UNITED
STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549



FORM
10-K



|(Mark
    One) |  |                                                                                                                                                         
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------
|☒              |  | ANNUAL REPORT PURSUANT
        TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
        For the Fiscal Year
        Ended December 31, 2017
|Or            
|☐              |  | TRANSITION REPORT
        PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
        For the Transition
        Period From  to     



Commission
File Number 000-26108



(american cannabis company logo)



AMERICAN
CANNABIS COMPANY, INC.
(Exact name of registrant as specified in its charter)



|Delaware
    (State or other jurisdiction of
    incorporation or organization)                                                                            |  | 90-1116625
    (I.R.S. Employer
    Identification No.)
|---------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------
|                                                                                                                                                           |  |                                                        
|5690
                                    Logan Street, Unit ADenver, Colorado
                                    (Address of principal executive offices) |  | 80216
                                       (Zip Code)



(303) 974-4770
(Registrant's telephone number, including area code)



Securities
registered pursuant to Section 12(b) of the Act:



None

Title
of each class



Securities
registered pursuant to Section 12(g) of the Act:



Common
Stock, $0.00001 Par Value

(Title
of each class)



Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐    No ☒



Indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☒    No ☐



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



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



Indicate by check mark if disclosure
of delinquent filers pursuant to Item 405 of Regulation S-K ((§229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K. ☐



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



|Large
    accelerated filer ☐ |  | Accelerated
    filer ☐ |  | Non-accelerated
    filer ☐
     (Do not check if a
    smaller reporting company) |  | Smaller
    reporting company ☒
|----------------------------- |  | ----------------------- |  | ---------------------------------------------------------------------------------- |  | -------------------------------



If an emerging growth company,
indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐



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



The aggregate market value
of common equity held by non-affiliates of the Registrant as of December 26, 2018 was approximately $14,406,677.



As of December 26, 2018, 51,513,064
of common stock, par value $0.00001, were issued and outstanding.



1







TABLE
OF CONTENTS





|PART
    1  
|------------
|            
|ITEM 1.     
|            
|ITEM 1A.    
|            
|ITEM 1B.    
|            
|ITEM 2.     
|            
|ITEM 3.     
|            
|ITEM 4.     
|            
|PART
    II 
|            
|ITEM 5.     
|            
|ITEM 6.     
|            
|ITEM 7.     
|            
|ITEM 7A.    
|            
|ITEM 8.     
|            
|ITEM 9.     
|            
|ITEM 9A.    
|            
|ITEM 9B.    
|            
|PART
    III
|            
|ITEM 10.    
|            
|ITEM 11.    
|            
|ITEM 12.    
|            
|ITEM 13.    
|            
|ITEM 14.    
|            
|PART
    IV 
|            
|ITEM 15.    





2







PART
I.



ITEM
1. BUSINESS



This annual
report on Form 10-K (including, but not limited to, the following disclosures regarding our Business) contains forward-looking
statements regarding our business, financial condition, results of operations and prospects. Words such as “expects,”
“anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates”
and similar expressions or variations of such words are intended to identify forward-looking statements, but are not the exclusive
means of identifying forward-looking statements in this annual report on Form 10-K. Additionally, statements concerning future
matters such as the development of new products, enhancements or technologies, sales levels, expense levels and other statements
regarding matters that are not historical are forward-looking statements.



Forward-looking
statements in this annual report on Form 10-K reflect our good faith judgment based on facts and factors currently known to us.
Forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially
from the results and outcomes discussed in or anticipated by the forward-looking statements. Readers are urged not to place undue
reliance on these forward-looking statements, which speak only as of the date of this annual report on Form 10-K. We undertake
no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise
after the date of this annual report on Form 10-K. Readers are urged to carefully review and consider the various disclosures
made in this annual report on Form 10-K, which attempt to advise interested parties of the risks and factors that may affect our
business, financial condition, results of operations and prospects.



Company
Background



American
Cannabis Company, Inc. and subsidiary is a publicly listed company quoted on the OTC Markets under the symbol “AMMJ”.
We are based in Denver, Colorado and operate a fully-integrated business model that features end-to-end solutions for businesses
operating in 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. We provide advisory and consulting services specific to this industry, design
industry-specific products and facilities, and manage a strategic group partnership that offers both exclusive and non-exclusive
customer products commonly used in the industry.



We are
a Delaware corporation formed on September 24, 2001 with the name Naturewell, Inc., which became Brazil Interactive Media, Inc.
(“BIMI”) on March 13, 2013 pursuant to a merger transaction that resulted in the Company becoming the owner of a Brazilian
interactive television technology and television production company, BIMI, Inc. We became American Cannabis Company, Inc. on September
29, 2014, pursuant to an Agreement and Plan of Merger dated May 15, 2014 (the “Merger Agreement”) between the Company,
Cannamerica Corp. (“Merger Sub”), a wholly-owned subsidiary of BIMI, and Hollister & Blacksmith, Inc. d/b/a American
Cannabis Consulting (“American Cannabis Consulting”). Pursuant to the Merger Agreement, which was consummated and
became effective on September 29, 2014, Merger Sub was merged with and into American Cannabis Consulting through a reverse triangular
merger transaction (the “Reverse Merger”), we changed our name to “American Cannabis Company, Inc.”, and
our officers and directors in office prior to the Merger Agreement resigned and American Cannabis Consulting appointed new officers
and directors to serve our Company. In concert with the Merger Agreement, we consummated a complete divestiture of BIMI, Inc.
pursuant to a Separation and Exchange Agreement dated May 16, 2014 (the “Separation Agreement”) between the Company,
BIMI, Inc., a Delaware corporation and wholly-owned subsidiary of the Company, and Brazil Investment Holding, LLC (“Holdings”),
a Delaware limited liability company. On October 10, 2014, we changed our stock symbol from BIMI to AMMJ.



The foregoing
descriptions of the Merger Agreement and Separation Agreement do not purport to be complete and are qualified in their entirety
by the terms of such agreements, which are filed as exhibits to the Current Report on Form 8-K filed by the Company with the U.S.
Securities and Exchange Commission (“SEC”) on October 3, 2014.



Industry
and Regulatory Overview



The Company
is not engaged in the direct growth, cultivation, harvesting and distribution of cannabis. However, we do offer consulting services
to licensed operators and applicants for state offered cannabis licenses, who seek to engage in the medical and/or recreational
cannabis business in those state jurisdictions where cannabis has been legalized. We also sell ancillary products which are used
in the legalized cannabis industry.



As of
the date of this filing, thirty-three states and the District of Columbia currently have laws broadly legalizing cannabis in some
form for either medicinal or recreational use governed by state specific laws and regulations. Although legalized in some states,
cannabis is a “Schedule 1” drug under the Controlled Substances Act (21 U.S.C. § 811), and is illegal under federal
law.



On August
29, 2013, The Department of Justice set out its prosecutorial priorities in light of various states legalizing cannabis for medicinal
and/or recreational use. The “Cole Memorandum” provided that when states have implemented strong and effective regulatory
and enforcement systems to control the cultivation, distribution, sale, and possession of cannabis, conduct in compliance with
those laws and regulations is less likely to threaten the federal priorities. Indeed, a robust system may affirmatively address
those priorities by, for example, implementing effective measures to prevent diversion of cannabis outside of the regulated system
and to other states, prohibiting access to cannabis by minors, and replacing an illicit cannabis trade that funds criminal enterprises
with a tightly regulated market in which revenues are tracked and accounted for. In those circumstances, consistent with the traditional
allocation of federal-state efforts in this area, the Cole Memorandum provided that enforcement of state law by state and local
law enforcement and regulatory bodies should remain the primary means of addressing cannabis-related activity. If state enforcement
efforts are not sufficiently robust to protect against the harms set forth above, the federal government may seek to challenge
the regulatory structure itself in addition to continuing to bring individual enforcement actions, including criminal prosecutions,
focused on those harms.



On January
4, 2018, Attorney General Jeff Sessions issued a memorandum for all United States Attorneys concerning cannabis enforcement under
the Controlled Substances Act (CSA). Mr. Sessions rescinded all previous prosecutorial guidance issued by the Department of Justice
regarding cannabis, including the August 29, 2013 “Cole Memorandum”.



In rescinding
the Cole Memorandum, Mr. Sessions stated that U.S. Attorneys must decide whether or not to pursue prosecution of cannabis activity
based upon factors including: the seriousness of the crime, the deterrent effect of criminal prosecution, and the cumulative impact
of particular crimes on the community. Mr. Sessions reiterated that the cultivation, distribution and possession of marijuana
continues to be a crime under the U.S. Controlled Substances Act.



On March
23, 2018, President Donald J. Trump signed into law a $1.3 trillion-dollar spending bill that included an amendment known as “Rohrabacher-Blumenauer,”
which prohibits the Justice Department from using federal funds to prevent certain states “from implementing their own State
laws that authorize the use, distribution, possession or cultivation of medical cannabis.”





3







Business
Overview



We primarily
operate within two divisions within the regulated cannabis industry: (i) consulting and professional services; and, (ii) the sale
of products and equipment commonly utilized in the cultivation, processing, transportation or retail sale of cannabis. We are
not licensed to produce and/or sell cannabis. We do not directly sell, cultivate, manufacture, or transact cannabis.



