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American Cannabis Company, Inc.
0000945617
10-Q
2016-06-30
false
--12-31
No
No
Yes
Smaller Reporting Company
Q2
2016
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; background-color: white"><font style="background-color: white"><b>Note 1.
Description of the Business</b></font></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center; background-color: white; text-indent: 0.5in"><font style="background-color: white"> </font></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">American Cannabis
Company, Inc. and its subsidiary Company, Hollister & Blacksmith, Inc., doing business as American Cannabis Consulting (“American
Cannabis Consulting”), (collectively “the “Company”) are based in Denver, Colorado and operate a fully-integrated
business model that features end-to-end solutions for businesses operating in the regulated cannabis industry in states and countries
where cannabis is regulated and/or has been de-criminalized for medical use and/or legalized for recreational use. The Company
provides advisory and consulting services specific to this industry, designs industry-specific products and facilities, and manages
a strategic group partnership that offers both exclusive and non-exclusive customer products commonly used in the industry. American
Cannabis Company, Inc. is a publicly listed company quoted on the OTCQB under the symbol “AMMJ”.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><font style="background-color: white"><b>Note 2.
Summary of Significant Accounting Policies</b></font></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"><font style="background-color: white"><b> </b></font></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><b><i>Basis
of Accounting</i></b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">The financial
statements are prepared in accordance with accounting principles generally accepted in the United States of America ("U.S.
GAAP"). The Company has elected a fiscal year ending on December 31. Certain balance sheet reclassifications have been made
to prior period balances to reflect the current period’s presentation format; such reclassifications had no impact on the
Company’s consolidated statements of operations or consolidated statements of cash flows and had no material impact on the
Company’s consolidated balance sheets.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><b><i>Reclassifications</i></b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">Prior year
amounts have been reclassified to conform to the current year presentation.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"><b><i> </i></b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><b><i>Use of
Estimates in Financial Reporting</i></b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">The preparation
of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts of assets
and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and reported amounts
of revenues and expenses during the periods presented. Actual results could differ from these estimates. Estimates and assumptions
are reviewed periodically and the effects of revisions are reflected in the financial statements in the period they are deemed
to be necessary. Significant estimates made in the accompanying financial statements include but are not limited to following:
those related to revenue recognition, allowance for doubtful accounts and unbilled services, lives and recoverability of equipment
and other long-lived assets, contingencies and litigation. The Company is subject to uncertainties, such as the impact of future
events, economic, environmental and political factors, and changes in the business climate; therefore, actual results may differ
from those estimates. When no estimate in a given range is deemed to be better than any other when estimating contingent liabilities,
the low end of the range is accrued. Accordingly, the accounting estimates used in the preparation of the Company's financial statements
will change as new events occur, as more experience is acquired, as additional information is obtained and as the Company's operating
environment changes. Changes in estimates are made when circumstances warrant. Such changes and refinements in estimation methodologies
are reflected in reported results of operations; if material, the effects of changes in estimates are disclosed in the notes to
the financial statements.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"><b><i> </i></b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><b><i>Unaudited
Interim Financial Statements</i></b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">The accompanying
unaudited financial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions
to Form 10-Q and Regulation S-X.  Accordingly, the financial statements do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments
consisting of normal recurring entries necessary for a fair statement of the periods presented for: (a) the financial position;
(b) the result of operations; and (c) cash flows, have been made in order to make the financial statements presented not misleading.
