full Circle for $500,000 consideration - Series C Warrants	—		1,000,000
Warrants issued to IPG	500,000		—
Warrants converted by Full Circle via cashless conversion option	(1,215,000	)	—
Ending balance, March 31	2,450,700		2,015,700

Fair Value of Warrants

Fair value is generally based on independent sources such as quoted market prices or dealer price quotations. To the extent certain financial instruments trade infrequently or are non-marketable securities, they may not have readily determinable fair values. The Company estimated the fair value of the warrants using a Black-Scholes option pricing model and available information that management deems most relevant. The stock price is the closing price of the Company’s stock on the valuation date; the risk-free interest rate is based on the U.S. Government Securities average rate for five or two-year maturities on the date of issuance; the volatility is a statistical measure (standard deviation) of the tendency of the Company’s stock price to change over time; the exercise price is the price at which the Warrants can be purchased by exercising prior to expiration; the dividend yield is not applicable due to the Company not intending to declare dividends; the expected term is based on the contractual life of the warrants; and the fair market value is value of the warrants based on the Black Scholes model on the valuation date. The following assumptions were used to derive the value of the warrants issued during the three months ended March 31, 2015:

	IPG $4.50 Warrants		IPG $5.00 Warrants
Grant date	3/26/2015		3/26/2015
Stock price on Grant date	2.48		$	2.48
Exercise price of warrant	4.50		$	5.00
Risk-free interest rate	0.98	%	0.98		%
Expected dividend yield	—	%	0.00		%
Expected term (in years)	3.0		3.0
Expected volatility	134	%	134		%

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Document and Entity Information	3 Months Ended
	Mar. 31, 2015	May 15, 2015
Document And Entity Information
Entity Registrant Name	Advanced Cannabis Solutions, Inc.
Entity Central Index Key	0001477009
Document Type	10-Q
Document Period End Date	Mar. 31, 2015
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		14,458,002
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2015

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DERIVATIVE WARRANT LIABILITY

3 Months Ended

Mar. 31, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE WARRANT LIABILITY

DERIVATIVE WARRANT LIABILITY

The Series C Warrants issued in connection with the agreements, as amended, with the Full Circle private placement offering initially provided Full Circle with the opportunity to purchase 1,000,000 shares of the Company’s common stock at the exercise price of $5.50 per share. In September 2014, through amendment, the shares of common stock were increased to 1,400,000 and the exercise price reduced to $4.00 per share. The Series C Warrants have non-standard anti-dilution protection provisions and, under certain conditions, grant the right to the holder to require the Company to adjust the warrant’s exercise price to a lower price. Accordingly, through December 31, 2014, these warrants were accounted for as derivative liabilities.

On January 21, 2014, the value of the initial warrant derivative liability was calculated to be $1,368,908. The Company received $500,000 in cash of which $100,000 was identified as deferred financing costs, resulting in an initial loss on the fair value of the derivative liability of $868,908 on the grant date. The price of $5.00 per share of the Series A and Series B Warrants granted in conjunction with the December 2013 Issuance and the January 2014 Issuance resulted in the revaluation of the Series C Warrants granted to Full Circle and an increase to the derivative liability of $153,994.

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

On January 21, 2015, Full Circle executed its option to cashlessly exercise 1,215,000 warrants in exchange for 660,263 common shares of the Company’s stock. At the time of the cashlessly exercise, the fair value of the common shares was determined to be $3,314,520 based on the Company's closing share price of $5.02 on January 21, 2015. Accordingly, the Company decreased the derivative liability by $3,314,520 and increased common stock by $660 and additional paid-in capital by $3,313,860. In determining the value of Full Circle’s remaining 185,000 warrants, the Company used the binomial pricing model and a stock price of $5.00 per share and utilized initial scenario stock prices of $3.00, $4.00, $6.00, and $7.00.  The Company utilized an expected term of 1.81 years which is the remaining term of Full Circle’s 185,000 warrants and an early exercise factor of 1.33 to factor in an anticipation of early exercise of in-the-money warrants. The underlying assumptions used in our value of the derivative warrant liability at March 31, 2015 were:

	Three Months Ended March 31, 2015 (unaudited)
Risk-free interest rate	0.56	%
Expected dividend yield	—	%
Expected term (in years)	1.81 years
Expected volatility	135	%
Early exercise factor	1.33

Changes in fair value of the derivative financial instruments are recognized in the Company’s consolidated statements of operations as a derivative gain or loss and are included in other income (expense). The warrant derivative gains (losses) are non-cash income (expenses); and loss on derivative liability, net, was included in other income (expense) in the Company’s consolidated statements of operations. The primary underlying risk exposure pertaining to the warrants is the change in fair value of the underlying common stock for each reporting period.