Consulting Services



We offer
consulting services for companies associated with the cannabis industry in all stages of development. Our service offerings include
the following:



| | ● | Cannabis
                                         Business Planning.Our commercial cannabis business planning services are structured
                                         to help those pursuing state based operational licensing to create and implement effective,
                                         long-range business plans. We work with our clients to generate a comprehensive strategy
                                         based on market need and growth opportunities, and be a partner through site selection,
                                         site design, the development of best operating practices, the facility build-out process,
                                         and the deployment of products. We understand the challenges and complexities of the
                                         regulated commercial cannabis market and we have the expertise to help client businesses
                                         thrive.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Cannabis
                                         Business License Applications.Our team has the experience necessary to help clients
                                         obtain approval for their state license and ensure their company remains compliant as
                                         it grows. We have crafted successful, merit-based medical marijuana business license
                                         applications in multiple states and we understand the community outreach and coordination
                                         of services necessary to win approval. As part of the process for crafting applications,
                                         we collaborate with clients to develop business protocols, safety standards, a security
                                         plan, and a staff training program. Depending on the nature of our clients’ businesses
                                         and needs, we can work with our clients to draft detailed cultivation plans, create educational
                                         materials for patients, or design and develop products that comply with legal state guidelines
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Cultivation
                                         Build-out Oversight Services.We offer cultivation build-out consulting as part of
                                         our Cannabis Business Planning service offerings. We help clients ensure their project
                                         timeline is being met, facilities are being designed with compliance and the regulated
                                         cannabis industry in mind, and that facilities are built to the highest of quality standards
                                         for cannabis production and/or distribution. This enables a seamless transition from
                                         construction to cultivation, ensuring that client success is optimized and unencumbered
                                         by mismanaged construction projects.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Cannabis
                                         Regulatory Compliance.Based on our understanding of regulated commercial cannabis
                                         laws nationwide, we can help client cultivation operations, retail dispensaries and/or
                                         infused-product kitchen businesses to meet and maintain regulatory compliance for both
                                         medical and recreational markets. We partner with our clients to establish standard operating
                                         procedures in accordance with their state’s regulation and help them implement
                                         effective staff hiring and training practices to ensure that employees adhere to relevant
                                         guidelines.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Compliance
                                         Audit Services.Our regulatory compliance service offerings include compliance auditing.
                                         The regulated cannabis industry is developing rapidly with evolving laws and regulations
                                         and navigating through current and new regulations and systems can be tedious and daunting. To
                                         assist our clients in addressing these challenges, we offer compliance audits performed
                                         by our experienced and knowledgeable staff; our team members maintain comprehensive oversight
                                         of the cannabis industry while staying up-to-date on current and new laws and regulations.
                                         Our compliance audits assess various regulatory topics, including: (1) licensing requirements;
                                         (2) visitor intake procedures; (3) seed-to-sale inventory tracking; (4) proper waste
                                         disposal procedures; (5) recordkeeping and documentation requirements; (6) cannabis transportation
                                         procedures; (7) packaging and labeling requirements; (8) security requirements; (9) product
                                         storage; (10) mandatory signage; and (11) preparedness for state and local inspections.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Cannabis
                                         Business Growth Strategies.Our team shares its collective knowledge and resources
                                         with our clients to create competitive, forward-looking cannabis business growth strategies
                                         formulated to minimize risk and maximize potential. We customize individual plans for
                                         the unique nature of our client businesses, their market and big-picture goals, supported
                                         with a detailed analysis and a thorough command of workflow best practices, product strategies,
                                         sustainability opportunities governed by a core understanding or regulatory barriers
                                         and/or opportunities.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Cannabis
                                         Business Monitoring. The regulated commercial cannabis industry is constantly growing
                                         and shifting, and the ongoing monitoring of a cannabis business allows it to remain responsive
                                         to evolving consumer demands and state regulations as well as potential operations problems.
                                         We offer fully-integrated business analysis solutions. Our monitoring services include
                                         sales tracking, market assessment, loss prevention strategies, review of operational
                                         efficiency and workflow recommendations. Additionally, our services include Strength,
                                         Weakness, Opportunity and Threat (“SWOT”) analysis, where we analyze client
                                         operations to pinpoint strengths, weaknesses, opportunities and threats. Our SWOT analyses
                                         allow clients to focus their efforts and resources on the most critical areas along these
                                         dimensions.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Equipment
and Supplies



In addition
to professional consulting services, we operate an equipment and supplies division for customers in the cannabis industry. Our
Group Purchasing Organization, American Cultivator CO., enables customers to procure commonly used cultivation supplies at competitive
prices. Our major product offerings include the following:



| | ● | The
                                         SatchelTM. The Satchel was invented in response to regulatory changes in Colorado
                                         and elsewhere that require child-proof exit containers. The Satchel is a pouch-like case
                                         designed as a high-quality, child-proof exit package solution for the regulated cannabis
                                         industry. The Satchel meets child-safety requirements of the Consumer Products
                                         Safety Commission (“CPSC”), making it compliant in all states. There are
                                         few products meeting regulatory standards, and even fewer that offer distinctive
                                         quality. The Satchel meets all current exit packaging regulations, featuring a child-proof
                                         closure that completely conceals the contents inside. On February 23, 2016, we announced
                                         our receipt of notice from the U.S. Patent Office that our application for patent protection
                                         for the Satchel were deemed allowable by the U.S. Patent and Trademark Office. On March
                                         29, 2016, the U.S. Patent and Trademark Office issued patent number 9,296,524 B2 for
                                         the Satchel.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





4







| | ● | SoHum
                                         Living SoilTM. The right grow methodology is critical to the success of any
                                         cannabis cultivation operation, and SoHum Living SoilTM is our solution to ensure
                                         that our customers can implement an optimal methodology that will maximize quality and
                                         yields while simplifying the cultivation process and reducing risk of operator error
                                         and test failure. The SoHum medium is a fully amended “just-add-water” soil
                                         that contains none of the synthetic components found in other potting mixes and requires
                                         no chemical additives to spur growth. Compared with comparable methodologies, SoHum Living
                                         SoilTM offers a number of key advantages, including: (1) consistent Pyto-pharmaceutical-grade
                                         product quality; (2) improved plant resistance to disease; and (3) reduced operator error.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | High
                                         Density Racking System.A key metric in the success of a cultivation operation is
                                         the maximization of available space to grow. Our High Density Racking System is a solution
                                         designed to ensure that space is used in the most efficient manner possible. The system
                                         takes advantage of the existence of vertical space, with racks installed vertically and
                                         placed on horizontal tracking to eliminate multiple isles, and creates multiple levels
                                         of space with which to grow plants. The High Density Racking System allows customers
                                         to increase production capacity without the need to add additional square footage to
                                         the operation.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | The
                                         Cultivation CubeTM. The Cultivation CubeTM is a self-contained, scalable
                                         cultivation system that is compliant with regulatory guidelines. The Cultivation CubeTM
                                         allows commercial cannabis cultivation operations to maximize space, yield and profit
                                         through an innovative design that provides a fully integrated growing solution. The Cultivation
                                         Cube utilizes more lights per square foot than traditional grow systems, which translates
                                         to profit increases per square foot. The Cultivation CubeTM is also stackable, which
                                         allows customers to achieve vertical gains and effectively doubles productive square-footage.
                                         It is an ideal solution for commercial-scale cultivation within limited space, with numerous
                                         advantages over other traditional grow systems, including: (1) flexibility to fit customer
                                         build-out sites; (2) efficient speed-to-market with fast delivery and set-up; (3) increased
                                         security with limited access units; (4) risk mitigation through precision environmental
                                         controls; and, (5) is compatible with lean manufacturing principles and operations.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Other
                                         Products. We offer our clients a diverse array of commonly utilized product offerings
                                         from across all areas of the regulated cannabis industry, including cultivation operations,
                                         medicinal and recreational cannabis dispensary operations, and infused-products. Examples
                                         of products available through American Cultivator Co. include HID Ballasts, reflectors,
                                         MH and HPS bulbs, T5 fixtures, mediums, nutrients and fertilizers, growing containers,
                                         flood tables, reservoirs, and various other supplies, including cleaning products and
                                         office supplies. We also offer a Group Purchasing Organization (“GPO”) focused
                                         on disposables to creates purchasing power by leveraging groups of businesses to
                                         obtain discounts from vendors based on the collective buying power of the GPO.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Sales
and Marketing



We sell
our services and products throughout the United States in states that have implemented regulated cannabis programs as well as
Canada. We intend to expand our offerings as more new countries, states and jurisdictions as they adopt state-regulated or Federal
programs.



Research
and Development



As a component
of our equipment and supplies offerings, from time-to-time we design and develop our own proprietary products to meet demand in
markets where current offerings are insufficient. These products include, but are not limited to: The SatchelTM, Cultivation
CubeTM, So-Hum Living SoilsTM and the HDCSTM. Costs associated with the development of new products are expensed
as occurred as research and development operating expenses. During the year ended December 31, 2017, our research and development
costs were $2,403 as compared to $2,553 for the fiscal year ended December 31, 2016.



Significant Customers



For the
year ended December 31, 2017 and December 31, 2016, three customers accounted 48.95% or more, respectively of the Company’s
total product sales revenues, and four customers accounted for 40.18% or more respectively of the Company’s total service
based revenue. For the year ended December 31, 2016, three customers accounted for 45.66% of the Company’s total revenues.