The results of operations for such interim periods are not necessarily indicative of operations for a full year.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"><b><i> </i></b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><b><i>Significant
Clients and Customers</i></b>  </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">For the three
months ended June 30, 2016, four customers individually accounted for $494,003 of the Company’s total revenues; these customers
accounted for approximately 79% of the Company’s total revenues for the period. For the six months ended June 30, 2016, six
customers individually accounted for $834,907 of the Company’s total revenues; these customers accounted for approximately
71% of the Company’s total revenues for the period.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">For the three
months ended June 30, 2015, two customers individually accounted for 10% or more of the Company’s revenues; these customers
accounted for approximately 63% of the Company’s total revenues for the period. For the six months ended June 30, 2015, three
customers individually accounted for 10% or more of the Company’s revenues; these customers accounted for approximately 70%
of the Company’s total revenues for the period. For the three months ended June 30, 2014, three customers individually accounted
for 10% or more and 65% in aggregate of the Company’s total revenues. For the six months ended June 30, 2014, three customers
individually accounted for 10% or more and 66% in aggregate of the Company’s total revenues. </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><b><i>Net Income
(Loss) Per Common Share</i></b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">The Company
reports net income (loss) per common share in accordance with FASB ASC 260, “Earnings per Share”. This statement requires
dual presentation of basic and diluted earnings with a reconciliation of the numerator and denominator of the earnings per share
computations. Basic net income (loss) per share is computed by dividing net income attributable to common stockholders by the weighted
average number of shares of common stock outstanding during the period and excludes the effects of any potentially dilutive securities.
Diluted net income (loss) per share gives effect to any dilutive potential common stock outstanding during the period. The computation
does not assume conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect on earnings.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">Due to the
Company’s net losses for the three and six months ended June 30, 2016 and June 30, 2015, any potentially dilutive shares
outstanding as of June 30, 2016 and June 30, 2015 respectively, were not presented in the EPS computations, as their effect would
have been antidilutive.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><font style="background-color: white"><b><i>Recent</i></b></font>  
<font style="background-color: white"><b><i>Accounting Pronouncements</i></b></font></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"><font style="background-color: white"><b> </b></font></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><font style="background-color: white">The
Company has reviewed all the recently issued, but not yet effective, accounting pronouncements and it does not believe any of these
pronouncements will have a material impact on the Company.</font></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"><font style="background-color: white"> </font></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><font style="background-color: white"><b><i>Reclassifications</i></b></font></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><font style="background-color: white">Prior
year amounts have been reclassified to conform to the current year presentation.</font></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><b>Note 3.
Accounts Receivable, net</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">Accounts receivable,
net, was comprised of the following as of June 30, 2016 and December 31, 2015:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>30-Jun-16</b></font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>31-Dec-15</b></font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 58%; text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Gross accounts receivable</font></td>
<td style="width: 8%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 11%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">154,222</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 8%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 11%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">56,704</font></td>
<td style="width: 1%; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Less: allowance for doubtful accounts</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">-2,486</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">-8,419</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Accounts receivable, net</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">151,736</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">48,285</font></td>
<td style="line-height: 107%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">The Company
had bad debt expense during the six months ended June 30, 2016 and 2015 of $13,344 and $0, respectively. During the six months
ended June 30, 2016 and 2015, the Company wrote-off old receivables and their related allowances for bad debts of $19,277 and $0,
respectively.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><font style="background-color: white"><b>Note
4. Deposits</b></font></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"><font style="background-color: white"><b> </b></font></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><font style="background-color: white">Deposits
were comprised of the following as of June 30, 2016 and December 31, 2015:</font></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"><font style="background-color: white"> </font></p>
<p style="font: 10pt/normal Calibri, Helvetica, Sans-Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><font style="background-color: white">Inventory
deposits as of June 30, 2016 and December 31, 2015 reflect down payments made to suppliers or manufacturers under inventory purchase
agreements.</font></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><font style="background-color: white"><b>Note
5. Inventory</b></font></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"><font style="background-color: white"><b> </b></font></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><font style="background-color: white">Inventory
as of June 30, 2016 and December 31, 2015 of $67,728 and $67,435, respectively, was fully comprised of finished goods. </font></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"><font style="background-color: white"> </font></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><b>Note 6.