Changes in the derivative warrant liability for the three-months ended March 31, 2015 and 2014 are as follows:

	2015			2014
Balance at beginning of period	3,893,904			—
Fair value of warrants issued				$	1,368,908
Increase in derivative liability resulting from anti-dilution provision in agreement, with Full Circle				153,994
Increase (decrease) in the fair value of warrant liability, net	22,233			(375,262		)
Reclassification to APIC for shares issued for Full Circle as a result of cashlessly exercise of 1,250,000 warrants	(3,314,520		)
Balance at end of period	$	601,617		$	1,147,640

Change in Aggregate Loss on Derivative Liability	2015		2014
Beginning balance at beginning of period	3,393,904		$	—
Initial loss on recognition of derivative liability			868,908
Loss (gain) in estimated fair market value	22,233		$	(221,268	)
Reclassification to APIC for shares issued for Full Circle as a result of cashlessly exercise of 1,250,000 warrants	(3,314,520	)
Balance at end of period	101,617		$	647,640

As of May 4, 2015, Full Circle exercised the remainder of its 185,000 warrants (see Note 17).

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CONSOLIDATED STATEMENT OF OPERATIONS (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
REVENUES
Security services revenue	$ 17,382	$ 0
Cost of security services revenue	(14,137)	0
Security services revenue, net	3,245	0
Wholesale sales, net	12,798	0
Tenant rentals	26,677	28,765
Consulting revenue, net	0	20,000
Net revenues	42,720	48,765
OPERATING EXPENSES
General and administrative	82,941	54,476
Payroll and related	89,199	105,135
Share-based compensation	248,625	0
Professional fees	94,107	82,516
Office expense	13,264	7,689
Depreciation and amortization	9,007	3,116
Total operating expenses	537,143	252,932
OPERATING LOSS	(494,423)	(204,167)
OTHER (EXPENSE)
Amortization of Financing Costs and Discounts	242,630	304,841
Interest expense	(69,207)	(49,274)
Loss on change in fair value of derivative liability	(22,233)	(647,640)
Total other (expense)	(334,070)	(1,001,755)
NET LOSS	$ (828,493)	$ (1,205,922)
PER SHARE DATA
Net loss per share – basic and diluted	$ (0.06)	$ (0.09)
Weighted average number of common shares outstanding – basic and diluted	13,095,465	13,659,997

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DEFERRED FINANCING COSTS, NET

3 Months Ended

Mar. 31, 2015

Amortization of Deferred Charges [Abstract]

DEFERRED FINANCING COSTS, NET

DEFERRED FINANCING COSTS, NET

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

The deferred financing costs of $115,000 are being amortized over the estimated term of the long-term financing agreement of three years (see Note 10). Amortization expense was approximately $9,600 and $6,000 for the three months ended March 31, 2015 and 2014, respectively. The unamortized deferred financing balance was approximately $73,000 and 83,000 at March 31, 2015 and December 31, 2014, respectively.

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PROPERTY AND EQUIPMENT

3 Months Ended

Mar. 31, 2015

Property, Plant and Equipment [Abstract]

PROPERTY AND EQUIPMENT

PROPERTY AND EQUIPMENT

The following table summarizes property and equipment and related accumulated depreciation:

	March 31, 2015			December 31, 2014
Land	$	812,340		$	812,340
Buildings	724,284			724,284
Leasehold improvements	45,000			45,000
Furniture, fixtures and equipment	15,792			15,792
Construction in progress	156,129			138,056
Property and Equipment, gross	1,753,545			1,735,472
Less: Accumulated Depreciation	(37,069		)	(28,062		)
Property and Equipment, net	$	1,716,475		$	1,707,410

Depreciation expense was $9,007 and $3,116 for the three months ended March 31, 2015 and 2014, respectively.

Construction in progress (“CIP”) includes land development costs, pre-construction costs, construction costs, interest incurred on financing, property taxes, insurance and overhead costs related to development. Included in pre-construction costs are architectural fees and site, soil, and engineering costs. Included in land development costs are on-site construction costs and other direct and indirect expenditures. Interest and property taxes are capitalized to CIP when development activities commence, and end when the qualifying assets are ready for their intended use. Sales and marketing costs are expensed as incurred. No interest or property taxes have been capitalized to CIP. Capitalized project costs are allocated to specific venues within the property using specific identification where feasible. Costs that are not specifically attributable to a particular venue will be allocated using methodologies deemed appropriate to the cost and areas benefited at the completion of the project. CIP of approximately $156,000 at March 31, 2015 was capitalized in conjunction with the Company’s renovation of The Greenhouse. CIP includes approximately $110,000 relating to the value of common stock and warrants issued to Spector Group II, LLP, a New York limited liability partnership (“Spector Group”), to act as the design architect for The Greenhouse. Management of the Company anticipates that costs to complete The Greenhouse will approximate $420,000 .