Intellectual Property



On March
29, 2016, the U.S. Patent and Trademark Office issued patent number 9,296,524 B2 for The SatchelTM, our child-proof exit
package solution for the regulated cannabis industry. We also have pending trademark applications pending to protect our branding
and logos. These pending applications included trademarks for American Cannabis Company (stylized and/or with design logo), American
Cannabis Consulting (stylized and/or with design logo), the design and colors used in our leaf logo, the Cultivation Cube (stylized
and/or with design logo), our slogan (“Growing the Next Frontier”), and two-word marks and the logo associated with
So-Hum Living SoilTM.



Competition



Our competitors
include professional services firms dedicated to the regulated cannabis industry, as well as suppliers of equipment and supplies
commonly utilized in the cultivation, processing, or retail sale of cannabis. We compete in markets where cannabis has been legalized
and regulated, which includes various states within the United States, it’s territories and Indian Country therein and Canada.
We expect that the quantity and composition of our competitive environment will continue to evolve as the industry matures. Additionally,
increased competition is possible to the extent that new states and geographies enter the marketplace as a result of continued
enactment of regulatory and legislative changes that de-criminalize and regulate cannabis products. We believe that by being well
established in the industry, our experience and success to date, and our continued expansion of service and product offerings
in new and existing locations, are factors that mitigate the risk associated with operating in a developing competitive environment.
Additionally, the contemporaneous growth of the industry as a whole will result in new customers entering the marketplace, thereby
further mitigating the impact of competition on our operations and results.



5







Employees



As of
December 31, 2017, we have 6 full-time employees and 1 part-time employee, all of whom are U.S based, primarily in Colorado at
our Denver headquarters. None of our U.S employees are represented by a labor union.







ITEM
1A. RISK FACTORS



We are
a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required
under this item.



ITEM
1B. UNRESOLVED STAFF COMMENTS



None.



ITEM
2. PROPERTIES



Our headquarters
are located in Denver, Colorado, where we lease office space under a contract effective July 28, 2015, expiring on July 31, 2020.



ITEM
3. LEGAL PROCEEDINGS



None.



ITEM
4. MINE SAFETY DISCLOSURES



Not Applicable.



PART
II.



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



Our common stock trades on
the OTC Markets under the ticker symbol “AMMJ”. As of December 31, 2017, there were 481 holders of record of our common
stock. The following table sets forth, for the periods indicated, the high and low closing sales prices of our common stock:





|2017                           |  |  | High |      |  | Low |  
|------------------------------ |  |  | ---- | ---- |  | --- | -
|Quarter
    ended December 31  |  |  | $    | 1.36 |  |     | $
|Quarter ended September
    30 |  |  | $    | 1.26 |  |     | $
|Quarter ended June
    30      |  |  | $    | 0.76 |  |     | $
|Quarter ended March
    31     |  |  | $    | 1.05 |  |     | $



|2016                           |  |  | High |      |  | Low |  
|------------------------------ |  |  | ---- | ---- |  | --- | -
|Quarter
    ended December 31  |  |  | $    | 0.97 |  |     | $
|Quarter ended September
    30 |  |  | $    | 0.29 |  |     | $
|Quarter ended June
    30      |  |  | $    | 0.11 |  |     | $
|Quarter ended March
    31     |  |  | $    | 0.18 |  |     | $



6







DIVIDEND POLICY



We have
never declared or paid, and do not anticipate declaring or paying, any cash dividends on our common stock. Instead, we currently
anticipate that we will retain all of our future earnings, if any, to fund the operation and expansion of our business and to
use as working capital and for other general corporate purposes. Any future determination as to the declaration and payment of
dividends, if any, will be at the discretion of our board of directors and will depend on then-existing conditions, including
our financial condition, operating results, contractual restrictions, capital requirements, business prospects, and other factors
our board of directors may deem relevant.



ITEM
6. SELECTED FINANCIAL DATA



We are
a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required
under this item.



ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



The statements
contained in this report that are not statements of historical fact, including without limitation, statements containing the words
“believes,” “expects,” “anticipates” and similar words, constitute forward-looking statements
that are subject to a number of risks and uncertainties. From time to time we may make other forward-looking statements. Investors
are cautioned that such forward-looking statements are subject to an inherent risk that actual results may materially differ as
a result of many factors, including the risks discussed from time to time in this report, including the risks described under
“Risk Factors” in any filings we have made with the SEC.



Our discussion
and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On
an on-going basis, we evaluate these estimates, including those related to useful lives of real estate assets, cost reimbursement
income, bad debts, impairment, net lease intangibles, contingencies and litigation. We base our estimates on historical experience
and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. There
can be no assurance that actual results will not differ from those estimates.



Background



American
Cannabis Company, Inc. and subsidiary is a publicly listed company quoted on the OTC Markets under the symbol “AMMJ”.
We 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. We provide advisory and consulting services specific to this industry,
design industry-specific products and facilities, and sell both exclusive and non-exclusive customer products commonly used in
the industry.



The Company
was incorporated in the State of Delaware on September 24, 2001 under the name “Naturewell, Inc.” On March 13, 2013,
the Company completed a merger transaction whereby it acquired Brazil Interactive Media, Inc. (“BIMI”), a Brazilian
interactive television company and television production company. The Company’s Articles of Incorporation were amended to
reflect a new name: Brazil Interactive Media, Inc. On May 15, 2014, the Company entered into an Agreement and Plan of Merger with
Cannamerica Corp. (the “Merger Sub”), a wholly-owned subsidiary of BIMI, and Hollister & Blacksmith, Inc. doing
business as American Cannabis Consulting (“American Cannabis Consulting”). The merger was completed on September 29,
2014, resulting in American Cannabis Consulting being merged with and into the Merger Sub (the “Reverse Merger”).
The Company subsequently amended its Articles of Incorporation to change its name to “American Cannabis Company, Inc.”
Upon the closing of the Reverse Merger, all of the Company’s officers and directors appointed designee officers and directors
from American Cannabis Consulting and resigned. Consistent with the Merger Agreement, the Company consummated a complete divestiture
of BIMI, Inc., a Delaware corporation and wholly-owned subsidiary of the Company, pursuant to a Separation and Exchange Agreement
dated May 16, 2014 (the “Separation Agreement”) between the Company, BIMI, Inc., and Brazil Investment Holding, LLC
(“Holdings”), a Delaware limited liability company. On October 10, 2014, the Company changed its stock symbol from
BIMI to AMMJ.



The foregoing
descriptions of the Merger Agreement and Separation Agreement do not purport to be complete and are qualified in their entirety
by the terms of such agreements, which are filed as exhibits to the Current Report on Form 8-K filed by the Company with the U.S.
Securities and Exchange Commission (“SEC”) on October 3, 2014.



7







Results of Operations



Year ended December 31,
2017 compared to year ended December 31, 2016



The following table presents
our operating results for the year ended December 31, 2017 compared to December 31, 2016:



|AMERICAN CANNABIS COMPANY, INC.                             
|------------------------------------------------------------
|CONSOLIDATED STATEMENTS OF OPERATIONS                       
|                                                            
|                                                            
|Revenues                                                    
|Consulting Services                                         
|Product and equipment                                       
|Product and equipment, related party                        
|Total Revenues                                              
|                                                            
|Cost of Revenues                                            
|Cost of consulting services                                 
|Cost of products and equipment                              
|Total Cost of Revenues                                      
|                                                            
|Gross Profit                                                
|                                                            
|Operating expenses                                          
|General and administrative                                  
|Investor Relations                                          
|Selling and marketing                                       
|Research and development                                    
|Total Operating expenses                                    
|                                                            
|Income (Loss) from Operations                               
|                                                            
|Other Income (expense)                                      
|Loss on debt extinguishment                                 
|Interest Income (expense)                                   
|Change in Derivative Liability                              
|Stock Based Compensation (expense)                          
|Bad Debt (expense)                                          
|Settlement (expense)                                        
|Warrant (expense)                                           
|Other Income                                                
|Total Other Income (expense)                                
|                                                            
|Net Income (Loss) before taxes                              
|Income Tax expense (benefit)                                
|                                                            
|NET INCOME (LOSS)                                           
|Basic and diluted net loss per common share                 
|                                                            
|Basic and diluted weighted average common shares outstanding

8
    
    



Revenues

Total
revenues for the year ended December 31, 2017 and December 31, 2016, were $2,443,055 and $1,560,866, respectively, an increase
of $882,189. This increase was primarily due to an increase in the demand for consulting services. For the year ended December
31, 2017 and December 31, 2016, consulting services revenue was $2,054,484 and $943,563, respectively. For the year ended December
31, 2017 and December 31, 2016, products and equipment revenue were $388,571 and $617,303, respectively.



Costs
of Revenues

Costs
of revenues primarily consist of labor, travel, marketing and other costs directly attributable to providing services or offering
products. For the year ended December 31, 2017 and December 31, 2016, our total costs of revenues were $805,820 and $691,581,
respectively. The increase was primarily due to higher operating expenses related to providing consulting services. For the year
ended December 31, 2017, consulting related costs were $463,298 or 18.96% of total revenues, and costs associated with products
and equipment were $342,522 or 14.02% of total revenues. For the year ended December 31, 2016, consulting related costs were $145,849
or 9.3% of total revenues, and costs related with costs associated with products and equipment were $545,732 or 34.96% of total
revenues.