Prepaid expenses and other current assets</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"><font style="background-color: white"> </font></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><font style="background-color: white">Prepaid
expenses and other current assets was comprised of the following as of June 30, 2016 and December 31, 2015:</font></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"><font style="background-color: white"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>30-Jun-16</b></font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>31-Dec-15</b></font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 58%; text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Inventory deposits</font></td>
<td style="width: 8%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 11%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">6,500</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 8%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 11%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">9,345</font></td>
<td style="width: 1%; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Operating lease deposits included in other Assets</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">4,500</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">4,500</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Deposits</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">11,000</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">13,845</font></td>
<td style="line-height: 107%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><b>Note 7.
Property and Equipment, net</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">Property and
equipment, net, was comprised of the following as of June 30, 2016 and December 31, 2015:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>30-Jun-16</b></font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>31-Dec-15</b></font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 58%; text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Office equipment</font></td>
<td style="width: 8%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 11%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">9,275</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 8%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 11%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">7,472</font></td>
<td style="width: 1%; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Furniture and fixtures</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">8,635</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">8,777</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Machinery and equipment</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2,337</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2,336</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Property and equipment, gross</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">20,247</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">18,585</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Less: accumulated depreciation</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(7,614</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(5,137</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Property and equipment, net</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">12,633</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">13,448</font></td>
<td style="line-height: 107%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">The Company
recorded depreciation expense of $1,256 and $758 during the three months ended June 30, 2016 and 2015, respectively. During the
six months ended June 30, 2016 and 2015, the Company recorded depreciation expense of $2,470 and $1,474, respectively.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><b>Note 8.
Notes Payable</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">As of June
30, 2016 and December 31, 2015, the Company reflected convertible notes payable as follows:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Principal balance</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Loan Discount</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Accrued Interest</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Total</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 44%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Balance as of December 31, 2015</font></td>
<td style="width: 2%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 10%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">71,500</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 2%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 10%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(11,248</font></td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">) </font></td>
<td style="width: 2%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 10%; text-align: right; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 2%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 10%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">60,252</font></td>
<td style="width: 1%; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Issued in the period</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">150000</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(10,235</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">) </font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">473</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">140,238</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Converted into shares of common shares</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(71,500</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">) </font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">10,075</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(61,425</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">) </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Balance as of June 30, 2016</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">150,000</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(11,408</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">) </font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">473</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">139,065</font></td>
<td style="line-height: 107%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">The Company
had convertible debentures which were originally issued on April 24, 2014, maturing on April 24, 2016, paid zero interest, and
were convertible until maturity at the holders’ discretion into shares of the Company’s common stock at $0.08 per share.
On April 11th, 2016, the maturity date on this note was renegotiated to April 24th, 2018. On April 12, 2016, the Company received
notice of a partial conversion of this note in the amount of $58,000 that was converted into 725,000 shares of common stock at
a price of $0.08 per share. On May 6, 2016, the Company received notice for the conversion of the balance of the note in the amount
of $13,500 that was converted into 168,750 shares of common stock at a price of $0.08 per share. Based on this conversion, as of
June 30, 2016, the Company had remaining convertible debentures in the total amount of $0, and any unamortized debt discount remaining
on the date of conversion was amortized in full to interest expense.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">On June 23,
2016, the Company entered into two convertible promissory notes: one for $50,000 and one for $330,000  . As of the date
of this filing, the Company received $150,000 in proceeds recorded a discount of $10,935. The maturity date for each note is February
14, 2017. Each note pays 8% fixed interest and is convertible at the holder’s discretion into shares of the Company’s
common stock at a fixed price of $0.1135 per share. On August 4, 2016 the notes were amended and restated to delete portions of
the notes that originally provided for a conversion formula used to determine the price per share and to delete a provision that
provided for repayment of the notes through a separate investment agreement providing for the Company to sell its registered shares
to an investor (See Subsequent Events Note 14).</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><b>Note 9.