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BUSINESS ACQUISITION BUSINESS ACQUISITION (Tables)

3 Months Ended

Mar. 31, 2015

Business Combinations [Abstract]

BUSINESS ACQUISITION

The total purchase price for IPG was approximately $1,887,000 and was comprised of stock and warrants (see Note 12 for the Company’s calculation of fair values below):

Stock consideration	$	1,054,000
Warrants issued with $4.50 exercise price	421,000
Warrants issued with $5.00 exercise price	412,000
Total purchase price	$	1,887,000

Finite-Lived and Indefinite-Lived Intangible Assets Acquired as Part of Business Combination [Table Text Block]

Intangible assets:
Customer base	$	1,000,000
Marketing related intangibles	200,000
Non-compete agreements	200,000
Goodwill	487,000
Total intangible assets	$	1,887,000

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INCOME TAXES

3 Months Ended

Mar. 31, 2015

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The Company accounts for income taxes in accordance with ASC 740. Deferred income taxes reflect the net effect of (i) temporary difference between carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax reporting purposes, and (ii) net operating loss carry-forwards. No net provision for refundable federal income tax has been made in the accompanying statement of loss because no recoverable taxes were paid previously. No provision was made for income taxes for the three months ended March 31, 2015 and 2014. The Company, from the date of Inception, has incurred net operating losses for tax purposes of approximately $8,466,000. The net operating loss carry-forward may be used to reduce taxable income through the year 2033.

The Company recognizes interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest or penalties at March 31, 2015 and December 31, 2014, and has not recognized interest and/or penalties during the three months ended March 31, 2015 and 2014, since there are no material unrecognized tax benefits. Management believes no material change to the amount of unrecognized tax benefits will occur within in the next 12 months. The tax years subject to examination by major tax jurisdictions include the years 2013 and forward by the U.S. Internal Revenue Service, and the years 2013 and forward for various states.

There was no significant difference between reportable income tax and statutory income tax, as the Company does not have significant temporary or permanent differences. For those years in which the Company has filed taxes, the Company’s sales have occurred within the State of Colorado, book depreciation expense approximates tax depreciation expense, and the Company did not incur any tax consequences for issuing warrants. Based on losses incurred since inception and an estimated federal tax rate of 35%, the Company calculated that it had a federal deferred tax asset of approximately $2,965,000 and 2,674,000 at March 31, 2015 and December 31, 2014, respectively. Based on an estimated Colorado state tax of 4.63% (flat tax rate applied to net income of corporation), the Company calculated that it had a state deferred tax asset of approximately $392,000 and 354,000 March 31, 2015 and December 31, 2014, respectively. A 100% valuation allowance has been established against these deferred tax asset, as the utilization of the loss carry-forwards cannot be reasonably assured.

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LONG TERM DEBT

3 Months Ended

Mar. 31, 2015

Debt Disclosure [Abstract]

LONG TERM DEBT

LONG TERM DEBT

Long-term debt consists of the following:

	Mar 31, 2015		Dec 31, 2014
12.0% convertible notes, due October 31, 2018, issued December 2013	380,000		530,000
8.5% convertible note payable, due December 31, 2018 (Pueblo West Property)	163,110		164,644
12.0% convertible notes, due October 31, 2018, issued January 2014	980,000		1,120,000
14.0% mortgage payable, due October 21, 2016 (The Greenhouse)	600,000		600,000
Unamortized discount	(1,119,463	)	(1,352,510	)
Long-term debt, net of unamortized discount	1,003,646		1,062,134
Debt maturing within one year	(6,473	)	(6,337	)
Debt maturing after one year	997,173		1,055,797

12% Convertible Notes

December 2013 Issuance

In December 2013, the Company entered into various convertible promissory notes with various third parties totaling $530,000 (the “December 2013 Issuance”), of which $380,000 and $530,000 was outstanding at March 31, 2015 and December 31, 2014, respectively. The principal amounts of these notes range between $10,000 and $150,000. Under the terms of these notes, they mature on October 31, 2018, accrue interest at 12.0% per annum, and are convertible into shares of the Company’s common stock at a conversion rate of $5.00 per share, with standard dilution clauses (i.e. dividends, stock splits, etc.).  These notes are convertible at the election of the noteholder at any time on or before maturity date at $5.00 per common share. These notes are secured by a first lien on all of the Company’s assets which the Company acquires with the proceeds from the sale of these notes.

The Company paid $66,000 to a placement agent for finder’s fees which the Company recorded as a debt discount as of March 31, 2015 and December 31, 2014. In addition, the Company granted the placement agent warrants to purchase 10,600 shares at a price of $5.00 per share, (with standard dilution clause for dividends, stock splits, etc.) which vest immediately, and expire October 31, 2018. The value of the warrants was approximately $20,000 based on the Black-Scholes pricing model. The Company recorded the value of warrants as additional debt discount at issuance. The debt discount is being amortized to interest expense over the life of the notes.   Amounts amortized to interest expense were approximately $17,000 and $4,000 for the three month periods ended March 31, 2015 and 2014 respectively.  The unamortized debt discount balance was approximately $40,000 and $82,000 at March 31, 2015 and December 31, 2014, respectively.