Gross
Profit

For the
year ended December 31, 2017 and December 31, 2016, gross profit was $1,637,235 and $869,285, respectively. This increase was
primarily due to growth in our client base and volume of operations including consulting services. As a percentage of total revenues,
gross profit was 67.02% and 55.69% for the years ended December 31, 2017 and December 31, 2016, respectively. This increase was
primarily due to the year ended December 31, 2017 having a higher proportion of total revenues from consulting services as compared
to product and equipment sales, as consulting services have a higher profit margin as compared to product and equipment sales.



Operating
Expenses



Total operating expenses for the years ended
December 31, 2017 and December 31, 2016 was $1,358,388 and $1,228,419, respectively. This increase of $129,968 was primarily due
to an increase in selling and marketing expenses of the Company.







Other
Income (Expense)



Other income (expense) for the years ended
December 31, 2017 and December 31, 2016 included expense of ($1,767,320) and ($244,548), respectively. This decrease was due to
an increase in stock based compensation and warrant expense, and an increase in settlement expense, attributed to interest due
under our financing arrangement with Tangiers.







Income
Tax Expense (Benefit)

We did
not have any income tax expense or benefit for the years ended December 31, 2017 and December 31, 2016, respectively. Although
our tax status changed from a non-taxable pass-through entity (S-Corporation) to a taxable entity (C-Corporation) during the year
ended December 31, 2014, due to cumulative losses since we became a C-Corporation, we recorded a valuation allowance against our
related deferred tax asset which netted our deferred tax asset and benefit for income taxes to zero. We were an S-Corporation
throughout the period from Inception (March 5, 2013) through December 31, 2013, and accordingly, no provision or benefit for income
taxes was applicable. The years 2010 to 2016 remain subject to examination by the Company’s major tax jurisdictions.



Net
Income (Loss)

As a result
of the factors discussed above, net income for the year ended December 31, 2017 and December 31, 2016 was a loss of ($1,488,473)
and ($603,682), respectively. For December 31, 2017 our net income was 60.93% of total revenues. For December 31, 2016, our net
losses represented a 38.68% of total revenues for the respective periods.



Liquidity and Capital Resources



As of
December 31, 2017, and December 31, 2016, our primary internal sources of liquidity were cash and cash equivalents of $ 1,648,087
and $751,038, respectively. We also have the ability to raise additional capital as needed through an external equity financing
transaction. For the years ended December 31, 2017 and December 31, 2016, the Company had a source (use) of cash from operations
of $180,906 and ($784,879), respectively.  For December 31, 2017 and December 31, 2016, we generated non-cash expenses
of $1,789,717 and $30,208, respectively related to stock-based compensation and depreciation which contributed to our net cash
derived from operating activities. Due to this factor and considering that our fixed overhead costs are relatively low, we have
the ability to issue stock and stock equivalents to compensate employees and management, and the level of future revenue we expect
to generate from executed client contracts, we believe our liquidity and capital resources to be adequate to fund our operational
and general and administrative expenses for the next 12 months.



Operating Activities



Net cash
provided by (used in) operating activities for the year ended December 31, 2017 was $180,906. Net cash provided by operating activities
for the year ended December 31, 2016 was ($784,879) which consisted of a net loss for the period of $1,488,473 which
was offset by an increase in stock based compensation of $893,857, an increase in warranty expense of $893,857and account
receivables of $107,363.



Investing
Activities



For the
years ended December 31, 2017 and December 31, 2016, net cash used in investing activities was $5,000 and $3,360, respectively.



Financing
Activities



For the
years ended December 31, 2017 and December 31, 2016, financing activities were a source of cash of $721,138 and $983,497, respectively.
For the year ended December 31, 2016, the Company received $721,143 from the sale of registered common stock to Tangiers Global,
LLC under an amended and restated Investment Agreement and Registration Rights Agreement dated August 4, 2016.



For the
years ended December 31, 2017 and December 31, 2016 we had cash and cash equivalents of $1,648,087 and $751,038, respectively.
We believe our liquidity and capital resources to be adequate to fund our operational and general and administrative expenses
for the next 12 months.



Off
Balance Sheet Arrangements



As of
December 31, 2017, and December 31, 2016,we did not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results
of operations, liquidity, capital expenditures or capital resources.






    9
    
    



Non-GAAP Financial Measures



We use
Adjusted EBITA, a non-GAAP metric, to monitor our overall business performance. We define Adjusted EBITA as net income (loss)
before interest expense, net, provision for (benefit from) income taxes, stock-based compensation and certain non-recurring expenses,
which for the year ended December 31, 2014 were limited to costs associated with the Reverse Merger. We believe that such adjustments
to arrive at Adjusted EBITA provides us with a more comparable measure for managing our business. We also believe that it is a
useful measure for securities analysts, investors, and other interested parties in the evaluation of our Company.



A reconciliation of net income
to Adjusted EBITA is provided below.



Adjusted
    EBITA Reconciliation
    
    For
                                         the Year Ended

December
31, 2017
    
    
    For
                                         the Year Ended

December
31, 2016Net
    Gain (Loss)
    
    $
    (1,488,473)
    
    
    $
    (603,682
    )Interest
    Expense, Net
    
    $
    (9,288)
    
    
    $
    87,314Tax
    Expense (benefit)
    
    $
    —
    
    
    $
    —Stock
    Based Compensation expense
    
    $
    893,857
    
    
    $
    30,208Adjusted
    EBITA
    
    $
    (603,904)
    
    
    $
    (486,160
    )

CRITICAL
ACCOUNTING POLICIES AND ESTIMATES



Our discussion
and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which
have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make
estimates and judgments that affect amounts reported in those statements. We have made our best estimates of certain amounts contained
in our consolidated financial statements. We base our estimates on historical experience and on various other assumptions that
we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying
value of assets and liabilities. However, application of our accounting policies involves the exercise of judgment and use of
assumptions as to future uncertainties, and, as a result, actual results could differ materially from these estimates. Management
believes that the estimates, assumptions, and judgments involved in the accounting policies described below have the most significant
impact on our consolidated financial statements.



We cannot
predict what future laws and regulations might be passed that could have a material effect on our results of operations. We assess
the impact of significant changes in laws and regulations on a regular basis and update the assumptions and estimates used to
prepare our financial statements when we deem it necessary.



Cash
and Cash Equivalents

We consider
all highly liquid investments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents
are held in operating accounts at a major financial institution.



Inventory

Inventory
is primarily comprised of products and equipment to be sold to end-customers. Inventory is valued at cost, based on the specific
identification method, unless and until the market value for the inventory is lower than cost, in which case an allowance is established
to reduce the valuation to market value. As of December 31, 2017, and December 31, 2016, market values of all of our inventory
were greater than cost, and accordingly, no such valuation allowances was recognized.



Deposits

Deposits
is comprised of advance payments made to third parties, primarily for inventory for which we have not yet taken title. When we
take title to inventory for which deposits are made, the related amount is classified as inventory, then recognized as a cost
of revenues upon sale (see “Costs of Revenues” below).



Prepaid
Expenses and Other Current Assets

Prepaid
expenses and other current assets is primarily comprised of advance payments made to third parties for independent contractors’
services or other general expenses. Prepaid services and general expenses are amortized over the applicable periods which approximate
the life of the contract or service period.



Accounts
Receivable

Accounts
receivable are recorded at the net value of face amount less any allowance for doubtful accounts. On a periodic basis, we evaluate
our accounts receivable and, based on a method of specific identification of any accounts receivable for which we deem the net
realizable value to be less than the gross amount of accounts receivable recorded, we establish an allowance for doubtful accounts
for those balances. In determining our need for an allowance for doubtful accounts, we consider historical experience, analysis
of past due amounts, client creditworthiness and any other relevant available information. However, our actual experience may
vary from our estimates. If the financial condition of our clients were to deteriorate, resulting in their inability or unwillingness
to pay our fees, we may need to record additional allowances or write-offs in future periods. This risk is mitigated to the extent
that we collect retainers from our clients prior to performing significant services.



The allowance
for doubtful accounts, if any, is recorded as a reduction in revenue to the extent the provision relates to fee adjustments and
other discretionary pricing adjustments. To the extent the provision relates to a client's inability to make required payments
on accounts receivables, the provision is recorded in operating expenses. As of December 31, 2017, and December 31, 2016 our allowance
for doubtful accounts was $21,581 and $31,421, respectively. For December 31, 2017 and December 31, 2016, we recorded bad debt
expense of ($89,715) and $118,641, respectively, which is reflected as a component of other income (expense) section on the consolidated
statement of operations.



Property
and Equipment, net

Property
and Equipment is stated at net book value, cost less depreciation. Maintenance and repairs are expensed as incurred. Depreciation
of owned equipment is provided using the straight-line method over the estimated useful lives of the assets, ranging from two
to seven years. Depreciation of capitalized construction in progress costs, a component of property and equipment, net, begins
once the underlying asset is placed into service and is recognized over the estimated useful life. Property and equipment is reviewed
for impairment as discussed below under “Accounting for the Impairment of Long-Lived Assets.” We did not capitalize
any interest as of December 31, 2017 and as of December 31, 2016.