Accrued and Other Current Liabilities</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">Accrued and
other current liabilities was comprised of the following at June 30, 2016 and December 31, 2015:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; background-color: white; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>30-Jun-16</b></font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>31-Dec-15</b></font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 58%; text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Accrued payroll liabilities</font></td>
<td style="width: 8%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 11%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">9,808</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 8%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 11%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">18,185</font></td>
<td style="width: 1%; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Accrual for products sold and shipped (in transit)</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">46,417</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">64,050</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Other accruals</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">15,525</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">11,233</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Accrued and other current liabilities</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">71,750</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">93,468</font></td>
<td style="line-height: 107%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><b>Note 10.
Related Party Transactions</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">During the
six months ended June 30, 2016, the Company incurred $14,500 of expense for accounting services payable to JDE Development LLC,
a company in which Jesus M Quintero, the Company’s Chief Financial Officer, is an owner.   </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><b>Note 11.
Commitments and Contingent Liabilities</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">On March 1,
2016, the Company retained Brian Johnson as a consultant for an initial term of three months until May 31, 2016, and agreed to
pay Mr. Johnson 10,000 shares of its restricted common stock per month for the three-month term payable on May 31, 2016, subject
to adjustment for actual hours of service rendered. On June 1, 2016, the Company and Mr. Johnson agreed to an extension of the
consulting engagement for an additional one-month term, ending on June 30, 2016. Mr. Johnson provided additional services and upon
the termination of the engagement on June 30, 2016, the Company agreed to issue Mr. Johnson 87,600 shares of common stock as a
final payment for services rendered from inception through June 30, 2016 at a value of $9,198. As of the date of this filing the
shares have not been issued.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">On January
20, 2016, we were named as a defendant in a civil suit entitled: Anthony Baroud vs. Hollister & Blacksmith, Inc., dba American
Cannabis Company filed in the Circuit Court of Cook County, Illinois. The lawsuit originally sought damages of $100,000 related
to an employment contract. The Company filed a motion with the Court to dismiss the complaint and refer the Company and Mr. Baroud
to arbitration. On May 18, 2016 the Court granted the Company’s motion and dismissed Mr. Baroud’s complaint. Mr. Baroud
has not pursued arbitration as of the date of this filing.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><b>Note 12.
Stock-based Compensation</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><font style="background-color: white"><b><i>Warrants</i></b></font></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"><font style="background-color: white"><b><i> </i></b></font></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">As of June 30, 2016 and December 31,
2015, the Company issued fully-vested warrants to the Company’s independent board member to purchase up to two hundred and
fifty thousand (250,000) shares of common stock at an exercise price of sixty-three cents ($0.63) per share were outstanding, exercisable
within five (5) years of the date of issuance on November 19, 2014. The grant date fair value of the warrants, as calculated based
on the Black-Scholes valuation model, was $0.59 per share. There were no outstanding unvested warrants or new issuances of warrants
during the three months ended June 30, 2016; consequently, no stock-based compensation expense associated with warrant was recorded
during the six months ended June 30, 2016.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">As of June
30, 2016 and December 31, 2015, as the exercise price per share exceeded the price per share of our common shares, there was no
aggregate intrinsic value of outstanding warrants. As of June 30, 2016 and December 31, 2015, the warrants had 3.6 and 3.3 years
remaining until expiration, respectively. No warrants were issued or outstanding during or preceding the six months ended June
30, 2016. </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"> </p>
<p style="font: 11pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><font style="font-size: 10pt"><b><i>Stock</i></b></font><font style="font-size: 8.5pt">
</font><font style="font-size: 10pt"><b><i>Options</i></b></font></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"><b><i> </i></b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">In addition
to the warrants as described above, the Company’s independent board member shall be eligible to receive options for 400,000
shares of common stock under the Company’s incentive plan, as and when duly approved by the Board of Directors.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><b><i>Stock
Issuable in Compensation for Professional Services</i></b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">From time to
time, the Company enters into agreements whereby a professional service provider will be compensated for services rendered to the
Company by shares of common stock in lieu of cash.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">On March 1,
2016, the Company retained Brian Johnson as a consultant for an initial term of three months until May 31, 2016, and agreed to
pay Mr. Johnson 10,000 shares of its restricted common stock per month for the three-month term payable on May 31, 2016, subject
to adjustment for actual hours of service rendered. On June 1, 2016, the Company and Mr. Johnson agreed to an extension of the
consulting engagement for an additional one-month term, ending on June 30, 2016. Mr. Johnson provided additional services and upon
the termination of the engagement on June 30, 2016, the Company agreed to issue Mr. Johnson 87,600 shares of common stock as a
final payment for services rendered from inception through June 30, 2016 at a value of $9,198 (See Note 11). . As of the date of
this filing the shares have not been issued.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"><font style="background-color: white"> </font></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><b>Note 13.