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

January 2014 Issuance

In January 2014, the Company entered into various convertible promissory notes with various third parties totaling $1,605,000 (the “January 2014 Issuance”), of which $980,000 and $1,120,000 was outstanding at March 31, 2015 and December 31, 2014, respectively. The principal amounts of these notes range between $10,000 and $200,000. Under the terms of these notes, they mature on October 31, 2018, accrue interest at 12.0% per annum, and are convertible into shares of the Company’s common stock at a conversion rate of $5.00 per share, with standard dilution clauses (i.e. dividends, stock splits, etc.). These notes are convertible at the election of the noteholder at any time on or before maturity date at $5.00 per common share. These notes are secured by a first lien on all of the Company’s assets which the Company acquires with the proceeds from the sale of these notes.

The Company paid approximately $160,500 in debt issuance costs and $32,100 to a placement agent for finder’s fees which the Company recorded as a debt discount as of December 31, 2014. In addition, the Company granted the placement agent warrants to purchase 32,100 shares at a price of $5.00 per share, (with standard dilution clause for dividends, stock splits, etc.) which vest immediately, and expire October 31, 2018. The value of the warrants was approximately $84,000 based on the Black-Scholes pricing model.

To properly account for the January 2014 Issuance, the Company evaluated the debt instruments pursuant to ASC 815, to identify whether any equity-linked features in the convertible debt are freestanding or embedded. The January 2014 Issuance was issued availing the option for note holders to convert debt to common stock at fixed conversion price of $5.00 per share. The Company determined that the conversion feature was embedded in the January 2014 Issuance, but did not meet the definition of a derivative pursuant to ASC 815 and therefore should not be bifurcated. The Company concluded that the January 2014 Issuance was conventional debt and assessed under ASC 470-20 whether the January 2014 Issuance had a beneficial conversion feature. Since the initial conversion price of the security was less than the market value of the common stock at the time of issuance, it was determined that a beneficial conversion feature existed. The Company calculated the value of the beneficial conversion feature using the intrinsic value method. The stock price on the date of issuance was $13.75 and the conversion price was $5.00.

The calculated value of the beneficial conversion feature and the combined value of the debt discount resulted in a value greater than the value of the debt and as such, the total discount was limited to the value of the debt balance of $1,605,000. The amount amortized to interest expense was approximately $164,000 and $300,000 for the three months ended March 31, 2015 and 2014, respectively.   The unamortized discount balance was approximately $739,000 and $903,000 at March 31, 2015 and December 31, 2014, respectively.

Conversion of 12% Convertible Notes

Through March 31, 2015, one of the December 2013 Issuance note holders converted notes with principal balances totaling $150,000 and into 30,000 shares of the Company’s common stock at a conversion price of $5.00 per share. Through March 31, 2015, ten of the January 2014 Issuance note holders converted notes with principal balances totaling $625,000, and accrued interest of approximately $4,700 into 125,946 shares of the Company’s common stock at a conversion price of $5.00 per share.

Upon conversion, any remaining unamortized portions of debt discount relating to converted notes is immediately expensed to amortization expense. Amortization expense immediately expensed to amortization expense relating to converted notes was approximately $124,000 and $0 for the three months ended March 31, 2015 and 2014, respectively.

After December 1, 2015, the remaining convertible notes in the December 2013 Issuance and the January 2014 Issuance (collectively, the “Convertible Notes”) will automatically convert to shares of the Company’s stock if the trading stock price has exceeded $10 for twenty consecutive trading days and the daily volume for those twenty consecutive trading days exceeds 25,000 shares. As of April 24, 2014, these parameters have been met and the Company expects that the Convertible Notes will automatically convert to shares of the Company’s stock on December 1, 2015. The Company’s Convertible Notes gross balance of $1,360,000 at March 31, 2015 is convertible to 272,000 shares of the Company’s stock.

8 ½% Convertible Note Payable (Pueblo West Property)

In December 2013, the Company executed a mortgage on its Pueblo West Property in the amount of $170,000 at 8 ½% interest amortized over 15 years with a maturity date of December 31, 2028 (the “Pueblo Mortgage”). This note is convertible at any time at $5.00 per share.

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

14% Mortgage Note Payable (The Greenhouse)

In October 2014, the Company executed a mortgage on The Greenhouse in the amount of $600,000 at 14.0% interest with a maturity date of October 21, 2016 (the “Greenhouse Mortgage”).

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

In addition, the Company granted 600,000 warrants to Evans Lendco, the note holder of the Greenhouse Mortgage, which expire on October 21, 2016. The warrants vest immediately and allow for Evans Lendco to purchase 600,000 shares of the Company’s common stock at a price of $4.40 per share, (with standard dilution clause for dividends, stock splits, etc.). The relative fair value of the warrants was approximately $418,000 based on the Black-Scholes pricing model. The Company recorded the relative fair value of warrants as debt discount at issuance. The debt discount is being amortized to interest expense over the life of the notes. The amount amortized to interest expense was approximately $52,000 for the three months ended March 31, 2015. The unamortized debt discount balance at March 31, 2015 and December 31, 2014 was approximately $325,000 and $377,000, respectively.