    10
    
    



Accounting
for the Impairment of Long-Lived Assets

We evaluate
long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Upon such an occurrence, recoverability of assets to be held and used is measured by comparing the carrying
amount of an asset to forecasted undiscounted net cash flows expected to be generated by the asset. If the carrying amount of
the asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount
of the asset exceeds the fair value of the asset. For long-lived assets held for sale, assets are written down to fair value,
less cost to sell. Fair value is determined based on discounted cash flows, appraised values or management's estimates, depending
upon the nature of the assets. We have not recorded any impairment charges related to long-lived assets during the year ended
December 31, 2017, and December 31, 2016.



Beneficial
Conversion Feature

If the
conversion features of conventional convertible debt provides for a rate of conversion that is below market value at issuance,
this feature is characterized as a beneficial conversion feature (“BCF”).  We record a BCF as a debt discount
pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ACF”) Topic
470-20 Debt with Conversion and Other Options. In those circumstances, the convertible debt is recorded net of the discount
related to the BCF, and we amortize the discount to interest expense over the life of the debt using the effective interest method.



Revenue
Recognition

For annual
reporting periods after December 15, 2017, the Financial Accounting Standards Board (“FASB”) made effective ASU 2014-09
“Revenue from Contracts with Customers” to supersede previous revenue recognition guidance under current U.S. GAAP.
Revenue is now recognized in accordance with FASB ASC Topic 606, Revenue Recognition. The guidance presents a single five-step
model for comprehensive revenue recognition that requires an entity to recognize revenue to depict the transfer of promised goods
or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for
those goods or services. Two options are available for implementation of the standard which is either the retrospective approach
or cumulative effect adjustment approach. The guidance becomes effective for annual reporting periods beginning after December
15, 2017, including interim periods within that reporting period, with early adoption permitted. We determined to implement the
cumulative effect adjustment approach to our implementation of FASB ASC Topic 606, with no restatement of the comparative periods
presented. We intend to apply this method to any incomplete contracts we determine are subject to FASB ASC Topic 606 prospectively.
As is more fully discussed below, we are of the opinion that none of our contracts for services or products contain significant
financing components that require revenue adjustment under FASB ASC Topic 606.



In accordance
with FASB ASC Topic 606, Revenue Recognition, we will recognize revenue when persuasive evidence of a significant financing component
exists in our consulting and product sales contracts. We examine and evaluate when our customers become liable to pay for goods
and services; how much consideration is paid as compared to the cash selling price of the goods or services; and, the length of
time between our performance and the receipt of payment.



Product
Sales



Revenue
from product and equipment sales, including delivery fees, is recognized when an order has been obtained from the customer, the
price is fixed and determinable when the order is placed, the product is shipped, title has transferred and collectability is
reasonably assured. Generally, our suppliers’ drop-ship orders to our clients with shipping-point or destination terms.
For any shipments with destination terms, the Company defers revenue until delivery to the customer. Given the facts that (1)
our customers exercise discretion in determining the timing of when they place their product order; and, (2) the price negotiated
in our product sales contracts is fixed and determinable at the time the customer places the order, we are not of the opinion
that our product sales indicate or involve any significant financing that would materially change the amount of revenue recognized
under the contract, or would otherwise contain a significant financing component for us or the customer under FASB ASC Topic 606.
During the year ended December 31, 2017, sales returns were $21,249 comprised of a cancelled contract and product returns and
replacement.



Consulting
Services



We also
generate revenues from professional services consulting agreements. These arrangements are generally entered into: (1) on an hourly
basis for a fixed-fee; or, (2) on a contingent fee basis. Generally, we require a complete or partial prepayment or retainer prior
to performing services.



For hourly
based fixed fee service contracts, we utilize and rely upon the proportional performance method, which recognizes revenue as services
are performed. Under this method, in order to determine the amount of revenue to be recognized, we calculate the amount of completed
work in comparison to the total services to be provided under the arrangement or deliverable. We segregate upon entry into a contract
any advances or retainers received from clients for fixed fee hourly services into a separate “Advances from Clients”
account, and only recognize revenues as we incur and charge billable hours, and then deposit the funds earned into our operating
account. Because our hourly fees for services are fixed and determinable and are only earned and recognized as revenue upon actual
performance, we are of the opinion that such arrangements are not an indicator of a vendor or customer based significant financing,
that would materially change the amount of revenue we recognize under the contract or would otherwise contain a significant financing
component under FASB ASC Topic 606.



Occasionally,
our fixed-fee hourly engagements are recognized under the completed performance method. Some fixed fee arrangements are for completion
of a final deliverable or act which is significant to the arrangement as a whole. These engagements do not generally exceed a
one-year term. If the performance is for a final deliverable or act, we recognize revenue under the completed performance method,
in which revenue is recognized once the final act or deliverable is performed or delivered for a fixed fee. Revenue recognition
is affected by a number of factors that change the estimated amount of work required to complete the deliverable, such as changes
in scope, timing, awaiting notification of license award from local government, and the level of client involvement. Losses, if
any, on fixed-fee engagements are recognized in the period in which the loss first becomes probable and reasonably estimable.
FASB ASC Topic 606 provides a practical expedient to disregard the effects of a financing component if the period between payment
and performance is one year or less. As, our fixed fee hourly engagements do not exceed one year, no significant customer-based
financing is implicated under FASB ASC Topic 606. During the year ended December 31, 2017, and December 31, 2016, we have incurred
no losses from fixed fee engagements that terminate prior to completion. We believe if an engagement terminates prior to completion,
we can recover the costs incurred related to the services provided.



We occasionally
enter into arrangements for which fixed and determinable revenues are contingent and agreed upon achieving a pre-determined deliverable
or future outcome. Any contingent revenue for these arrangements is not recognized until the contingency is resolved and collectability
is reasonably assured.



Our arrangements
with clients may include terms to deliver multiple services or deliverables. These contracts specifically identify the services
to be provided with the corresponding deliverable. The value for each deliverable is determined based on the prices charged when
each element is sold separately or by other vendor-specific objective evidence (“VSOE”) or estimates of stand-alone
selling prices. Revenues are recognized in accordance with our accounting policies for the elements as described above (see Product
Sales). The elements qualify for separation when the deliverables have value on a stand-alone basis and the value of the separate
elements can be established by VSOE or an estimated selling price.






    11
    
    



While
assigning values and identifying separate elements requires judgment, selling prices of the separate elements are generally readily
identifiable as fixed and determinable as we also sell those elements individually outside of a multiple services engagement.
Contracts with multiple elements typically incorporate a fixed-fee or hourly pricing structure. Arrangements are typically terminable
by either party upon sufficient notice and do not include provisions for refunds relating to services provided.



Reimbursable
expenses, including those relating to travel, other out-of-pocket expenses and any third-party costs, are included as a component
of revenues. Typically, an equivalent amount of reimbursable expenses is included in total direct client service costs. Reimbursable
expenses related to time and materials and fixed-fee engagements are recognized as revenue in the period in which the expense
is incurred and collectability is reasonably assured. Taxes collected from customers and remitted to governmental authorities
are presented in the statement of operations on a net basis.



Costs
of Revenues

Our policy
is to recognize costs of revenue in the same manner in conjunction with revenue recognition. Cost of revenues include the costs
directly attributable to revenue recognition and includes compensation and fees for services, travel and other expenses for services
and costs of products and equipment. Selling, general and administrative expenses are charged to expense as incurred.



Advertising
and Promotion Costs

Advertising
and promotion costs are included as a component of selling and marketing expense and are expensed as incurred. During the year
ended December 31, 2017 and December 31, 2016, these costs were $278,542 and $88,047, respectively.





Shipping
and Handling Costs

For product
and equipment sales, shipping and handling costs are included as a component of cost of revenues.



Stock-Based
Compensation

Restricted
shares are awarded to employees and entitle the grantee to receive shares of restricted common stock at the end of the established
vesting period. The fair value of the grant is based on the stock price on the date of grant. We recognize related compensation
costs on a straight-line basis over the requisite vesting period of the award, which to date has been one year from the grant
date. During the years ended December 31, 2017 and December 31, 2016, stock-based compensation expense for restricted shares was
$893,857 and $36,750, respectively. Compensation expense for warrants and options is based on the fair value of the instruments
on the grant date, which is determined using the Black-Scholes valuation model and are expensed over the expected term of the
awards. During the year ended December 31, 2017 and December 31, 2016, compensation expense for warrants and options was $0, respectively.



Income
Taxes

Our corporate
status changed from an S-Corporation, which it had been since inception, to a C-Corporation during the year ended December 31,
2014. As provided in Section 1361 of the Internal Revenue Code, for income tax purposes, S-Corporations are not subject to corporate
income taxes; instead, the owners are taxed on their proportionate share of the S-Corporation’s taxable income. Accordingly,
we were only subject to income taxes for a portion of 2014. We recognize deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial statements or tax returns in accordance with applicable
accounting guidance for accounting for income taxes, using currently enacted tax rates in effect for the year in which the differences
are expected to reverse. We record a valuation allowance when necessary to reduce deferred tax assets to the amount expected to
be realized.  For the year ended December 31, 2017 and December 31, 2016, due to cumulative losses since our corporate status
changed, we recorded a valuation allowance against our deferred tax asset that reduced our income tax benefit for the period to
zero. As of December 31, 2017, and December 31, 2016, we had no liabilities related to federal or state income taxes and the carrying
value of our deferred tax asset was zero. The years 2010 to 2015 remain subject to examination by the Company’s major tax
jurisdictions.