Stockholders’ Equity</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><i>Preferred
Stock</i></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">American Cannabis
Company, Inc. is authorized to issue 5,000,000 shares of preferred stock at $0.01 par value. No shares of preferred stock
were issued and outstanding during the six months ended June 30, 2016 and 2015, respectively.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><i>Common Stock</i></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"><i> </i></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">American Cannabis
Company, Inc. is authorized to issue 100,000,000 common shares at $0.00001 par value per share.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><b>Note 14.
Subsequent Events</b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">The Company
previously entered into an Investment Agreement with Tangiers Global, LLC, a Wyoming Limited Liability Company, on June 23, 2016.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">On August 4,
2016, the Company and Tangiers Global, LLC, amended and restated the two fixed convertible promissory notes disclosed in Note 8.
The amendments deleted portions of the notes that originally provided for a conversion formula used to determine the conversion
price per share, and deletes provisions for the repayment of the notes through sales of the Company’s registered shares to
Tangiers .</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">We previously
reported an expense payable to New Era CPAs, an accounting firm in which Antonio Migliarese, the Company’s former Chief Financial
Officer, is a partner. The expense is payable in common stock. As of June 30, 2016 the Company owed Mr. Migliarese 77,660 shares,
reflected as a liability. On July 29, 2016 the Company issued 77,660 shares due Mr. Migliarese.</p>
<p style="font: 11pt/107% Calibri, Helvetica, Sans-Serif; margin: 0 0 8pt"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><b><i>Basis
of Accounting</i></b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">The financial
statements are prepared in accordance with accounting principles generally accepted in the United States of America ("U.S.
GAAP"). The Company has elected a fiscal year ending on December 31. Certain balance sheet reclassifications have been made
to prior period balances to reflect the current period’s presentation format; such reclassifications had no impact on the
Company’s consolidated statements of operations or consolidated statements of cash flows and had no material impact on the
Company’s consolidated balance sheets.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><b><i>Reclassifications</i></b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">Prior year
amounts have been reclassified to conform to the current year presentation.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><b><i>Use of
Estimates in Financial Reporting</i></b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">The preparation
of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts of assets
and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and reported amounts
of revenues and expenses during the periods presented. Actual results could differ from these estimates. Estimates and assumptions
are reviewed periodically and the effects of revisions are reflected in the financial statements in the period they are deemed
to be necessary. Significant estimates made in the accompanying financial statements include but are not limited to following:
those related to revenue recognition, allowance for doubtful accounts and unbilled services, lives and recoverability of equipment
and other long-lived assets, contingencies and litigation. The Company is subject to uncertainties, such as the impact of future
events, economic, environmental and political factors, and changes in the business climate; therefore, actual results may differ
from those estimates. When no estimate in a given range is deemed to be better than any other when estimating contingent liabilities,
the low end of the range is accrued. Accordingly, the accounting estimates used in the preparation of the Company's financial statements
will change as new events occur, as more experience is acquired, as additional information is obtained and as the Company's operating
environment changes. Changes in estimates are made when circumstances warrant. Such changes and refinements in estimation methodologies
are reflected in reported results of operations; if material, the effects of changes in estimates are disclosed in the notes to
the financial statements.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><b><i>Unaudited
Interim Financial Statements</i></b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">The accompanying
unaudited financial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions
to Form 10-Q and Regulation S-X.  Accordingly, the financial statements do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments
consisting of normal recurring entries necessary for a fair statement of the periods presented for: (a) the financial position;
(b) the result of operations; and (c) cash flows, have been made in order to make the financial statements presented not misleading.