The tables below summarize the Company's convertible notes activity during the three months ended March 31, 2015:

	Principal Balance			Debt Discount			Accrued Interest			Total
Balance at December 31, 2014	$	2,414,644		$	(1,352,510	)	$	16,470		$	1,078,604
Converted into shares of common stock	(290,000		)	—			(1,063		)	(291,063		)
Amortization of debt discount to interest expense	—			233,047			—			233,047
Payment of loan principal	(1,534		)	—			—			(1,534		)
Interest accrued during period	—			—			69,207			69,207
Interest paid during period	—			—			(46,938		)	(46,938		)
Balance at March 31, 2015	2,123,110			(1,119,463		)	37,676			1,041,322
Less: Current portion (1)	(6,473		)	—			—			(6,473		)
Long-term debt	2,116,637			(1,119,463		)	37,676			1,034,849

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

Annual maturities of long-term debt (excluding unamortized discount) for the next five years ending December 31, and thereafter, consist of:

Remainder of 2015	$	4,803
2016	606,898
2017	7,507
2018	1,495,731
2019	—
2020	—
Thereafter	—
	$	2,123,110

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RECEIVABLES

3 Months Ended

Mar. 31, 2015

Receivables [Abstract]

RECEIVABLES

RECEIVABLES

The Company’s Finance and Real Estate segment owns, operates, and leases warehouse and office space to tenants (See Note 9). At March 31, 2015 and December 31, 2014, tenant rental receipts exceeded revenue recognized by $18,244 and $0, respectively, which was recorded as deferred rental revenue at period end. The following discloses scheduled tenant receipts for the remainder of 2015, the next five fiscal years, and thereafter:

2015	$	101,196
2016	110,536
2017	112,753
2018	115,008
2019	117,308
2020	119,655
Thereafter	126,548
Total scheduled rental receipts	$	803,004

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BUSINESS SEGMENTS

3 Months Ended

Mar. 31, 2015

Segment Reporting [Abstract]

BUSINESS SEGMENTS

BUSINESS SEGMENTS

At March 31, 2015, the Company reported three business segments in accordance with ASC 280: (i) Finance and Real Estate; (ii) Wholesale Supply; and (iii) Security. For the three months ended March 31, 2015:

	Finance and Real Estate			Wholesale Supply			Security			Corporate and Other			Total
Net revenue	$	26,677		$	12,789		$	3,245		$	—		$	42,720
Operating expenses and other	$	77,530		24,653			13,333			755,697			871,213
Net loss	$	(50,853	)	$	(11,855	)	$	(10,088	)	$	(755,697	)	$	(828,493	)
Property and equipment, net	$	1,710,814		$	—		$	—		$	5,662		$	1,722,138
Other assets	$	18,319		$	81,577		$	1,887,000		$	215,766		$	2,208,324
Depreciation expense	$	9,007		$	—		$	—		$	—		$	9,007

For the three months ended March 31, 2014:

	Finance and Real Estate		Wholesale Supply		Security		Corporate and Other			Total
Net revenue	$	28,765	$	—	$	—	$	20,000		$	48,765
Operating expenses and other	$	22,718	—		—		1,231,969			1,254,687
Net loss	$	6,047	$	—	$	—	$	(1,211,969	)	$	(1,205,922	)
Depreciation expense	$	3,116	$	—			$	—		$	3,116

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COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 31, 2015

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Long-Term Financing Commitment

On January 21, 2014, the Company signed a Securities Purchase Agreement (the “SPA”) with Full Circle.  The SPA provides that Full Circle will initially provide $7.5 million to the Company in the form of Senior Secured Convertible Notes, subject to certain named conditions.  The Company can borrow an additional $22.5 million with the mutual agreement of Full Circle and the Company.

At least 95% of any loan proceeds will be used to acquire properties, which the Company will lease to licensed cannabis cultivators.

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

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

• The specified property’s appraised value is satisfactory to Full Circle;

• A Phase I environmental inspection is completed to the satisfaction of Full Circle; and

• The Company is able to provide a first priority lien on the property in favor of Full Circle.

The six-year loan(s) will be secured by real estate acquired with the loan proceeds and will require interest-only payments at a rate of 12% a year, payable monthly. The funding of the loan(s) is subject to the execution of additional documents between the parties. The initial loan can, at any time, be converted into shares of the Company’s common stock at a conversion price of $5.00 per common share. It is contemplated that further advances will be convertible at 110% of the market price of the Company's stock on the day of any advance, or the ten-day volume-weighted average price prior to the day of advance, whichever is lower. As of March 31, 2015, no amounts have been funded to the Company pursuant to the SPA. In connection with the SPA, Full Circle purchased warrants from the Company for $500,000 (see Note 12).