Net
Income (Loss) Per Common Share

We report
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.



Related
Party Transactions

We follow
FASB ASC subtopic 850-10, “Related Party Transactions”, for the identification of related parties and disclosure of
related party transactions.



Pursuant
to ASC 850-10-20, related parties include: a) affiliates of the Company; b) entities for which investments in their equity securities
would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15,
to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and
profit-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management
of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management
or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its
own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting
parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent
that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.



Material
related party transactions are required to be disclosed in the consolidated financial statements, other than compensation arrangements,
expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated
in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall
include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which
no amounts or nominal amounts were ascribed, for each of the periods for which statements of operation are presented, and such
other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the
dollar amounts of transactions for each of the periods for which statements of operations are presented and the effects of any
change in the method of establishing the terms from that used in the preceding period; and d) amounts due from or to related parties
as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.



ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



We are
a smaller reporting Company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required
under this item.






    12
    
    



ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA





19720
                                         Jetton Road, 3rd Floor
                           Cornelius,
                           NC 28031
                           Tel:
                           704-897-8336
                           Fax:704-919-5089







REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM





To the Board of Directors and Stockholders
of

American Cannabis
Company, Inc. and Subsidiary



Opinion
on the Financial Statements

We
have audited the accompanying consolidated balance sheets of American Cannabis Company Inc. and Subsidiary (“the Company”)
as of June 30, 2018 and the related consolidated statement of operations, stockholders’ deficit and the related notes (collectively
referred to as the “financial statements”) for the year ended December 31, 2017. These financial statements are the
responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based
on our audit. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects,
the financial position of the Company as of December 31, 2017, and the results of its operations, changes in stockholders’
deficit and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States
of America.



Basis for Opinion

These consolidated
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the
Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.



We conducted
our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.
As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the
purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly,
we express no such opinion.



Our
audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that our audits provide a reasonable basis for our opinion.



/s/ L&L CPAS, PA

L&L CPAS, PA

Certified Public Accountants

Cornelius, NC

The United States of America

December 24, 2018

We have served as the Company's
auditor since August 2018.



www.llcpas.net






    13

AMERICAN CANNABIS COMPANY, INC.

CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                                     |  |   | December 31, |   |  |   | December 31, |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | ------------ | - |  | - | ------------ | -
|                                                                                                                                                                     |  |   | 2017         |   |  |   | 2016         |  
|ASSETS                                                                                                                                                               |  |   |              |   |  |   |              |  
|Current Assets                                                                                                                                                       |  |   |              |   |  |   |              |  
|Cash and Equivalents                                                                                                                                                 |  | $ | 1,648,087    |   |  | $ | 751,038      |  
|Accounts Receivable, net (see note 3)                                                                                                                                |  |   | 146,804      |   |  |   | 164,451      |  
|Inventory                                                                                                                                                            |  |   | 35,757       |   |  |   | 42,500       |  
|Prepaid Expenses and Other Current Assets                                                                                                                            |  |   | 11,327       |   |  |   | 9,825        |  
|Total Current Assets                                                                                                                                                 |  |   | 1,841,975    |   |  |   | 967,814      |  
|                                                                                                                                                                     |  |   |              |   |  |   |              |  
|Property and Equipment - net (see note 5)                                                                                                                            |  |   | 11,782       |   |  |   | 11,639       |  
|Other Assets                                                                                                                                                         |  |   | 4,500        |   |  |   | 4,500        |  
|TOTAL ASSETS                                                                                                                                                         |  | $ | 1,858,256    |   |  | $ | 983,953      |  
|                                                                                                                                                                     |  |   |              |   |  |   |              |  
|LIABILITIES AND SHAREHOLDER'S EQUITY                                                                                                                                 |  |   |              |   |  |   |              |  
|Current Liabilities                                                                                                                                                  |  |   |              |   |  |   |              |  
|Accounts Payable                                                                                                                                                     |  |   | 28,002       |   |  |   | 55,782       |  
|Accounts Payable, related party                                                                                                                                      |  |   | —            |   |  |   | 14,325       |  
|Advances from Clients                                                                                                                                                |  |   | 100,587      |   |  |   | 222,188      |  
|Warrant Liability                                                                                                                                                    |  |   | 895,860      |   |  |   | —            |  
|Accrued and Other Current Liabilities                                                                                                                                |  |   | 52,352       |   |  |   | 36,724       |  
|Total Current Liabilities                                                                                                                                            |  |   | 1,076,801    |   |  |   | 329,019      |  
|                                                                                                                                                                     |  |   |              |   |  |   |              |  
|Shareholder's Equity                                                                                                                                                 |  |   |              |   |  |   |              |  
|Preferred Stock, $0.01 par value, 5,000,000 shares authorized; 0 shares issued and outstanding at December 31, 2017 and 2016, respectively                           |  |   | —            |   |  |   | —            |  
|Common stock, $0.00001 par value; 100,000,000 shares authorized; 51,434,050 and 49,847,593 shares issued and outstanding at December 31, 2017 and 2016, respectively |  |   | 514          |   |  |   | 498          |  
|Additional paid-in capital                                                                                                                                           |  |   | 7,004,363    |   |  |   | 5,389,384    |  
|Accumulated deficit                                                                                                                                                  |  |   | (6,223,422   | ) |  |   | (4,734,948   | )
|Total Shareholder's Equity                                                                                                                                           |  |   | 781,455      |   |  |   | 654,934      |  
|                                                                                                                                                                     |  |   |              |   |  |   |              |  
|TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY                                                                                                                           |  | $ | 1,858,256    |   |  | $ | 983,953      |  
|                                                                                                                                                                     |  |   |              |   |  |   |              |  

The
accompanying notes are an integral part of these audited consolidated financial statements






    14
    
    



AMERICAN CANNABIS COMPANY, INC.

CONSOLIDATED
STATEMENTS OF OPERATIONS





For the Year endedDecember 31,2017
    2016RevenuesConsulting Services
    $2,054,484
    $943,563Product & Equipment
    388,570
    613,535Product & Equipment, related party
    —
    3,768Total Revenues
    2,443,054
    1,560,866Cost of RevenuesCost of Consulting Services
    463,298
    145,849Cost of Products and Equipment
    342,522
    545,732Total Cost of Revenues
    805,820
    691,581Gross Profit
    1,637,234
    869,285Operating ExpensesGeneral and Administrative
    1,042,889
    1,099,900Investor Relations
    34,554
    37,919Selling and Marketing
    278,542
    88,047Research and Development
    2,403
    2,553Total Operating Expenses
    1,358,388
    1,228,419Income (Loss) from Operations
    278,846
    (359,134)Other Income (expense)Gain (loss) on debt extinguishment
    —
    (7,640)Interest (expense)
    9,288
    (87,314)Change in Derivative Liability
    —
    14,449Stock Bassed Compensastion (expense)
    (893,857)
    (30,208)Bad Debt (expense)
    89,715
    (118,641)Settlement (expense)
    (118,450)
    (25,000)Warrant (expense)
    (895,860)
    —Other Income
    41,843
    9,806Total other income (expense)
    (1,767,320)
    (244,548)Net Income (Loss) before taxes
    (1,488,474)
    (603,682)Income Tax Expense (benefit)
    —
    —NET INCOME (LOSS)
    $(1,488,474)
    $(603,682)Basic and diluted net loss per common share
    $(0.029)
    $(0.013)Basic and diluted weighted average common shares outstanding
    51,336,522
    46,389,474







The
accompanying notes are an integral part of these audited consolidated financial statements






    15
    
    



AMERICAN CANNABIS COMPANY, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016







Additional
    
    TotalCommon Stock
    Paid-In
    Accumulated
    Stockholder'sShares
    Amount
    Capital
    Deficit
    EquityBalance, December 31, 2015
    44,808,731
    $448
    $4,268,708
    $(4,131,266)
    $137,890Shares issued for services
    195,260
    2
    13,966
    —
    13,968Shares issued for Cash
    2,370,039
    23
    858,224
    —
    858,247Stock-based compensation granted to employees
    152,500
    2
    16,238
    —
    16,240Recension and cancellation of common shares
    2,321,063
    23
    232,248
    —
    232,271Net loss
    —
    —
    —
    (603,682)
    (603,682)Balance, December 31, 2016
    49,847,593
    $498
    $5,389,384
    $(4,734,948)
    $654,934APIC Cashless Warrants
    —
    —
    228,250
    —
    228,250Shares issued for PY conversion of debt and interest
    237,885
    2
    (2)
    —
    —Shares issued for Cash
    909,390
    9
    602,684
    —
    602,693Shares issued for services
    430,227
    4
    391,698
    —
    391,702Shares issued for legal settlement
    8,955
    1
    5,999
    —
    6,000Shares return to treassury on settlement
    (100,000)
    (1)
    1
    —
    —Shares issued on settlement
    100,000
    1
    112,449
    —
    112,450Options issued for Settlement
    