The results of operations for such interim periods are not necessarily indicative of operations for a full year.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><b><i>Significant
Clients and Customers</i></b>  </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">For the three
months ended June 30, 2016, four customers individually accounted for $494,003 of the Company’s total revenues; these customers
accounted for approximately 79% of the Company’s total revenues for the period. For the six months ended June 30, 2016, six
customers individually accounted for $834,907 of the Company’s total revenues; these customers accounted for approximately
71% of the Company’s total revenues for the period.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">For the three
months ended June 30, 2015, two customers individually accounted for 10% or more of the Company’s revenues; these customers
accounted for approximately 63% of the Company’s total revenues for the period. For the six months ended June 30, 2015, three
customers individually accounted for 10% or more of the Company’s revenues; these customers accounted for approximately 70%
of the Company’s total revenues for the period. For the three months ended June 30, 2014, three customers individually accounted
for 10% or more and 65% in aggregate of the Company’s total revenues. For the six months ended June 30, 2014, three customers
individually accounted for 10% or more and 66% in aggregate of the Company’s total revenues. </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><b><i>Net Income
(Loss) Per Common Share</i></b></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">The Company
reports net income (loss) per common share in accordance with FASB ASC 260, “Earnings per Share”. This statement requires
dual presentation of basic and diluted earnings with a reconciliation of the numerator and denominator of the earnings per share
computations. Basic net income (loss) per share is computed by dividing net income attributable to common stockholders by the weighted
average number of shares of common stock outstanding during the period and excludes the effects of any potentially dilutive securities.
Diluted net income (loss) per share gives effect to any dilutive potential common stock outstanding during the period. The computation
does not assume conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect on earnings.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">Due to the
Company’s net losses for the three and six months ended June 30, 2016 and June 30, 2015, any potentially dilutive shares
outstanding as of June 30, 2016 and June 30, 2015 respectively, were not presented in the EPS computations, as their effect would
have been antidilutive.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><font style="background-color: white"><b><i>Recent</i></b></font>  
<font style="background-color: white"><b><i>Accounting Pronouncements</i></b></font></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"><font style="background-color: white"><b> </b></font></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><font style="background-color: white">The
Company has reviewed all the recently issued, but not yet effective, accounting pronouncements and it does not believe any of these
pronouncements will have a material impact on the Company.</font></p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"> </p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>30-Jun-16</b></font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>31-Dec-15</b></font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 58%; text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Gross accounts receivable</font></td>
<td style="width: 8%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 11%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">154,222</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 8%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 11%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">56,704</font></td>
<td style="width: 1%; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Less: allowance for doubtful accounts</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">-2,486</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">-8,419</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Accounts receivable, net</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">151,736</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">48,285</font></td>
<td style="line-height: 107%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"> </p>
<p style="font: 8.5pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"> </p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>30-Jun-16</b></font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>31-Dec-15</b></font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 58%; text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Inventory deposits</font></td>
<td style="width: 8%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 11%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">6,500</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 8%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 11%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">9,345</font></td>
<td style="width: 1%; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Operating lease deposits included in other Assets</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">4,500</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">4,500</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Deposits</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">11,000</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">13,845</font></td>
<td style="line-height: 107%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in"> </p>
<p style="font: 8.5pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"> </p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>30-Jun-16</b></font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>31-Dec-15</b></font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 58%; text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Office equipment</font></td>
<td style="width: 8%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 11%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">9,275</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 8%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 11%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">7,472</font></td>