Operating Leases

The Company rents office space for its corporate needs. The Company entered into a month-to-month lease agreement in July 2013 to lease 2,000 square feet for an annual rate of $12,000, paid monthly. This lease was terminated effective April 1, 2014. On April 2, 2014, the Company entered into a three-year lease agreement to lease 3,000 square feet for its corporate offices. The Company’s lease for office space at 4445 Northpark Avenue, Colorado Springs, Colorado, 80907 was cancelled without penalty, effective November 1, 2014.

The Company entered into a three-year agreement effective April 21, 2014 for a warehouse supply and distribution facility. The facility leased is 1,800 square feet and expires April 30, 2017. Lease expense was approximately $3,200 and $0 for the three months ended March 31, 2015 and 2014, respectively. The future obligations under this lease amount to approximately $9,700 for the remainder of 2015, $13,200 for 2016, and $4,500 for 2017.

Legal

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

XML

INTANGIBLE ASSETS AND GOODWILL INTANGIBLE ASSETS AND GOODWILL (Details) (USD $)	3 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Schedule of Intangible Assets and Goodwill [Line Items]
Finite-Lived Intangible Assets, Amortization Expense, Remainder of Fiscal Year	165,000
Finite-Lived Intangible Assets, Amortization Expense, Next Twelve Months	220,000
Finite-Lived Intangible Assets, Amortization Expense, Year Two	145,000
Finite-Lived Intangible Assets, Amortization Expense, Year Three	120,000
Finite-Lived Intangible Assets, Amortization Expense, Year Four	120,000
Finite-Lived Intangible Assets, Amortization Expense, Year Five	120,000
Thereafter	510,000
Total intangible assets	1,400,000	$ 0
Customer-Related Intangible Assets [Member]
Schedule of Intangible Assets and Goodwill [Line Items]
Finite-Lived Intangible Asset, Useful Life	10 years
Noncompete Agreements [Member]
Schedule of Intangible Assets and Goodwill [Line Items]
Finite-Lived Intangible Asset, Useful Life	2 years
Marketing-Related Intangible Assets [Member]
Schedule of Intangible Assets and Goodwill [Line Items]
Finite-Lived Intangible Asset, Useful Life	10 years

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DERIVATIVE WARRANT LIABILITY (Details Narrative) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Net derivative loss	$ (22,233)	$ (647,640)

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SUBSEQUENT EVENTS

3 Months Ended

Mar. 31, 2015

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

On April 28, 2015, pursuant to the Feinsod Agreement, the Company issued 1,000,000 shares of its stock to Infinity Capital as a result of the uplisting of the Company’s stock to the OTC Market's Pink Sheets on April 28, 2015. In connection with the Feinsod Agreement (see Note 16), the Company expects to record accrued stock payable and stock compensation expense of approximately $3,490,000, based on a closing price per share of $3.49 at April 27, 2015.

On April 30, 2015, Infinity Capital amended the Infinity Note with the Company (see Note 15). The aggregate principal amount of the Infinity Note was increased to $300,000, interest will continue to accrue on the then-outstanding principal amount and will be payable monthly in arrears commencing June 30, 2015, until the Infinity Note’s maturity date on August 31, 2015. Interest on the Infinity Note will continue to accrue at 5.0%. At May 9, 2015, the balance of the Infinity Note was $239,000. Pursuant to the amended agreement, the Company shall use any proceeds in excess of $750,000 from any incremental capital raises to pay any outstanding principal and interest due under the Infinity Note.

On May 1, 2015, the Company and Robert L. Frichtel entered into an Executive Employment Agreement (the “Frichtel Agreement”) in order to secure Mr. Frichtel’s continued employment as the Company’s President and Chief Executive Officer.  Under the terms of the Frichtel Agreement, Mr. Frichtel will receive a base salary of $150,000 per year, which may be increased (but not decreased) subject to annual review by the Board. Mr. Frichtel will be eligible for an annual bonus pursuant to the Company’s Executive Bonus Plan and is entitled to participate in any employee benefit plan that Company has adopted or may adopt. The term of the Frichtel Agreement expires on December 31, 2018.

In addition, the Company and Mr. Frichtel entered into an Option Agreement (the “Frichtel Option Agreement”), pursuant to which Mr. Frichtel will receive options to purchase 300,000 shares of the Company’s common stock at a price of $3.75 per share (which price was based on the closing price of the Company’s common stock on May 1, 2015), 100,000 of which vested upon execution of the Frichtel Agreement, and provided that Mr. Frichtel remains an employee of the Company on each date, 100,000 of which will vest on May 1, 2016, and the remaining 100,000 will vest on May 1, 2017.  

On May 1, 2015, the Company and Full Circle entered into Amendment No. 2 to the Series C Warrants, pursuant to which Full Circle cashlessly exercised 160,000 warrants and received 100,000 shares of the Company’s common stock. On May 4, 2015, Full Circle exercised its remaining warrants under the Series C Warrants to purchase 25,000 shares of the Company’s common stock for $4.00 per share. There are no more warrants under the Series C Warrants outstanding. Immediately preceding Full Circle’s exercise of its 185,000 warrants, the fair value of the warrants was determined to be $593,530. The fair values of the 25,000 restricted shares and 100,000 unrestricted shares issued were determined to be approximately $80,000 and $375,000, respectively, based on a closing price per share of $3.75 on May 1, 2015.