    
    273,900
    
    273,900Net (Loss)
    —
    —
    —
    (1,488,474)
    (1,488,474)Balance, December 31, 2017
    51,434,050
    $514
    $7,004,363
    $(6,223,422)
    $781,455








The accompanying
notes are an integral part of these audited consolidated financial statements






    16
    
    



AMERICAN
CANNABIS COMPANY, INC.CONSOLIDATED
STATEMENTS OF CASH FLOWSFOR THE
YEARS ENDED DECEMBER 31, 2017 AND 2016








2017
    2016CASH FLOWS FROM OPERATING ACTIVITIESNet (Loss)
    $(1,488,474)
    $(603,682)Adjustments to reconcile net (loss) to net cash (used in) operating activities:Bad Debt Expense
    (89,715)
    118,641Depreciation
    4,487
    5,173Amortization of discount on convertible notes payable
    —
    41,578Interest Converted to Common Stock
    —
    12,000Change in Value of Derivative Liability
    —
    (14,449)Stock-based compensation to employees
    893,857
    16,240Stock-based compensation to service providers
    —
    13,968Shares and warrants issued on settlementWarranty Expense
    895,860
    —Loss on debt extinguishment
    —
    7,640Changes in operating assets and liabilities:Accounts receivable
    107,362
    (234,807)Deposits
    —
    9,345Inventory
    6,743
    24,935Prepaid expenses and other current assets
    (1,502)
    22,292Advances from Clients
    (121,601)
    1,222Accrued and other current liabilities
    15,628
    (56,744)Accounts Payable
    (27,780)
    (162,556)Accounts Payable, Related Party
    (14,325)
    14,325Net Cash provided by (used in) Operating Activities
    180,541
    (784,879)CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of property and equipment
    (4,629)
    (3,360)Net cash used in Investing Activities
    (4,629)
    (3,360)CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from convertible notes
    —
    305,250Principal payments of convertible debt
    —
    (180,000)Proceeds from issuance of common shares
    721,138
    858,247Net cash Provided by Financing Activities
    721,138
    983,497NET INCREASE IN CASH
    897,049
    195,258CASH AT BEGINNING OF PERIOD
    751,038
    555,780CASH AT END OF YEAR
    $1,648,086.95
    $751,037.56Supplemental disclosure of cash flow information:Non-Cash Investing and FinancingConvertible Debt Converted to Common Stock
    $—
    $220,271.00Cash paid during the period for interest
    $—
    $33,840.00Cash paid during the period for income taxes, net
    $—
    $—







The accompanying
notes are an integral part of these audited consolidated financial statements





    17
    
    



AMERICAN
CANNABIS COMPANY, INC. AND SUBISIDIARY

NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2017 and 2016



Note 1.
Principles of Consolidation.



The consolidated
financial statements include the accounts of American Cannabis Company, Inc. and its wholly-owned subsidiary, Hollister &
Blacksmith, Inc., doing business as American Cannabis Company, Inc. Intercompany accounts and transactions have been eliminated.



Note
2. Description of Business.



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. We provide advisory and consulting services specific to this industry, design industry-specific products
and facilities, and sell both exclusive and non-exclusive customer products commonly used in the industry.



Note
3. Summary of Significant Accounting Policies



Basis
of Accounting

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.



Use
of Estimates in Financial Reporting

The preparation
of financial statements in conformity with U.S. 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.



Cash
and Cash Equivalents

The Company
considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Cash and cash
equivalents are held in operating accounts at a major financial institution. Cash balances may exceed federally insured limits.
Management believes the financial risk associated with these balances is minimal and has not experienced any losses to date. As
of December 31, 2017, and 2016, the Company had cash balances in excess of FDIC insured limits of $1,398,087 and $453,691, respectively.



Inventory

Inventory
is comprised of products and equipment owned by the Company to be sold to end-customers. Inventory is valued at cost, using the
first-in first-out and specific identification methods, unless and until the market value for the inventory is lower than cost,
in which case an allowance is established to reduce the valuation to market value. As of December 31, 2017, market values of all
of the Company’s inventory were greater than cost, and accordingly, no such valuation allowances was recognized.



Research
and Development

As a component
of our equipment and supplies offerings, from time-to-time we design and develop our own proprietary products to meet demand in
markets where current offerings are insufficient. These products include, but are not limited to: The SatchelTM, Cultivation
CubeTM, So-Hum Living SoilsTM and the HDCSTM. Costs associated with the development of new products are expensed
as occurred as research and development operating expenses. During the year ended December 31, 2017, our research and development
costs were $2,403 as compared to $2,553 for the fiscal year ended December 31, 2016.



Deposits

Deposits
is comprised of advance payments made to third parties, primarily for inventory for which the Company has not yet taken title.
When the Company takes title to inventory for which deposits are made, the related amount is classified as inventory, then recognized
as a cost of revenues upon sale (see “Costs of Revenues” below).



Prepaid
Expenses and Other Current Assets

Prepaid
expenses and other current assets is primarily comprised of advance payments made to third parties for independent contractors’
services or other general expenses. Prepaid services and general expenses are amortized over the applicable periods which approximate
the life of the contract or service period.



Accounts
Receivable

Accounts
receivable are recorded at the net value of face amount less an allowance for doubtful accounts. On a periodic basis, the Company
evaluates its accounts receivable and, based on a method of specific identification of any accounts receivable for which it deems
the net realizable value to be less than the gross amount of accounts receivable recorded, establishes an allowance for doubtful
accounts for those balances. In determining its need for an allowance for doubtful accounts, the Company considers historical
experience, analysis of past due amounts, client creditworthiness and any other relevant available information. However, the Company’s
actual experience may vary from its estimates. If the financial condition of its clients were to deteriorate, resulting in their
inability or unwillingness to pay the Company’s fees, it may need to record additional allowances or write-offs in future
periods. This risk is mitigated to the extent that the Company receives retainers from its clients prior to performing significant
services.






    18
    
    



The allowance
for doubtful accounts, if any, is recorded as a reduction in revenue to the extent the provision relates to fee adjustments and
other discretionary pricing adjustments. To the extent the provision relates to a client's inability to make required payments
on accounts receivables, the provision is recorded in operating expenses. As of December 31, 2017, and December 31, 2016 our allowance
for doubtful accounts and was $21,581 and $31,421 respectively. For December 31, 2017 and December 31, 2016, we recorded bad debt
expense of $89,715 and $118,641, respectively, which is reflected as a component of general and administrative expenses on the
consolidated statement of operations.



Significant Customers



For the
year ended December 31, 2017 and December 31, 2016, three customers accounted 48.95% or more, respectively of the Company’s
total product sales revenues, and four customers accounted for 40.18% or more respectively of the Company’s total service
based revenue. For the year ended December 31, 2016, three customers accounted for 45.66% of the Company’s total revenues.



Property
and Equipment, net

Property
and Equipment is stated at net book value, cost less depreciation. Maintenance and repairs are expensed as incurred. Depreciation
of owned equipment is provided using the straight-line method over the estimated useful lives of the assets, ranging from two
to seven years. Depreciation of capitalized construction in progress costs, a component of property and equipment, net, begins
once the underlying asset is placed into service. Property and equipment is reviewed for impairment as discussed below under “Accounting
for the Impairment of Long-Lived Assets.” The Company had not capitalized any interest as of December 31, 2017 and 2016.



Accounting
for the Impairment of Long-Lived Assets

The Company
evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Upon such an occurrence, recoverability of assets to be held and used is measured by comparing the
carrying amount of an asset to forecasted undiscounted net cash flows expected to be generated by the asset. If the carrying amount
of the asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount
of the asset exceeds the fair value of the asset. For long-lived assets held for sale, assets are written down to fair value,
less cost to sell. Fair value is determined based on discounted cash flows, appraised values or management's estimates, depending
upon the nature of the assets. The Company did not record any impairment charges related to long-lived assets during the years
ended December 31, 2017 and 2016.



Beneficial
Conversion Feature

If the
conversion features of conventional convertible debt provide for a rate of conversion that is below market value at issuance,
this feature is characterized as a beneficial conversion feature (“BCF”). A BCF is recorded by the Company as
a debt discount pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ACF”)
Topic 470-20 Debt with Conversion and Other Options. In those circumstances, the convertible debt is recorded net of the
discount related to the BCF, and the Company amortizes the discount to interest expense over the life of the debt using the effective
interest method.



Embedded
Conversion Features



The Company
evaluates embedded conversion features within convertible debt under ASC 815 “Derivatives and Hedging” to determine
whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at
fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under
ASC 815, the instrument is evaluated under ASC 470-20 “Debt with Conversion and Other Options” for consideration of
any beneficial conversion features.



Derivative
Financial Instruments



Fair value
accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments,
and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes
option-pricing model. In assessing the convertible debt instruments, management determines if the convertible debt host instrument
is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument
is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative
financial instruments.



Once determined,
derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair
value being recorded in results of operations as an adjustment to fair value of derivatives. In addition, the fair value of freestanding
derivative instruments such as warrants, are also valued using the Black-Scholes option-pricing model.