<td style="width: 1%; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Furniture and fixtures</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">8,635</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">8,777</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Machinery and equipment</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2,337</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">2,336</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Property and equipment, gross</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">20,247</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">18,585</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Less: accumulated depreciation</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(7,614</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(5,137</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Property and equipment, net</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">12,633</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">13,448</font></td>
<td style="line-height: 107%"> </td></tr>
</table>
<p style="font: 8pt/normal Calibri, Helvetica, Sans-Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Principal balance</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Loan Discount</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Accrued Interest</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Total</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 44%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Balance as of December 31, 2015</font></td>
<td style="width: 2%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 10%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">71,500</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 2%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 10%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(11,248</font></td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">) </font></td>
<td style="width: 2%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 10%; text-align: right; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 2%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 10%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">60,252</font></td>
<td style="width: 1%; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Issued in the period</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">150000</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(10,235</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">) </font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">473</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">140,238</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Converted into shares of common shares</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(71,500</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">) </font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">10,075</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(61,425</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">) </font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Balance as of June 30, 2016</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">150,000</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">(11,408</font></td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">) </font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">473</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">139,065</font></td>
<td style="line-height: 107%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; background-color: white; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>30-Jun-16</b></font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif"><b>31-Dec-15</b></font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"> </td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 58%; text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Accrued payroll liabilities</font></td>
<td style="width: 8%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 11%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">9,808</font></td>
<td style="width: 1%; line-height: 107%"> </td>
<td style="width: 8%; line-height: 107%"> </td>
<td style="width: 1%; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 11%; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">18,185</font></td>
<td style="width: 1%; line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Accrual for products sold and shipped (in transit)</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">46,417</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">64,050</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Other accruals</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">15,525</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">11,233</font></td>
<td style="line-height: 107%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: justify; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">Accrued and other current liabilities</font></td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">71,750</font></td>
<td style="line-height: 107%"> </td>
<td style="line-height: 107%"> </td>
<td style="border-bottom: black 1pt solid; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right; line-height: 107%"><font style="font: 10pt Times New Roman, Times, Serif">93,468</font></td>
<td style="line-height: 107%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; background-color: white; text-indent: 0.5in"> </p>
151736
48285
2486
8419
154222
56704
67728
67435
11000
13845
6500
9345
20247
18585
9275
7472
8635
8777
2337
2336
12633
13448
7614
5137
2477
1474
1256
758
71750
93468
15525
11233
46417
64050
9808
18185
46663474
505381
712962
50763
32117
67728
67435
6500
9345
151736
48285
228654
555780
227513
165213
398208
593020
71750
93468
139065
60252
-115550
-220966
71843
218334
398208
593020
124306
137890
-4229598
-4131266
4353439
4268708
465
448
522514
730910
522514
730910
4500
4500
4500
4500
0.00001
0.00001
100000000
100000000
46585814
44808731
46585814
44808731
984052
912412
443648
468745
524579
448354
231785
200257
459473
464058
211863
268488
480657
548481
197126
264979
380857
401998
145848
176347
99800
146483
51278
88632
503395
363931
246522
203766
591398
689531
329921
311314
1413
41722
1413
11350
40477
207529
19662
113224
18068
187702
893
56286
531440
252578
307953
130454
-88003
-325600
-83399
-107548
10329
-55148
1376
-63934
-10329
-17623
-1376
-8837
0
0
0
0
-98332
-270452
-84775
-43614
-98332
-270452
-84775
-43614
0
-0.01
0
0
45628580
45275183
46375168
45752033
0
72771
0
72771
9198
107385
14422
80394
10372
17704
-464529
-175368
-146491
80370
-31214
-1511
-105416
-144115
-18646
-5606
-293
-25600
2845
102202
-116795
-44842
-1662
-12332
-1662
-12332
139065
250000
0
250000
-327126
62300
80
71500
-71500
139065
0
-72771
13344
0
71500
150000
-71500
150000
-11248
-10235
10075
-11408
473
473
60252
140238
-61425
139065