On May 7, 2015, the Company raised capital of $200,000 through its Promissory Note and Warrant Purchase Agreement (the “10% Notes”). Under the 10% Notes, the Company can sell up to $2,000,000 of notes to investors, each note with a denomination of a minimum of $50,000. The 10% Notes mature on May 1, 2016 and carry an interest rate of 10% per annum, with interest payable quarterly beginning on June 30, 2015. Subject to the terms and conditions of the 10% Notes, each investor is granted warrants equal to their note principal divided by 2 (the “10% Note Warrants”). The 10% Note Warrants shall be exercisable for a period of one year after grant date and have an exercise price of the Company’s closing price per share on the date of grant. In connection with the balance of the 10% Notes issued at May 7, 2015, the Company granted 100,000 warrants, which had a fair value of approximately $90,000 on the grant date. The Company expects to record the fair value of the warrants as a debt discount and amortize the value through interest expense through the maturity date of these notes. The Company’s agreements with each of the investors are separate agreements, and the sales of the 10% Notes and the 10% Note Warrants to each of the investors are separate sales.

In accordance with ASC Topic 855, Subsequent Events, the Company has evaluated events that occurred subsequent to the balance sheet date through April 27, 2015, the date of available issuance of these unaudited financial statements. The Company determined that other than as disclosed above, there were no material reportable subsequent events to be disclosed.

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RECEIVABLES (Tables)

3 Months Ended

Mar. 31, 2015

Receivables [Abstract]

Schedule of future tenant receipts

2015	$	101,196
2016	110,536
2017	112,753
2018	115,008
2019	117,308
2020	119,655
Thereafter	126,548
Total scheduled rental receipts	$	803,004

XML

DERIVATIVE WARRANT LIABILITY (Details 1) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Balance beginning	$ 3,893,904	$ 0
Fair value of warrants issued		1,368,908
Increase in derivative liability resulting from anti-dilution provision in agreement with Full Circle	153,994
Decrease in the fair value of warrant liability	(3,314,520)	(375,262)
Balance ending	$ 601,617	$ 1,147,640

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LONG TERM DEBT (Details 1) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Debt Instrument [Line Items]
Amortization of debt discount to interest expense	$ 233,046	$ 304,841
Interest paid during period	46,938	46,476
14.0% mortgage payable, due October 21, 2016 (The Greenhouse) [Member]
Debt Instrument [Line Items]
Balance at December 31, 2013	1,078,604
Converted into shares of common stock	(291,063)
Amortization of debt discount to interest expense	233,047
Payment of loan principal	(1,534)
Interest accrued during period	69,207
Interest paid during period	(46,938)
Ending Balance	1,041,322
Less: Current portion (1)	(6,473)
Long-term debt	1,034,849
Principal Balance [Member]
Debt Instrument [Line Items]
Balance at December 31, 2013	2,414,644
Converted into shares of common stock	(290,000)
Amortization of debt discount to interest expense	0
Payment of loan principal	(1,534)
Interest accrued during period	0
Interest paid during period	0
Ending Balance	2,123,110
Less: Current portion (1)	(6,473)
Long-term debt	2,116,637
Debt Discount [Member]
Debt Instrument [Line Items]
Balance at December 31, 2013	(1,352,510)
Converted into shares of common stock	0
Amortization of debt discount to interest expense	233,047
Payment of loan principal	0
Interest accrued during period	0
Interest paid during period	0
Ending Balance	(1,119,463)
Less: Current portion (1)	0
Long-term debt	(1,119,463)
Accrued Interest [Member]
Debt Instrument [Line Items]
Balance at December 31, 2013	16,470
Converted into shares of common stock	(1,063)
Amortization of debt discount to interest expense	0
Payment of loan principal	0
Interest accrued during period	69,207
Interest paid during period	(46,938)
Ending Balance	37,676
Less: Current portion (1)	0
Long-term debt	$ 37,676

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net loss	$ (828,493)	$ (1,205,922)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	9,007	3,116
Amortization of debt discount	233,046	304,841
Amortization of deferred financing costs	9,584	6,000
Gain (loss) on derivative liability, net	22,233	647,640
Issuance of common stock for services	248,625	0
Changes in operating assets and liabilities
(Increase) / decrease in accounts receivable	938	(65,624)
(Increase) / decrease in prepaid expenses and other assets	(26,804)	(7,304)
(Increase) in inventory	(11,236)	0
Increase in accounts payable and accrued expenses	34,795	(12,730)
Increase in deferred rental revenue		0
Net cash provided by (used in) operating activities	(290,061)	(329,983)
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES
Purchase of property and equipment	(13,253)	(8,250)
Net cash used in investing activities	(13,253)	(8,250)
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES
Increase in short-term financing with related party	239,000	0
Proceeds from sale of warrants, net	0	400,000
Principal repayment on convertible notes payable	(1,534)	(1,737)
Proceeds from issuance of convertible notes payable, net of cash expenses	0	1,412,400
Deferred financing costs	0	(15,000)
Net cash provided by financing activities	237,466	1,795,663
NET (DECREASE) INCREASE IN CASH	(65,848)	1,457,430
CASH, BEGINNING OF PERIOD	165,536	427,436
CASH, END OF PERIOD	99,688	1,884,866
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Cash paid for interest	46,938	46,476
Supplemental disclosure on non-cash financing activities
Value of common stock and warrants issuable in acquisition of IPG	1,887,000	0
Non-cash financing costs	0	100,000
Convertible notes payable settled in stock	290,000	255,000
Interest on convertible notes payable settled in stock	1,063	3,669
Warrants issued in connection with debt recorded as debt discount	0	92,600
Stock Issued During Period, Value, Conversion of Convertible Securities	3,314,520
Stock and warrants issued in satisfaction of accrued stock payable	109,667	0
Stock Warrants Capitalized to CIP	$ 4,820

XML

INTANGIBLE ASSETS AND GOODWILL INTANGIBLE ASSETS AND GOODWILL

3 Months Ended

Mar. 31, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

INTANGIBLE ASSETS AND GOODWILL

INTANGIBLE ASSETS AND GOODWILL

Intangible Assets

The useful lives of amortizable intangible assets are as follows:

Asset	Life
Customer base	10 years
Marketing related intangibles	10 years
Non-compete agreements	2 years

The following table represents the estimated future amortization expense of intangible assets as of March 31, 2015:

Fiscal Year	Amount
Remainder of 2015	$	165,000
2016	220,000
2017	145,000
2018	120,000
2019	120,000
2020	120,000
Thereafter	510,000
Total intangible assets	$	1,400,000

XML

BUSINESS SEGMENTS (Tables)

3 Months Ended

Mar. 31, 2015

Segment Reporting [Abstract]

BUSINESS SEGMENTS

For the three months ended March 31, 2015:

	Finance and Real Estate			Wholesale Supply			Security			Corporate and Other			Total
Net revenue	$	26,677		$	12,789		$	3,245		$	—		$	42,720
Operating expenses and other	$	77,530		24,653			13,333			755,697			871,213
Net loss	$	(50,853	)	$	(11,855	)	$	(10,088	)	$	(755,697	)	$	(828,493	)
Property and equipment, net	$	1,710,814		$	—		$	—		$	5,662		$	1,722,138
Other assets	$	18,319		$	81,577		$	1,887,000		$	215,766		$	2,208,324
Depreciation expense	$	9,007		$	—		$	—		$	—		$	9,007

For the three months ended March 31, 2014:

	Finance and Real Estate		Wholesale Supply		Security		Corporate and Other			Total
Net revenue	$	28,765	$	—	$	—	$	20,000		$	48,765
Operating expenses and other	$	22,718	—		—		1,231,969			1,254,687
Net loss	$	6,047	$	—	$	—	$	(1,211,969	)	$	(1,205,922	)
Depreciation expense	$	3,116	$	—			$	—		$	3,116

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RECEIVABLES (Details) (USD $)	Mar. 31, 2015	Dec. 31, 2014
Receivables [Abstract]
Deferred Rent Credit, Current	$ 18,244	$ 0
2015	101,196
2016	110,536
2017	112,753
2018	115,008
2019	117,308
2020	119,655
Thereafter	126,548
Total scheduled rental receipts	$ 803,004

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RELATED PARTY TRANSACTIONS

3 Months Ended

Mar. 31, 2015

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

On February 19, 2015, the Company completed the closing of a private placement financing transaction with Infinity Capital, which purchased a senior secured note (the “Infinity Note”) from the Company in the principal amount of up to $300,000. Michael Feinsod, who is a director of the Company, is deemed to be the beneficial owner of Infinity Capital. Infinity Capital agreed to make advances to the Company from time to time in amounts not to exceed the aggregate principal amount of the Infinity Note of $300,000.  The balance of the Infinity Note was approximately $239,000 on March 31, 2015. For the three months ended March 31, 2015, interest expense was approximately $1,000, all of which was interest payable at March 31, 2015.

Interest on the Infinity Note accrues at 5.0% on the then-outstanding principal amount is payable monthly in arrears commencing June 30, 2015, until the note’s maturity date on August 31, 2015.  The Infinity Note may be prepaid at any time upon 5 business days’ notice to the Infinity Capital.  As collateral for payment of the Infinity Note, the Company granted Infinity Capital a lien and security interest in substantially all of the Company’s business assets and property.  The Company believes that the arrangement was on terms that were at least as favorable as it could have obtained from third parties. The terms of the Infinity Note were updated subsequent to March 31, 2015 (see Note 17).