Revenue
Recognition



For annual
reporting periods after December 15, 2017, the Financial Accounting Standards Board (“FASB”) made effective ASU 2014-09
“Revenue from Contracts with Customers” to supersede previous revenue recognition guidance under current U.S. GAAP.
As a smaller reporting company, the Company elected to not adopt FASB ASC Topic 606, Revenue Recognition as of December 31, 2017.
Currently, revenue is now recognized in accordance with FASB ASC Topic 606. The guidance presents a single five-step model for
comprehensive revenue recognition that requires an entity to recognize revenue to depict the transfer of promised goods or services
to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods
or services. Two options are available for implementation of the standard which is either the retrospective approach or cumulative
effect adjustment approach. The guidance becomes effective for annual reporting periods beginning after December 15, 2017, including
interim periods within that reporting period, with early adoption permitted. We determined to implement the cumulative effect
adjustment approach to our implementation of FASB ASC Topic 606, with no restatement of the comparative periods presented. We
intend to apply this method to any incomplete contracts we determine are subject to FASB ASC Topic 606 prospectively. As is more
fully discussed below, we are of the opinion that none of our contracts for services or products contain significant financing
components that require revenue adjustment under FASB ASC Topic 606.



In accordance
with FASB ASC Topic 606, Revenue Recognition, we will recognize revenue when persuasive evidence of a significant financing component
exists in our consulting and product sales contracts. We examine and evaluate when our customers become liable to pay for goods
and services; how much consideration is paid as compared to the cash selling price of the goods or services; and, the length of
time between our performance and the receipt of payment.






    19
    
    



Product
Sales



Revenue
from product and equipment sales, including delivery fees, is recognized when an order has been obtained from the customer, the
price is fixed and determinable when the order is placed, the product is shipped, title has transferred and collectability is
reasonably assured. Generally, our suppliers’ drop-ship orders to our clients with shipping-point or destination terms.
For any shipments with destination terms, the Company defers revenue until delivery to the customer. Given the facts that (1)
our customers exercise discretion in determining the timing of when they place their product order; and, (2) the price negotiated
in our product sales contracts is fixed and determinable at the time the customer places the order, we are not of the opinion
that our product sales indicate or involve any significant financing that would materially change the amount of revenue recognized
under the contract, or would otherwise contain a significant financing component for us or the customer under FASB ASC Topic 606.
During the year ended December 31, 2017, sales returns were $21,249 comprised of a cancelled contract and product returns and
replacement.



Consulting
Services



We also
generate revenues from professional services consulting agreements. These arrangements are generally entered into: (1) on an hourly
basis for a fixed-fee; or, (2) on a contingent fee basis. Generally, we require a complete or partial prepayment or retainer prior
to performing services.



For hourly
based fixed fee service contracts, we utilize and rely upon the proportional performance method, which recognizes revenue as services
are performed. Under this method, in order to determine the amount of revenue to be recognized, we calculate the amount of completed
work in comparison to the total services to be provided under the arrangement or deliverable. We segregate upon entry into a contract
any advances or retainers received from clients for fixed fee hourly services into a separate “Advances from Clients”
account, and only recognize revenues as we incur and charge billable hours, and then deposit the funds earned into our operating
account. Because our hourly fees for services are fixed and determinable and are only earned and recognized as revenue upon actual
performance, we are of the opinion that such arrangements are not an indicator of a vendor or customer based significant financing,
that would materially change the amount of revenue we recognize under the contract or would otherwise contain a significant financing
component under FASB ASC Topic 606.



Occasionally,
our fixed-fee hourly engagements are recognized under the completed performance method. Some fixed fee arrangements are for completion
of a final deliverable or act which is significant to the arrangement as a whole. These engagements do not generally exceed a
one-year term. If the performance is for a final deliverable or act, we recognize revenue under the completed performance method,
in which revenue is recognized once the final act or deliverable is performed or delivered for a fixed fee. Revenue recognition
is affected by a number of factors that change the estimated amount of work required to complete the deliverable, such as changes
in scope, timing, awaiting notification of license award from local government, and the level of client involvement. Losses, if
any, on fixed-fee engagements are recognized in the period in which the loss first becomes probable and reasonably estimable.
FASB ASC Topic 606 provides a practical expedient to disregard the effects of a financing component if the period between payment
and performance is one year or less. As, our fixed fee hourly engagements do not exceed one year, no significant customer-based
financing is implicated under FASB ASC Topic 606. During the year ended December 31, 2017, and December 31, 2016, we have incurred
no losses from fixed fee engagements that terminate prior to completion. We believe if an engagement terminates prior to completion,
we can recover the costs incurred related to the services provided.



We occasionally
enter into arrangements for which fixed and determinable revenues are contingent and agreed upon achieving a pre-determined deliverable
or future outcome. Any contingent revenue for these arrangements is not recognized until the contingency is resolved and collectability
is reasonably assured.



Our arrangements
with clients may include terms to deliver multiple services or deliverables. These contracts specifically identify the services
to be provided with the corresponding deliverable. The value for each deliverable is determined based on the prices charged when
each element is sold separately or by other vendor-specific objective evidence (“VSOE”) or estimates of stand-alone
selling prices. Revenues are recognized in accordance with our accounting policies for the elements as described above (see Product
Sales). The elements qualify for separation when the deliverables have value on a stand-alone basis and the value of the separate
elements can be established by VSOE or an estimated selling price.



While
assigning values and identifying separate elements requires judgment, selling prices of the separate elements are generally readily
identifiable as fixed and determinable as we also sell those elements individually outside of a multiple services engagement.
Contracts with multiple elements typically incorporate a fixed-fee or hourly pricing structure. Arrangements are typically terminable
by either party upon sufficient notice and do not include provisions for refunds relating to services provided.



Reimbursable
expenses, including those relating to travel, other out-of-pocket expenses and any third-party costs, are included as a component
of revenues. Typically, an equivalent amount of reimbursable expenses is included in total direct client service costs. Reimbursable
expenses related to time and materials and fixed-fee engagements are recognized as revenue in the period in which the expense
is incurred and collectability is reasonably assured. Taxes collected from customers and remitted to governmental authorities
are presented in the statement of operations on a net basis.



Costs
of Revenues

The Company’s
policy is to recognize costs of revenue in the same manner in conjunction with revenue recognition. Cost of revenue includes the
costs directly attributable to revenue recognition and includes compensation and fees for services, travel and other expenses
for services and costs of products and equipment. Selling, general and administrative expenses are charged to expense as incurred.



Advertising
and Promotion Costs

Advertising
and promotion costs are included as a component of selling and marketing expense and are expensed as incurred. During the year
ended December 31, 2017 and 2016, these costs were $278,542 and $88,047, respectively.



Shipping
and Handling Costs

For product
and equipment sales, shipping and handling costs are included as a component of cost of revenues.



Stock-Based
Compensation

Restricted
shares are awarded to employees and entitle the grantee to receive shares of common stock at the end of the established vesting
period. The fair value of the grant is based on the stock price on the date of grant. We recognize related compensation costs
on a straight-line basis over the requisite vesting period of the award, which to date has been one year from the grant date.
During the years ended December 31, 2017 and 2016, stock-based compensation expense for restricted shares for Company employees
and service providers was $893,857 and $30,208, respectively. Compensation expense for warrants and options is based on the fair
value of the instruments on the grant date, which is determined using the Black-Scholes valuation model, and are expensed over
the expected term of the awards.






    20
    
    



Income
Taxes

We recognize
deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial
statements or tax returns in accordance with applicable accounting guidance for accounting for income taxes, using currently enacted
tax rates in effect for the year in which the differences are expected to reverse. We record a valuation allowance when necessary
to reduce deferred tax assets to the amount expected to be realized.  For the years ended December 31, 2017 and 2016, we
recorded a valuation allowance against our deferred tax asset that reduced our income tax benefit for the period to zero. As of
December 31, 2017, and, we had no liabilities related to federal or state income taxes and the carrying value of our deferred
tax asset was zero.



Net
Income (Loss) Per Common Share

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 earnings per share is equal to basic earnings per share because there are no potential dilutable instruments
that would have an anti-dilutive effect on earnings. 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
since that would have an anti-dilutive effect on earnings.



Related
Party Transactions

The Company
follows FASB ASC subtopic 850-10, Related Party Disclosures, for the identification of related parties and disclosure of
related party transactions. Related parties include: a) affiliates of the Company; b) entities for which investments in their
equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section
825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees,
such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the
Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly
influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented
from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating
policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly
influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate
interests.



Material
related party transactions are required to be disclosed in the consolidated financial statements, other than compensation arrangements,
expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated
in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall
include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which
no amounts or nominal amounts were ascribed, for each of the periods for which statements of operation are presented, and such
other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the
dollar amounts of transactions for each of the periods for which statements of operations are presented and the effects of any
change in the method of establishing the terms from that used in the preceding period; and d) amounts due from or to related parties
as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.



Reclassifications

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.



Recent
Accounting Pronouncements

In August
2014, the FASB issued ASU 2014-15 “Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure
of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”). By incorporating
and expanding upon certain principles that are currently in U.S. auditing standards, ASU 2014-15 requires management to assess
whether there is substantial doubt about the entity’s ability to continue as a going concern. Specifically, ASU 2014-15
(1) provides a definition of the term substantial doubt, (2) requires an evaluation every reporting period including interim periods,
(3) provides principles for considering the mitigating effect of management’s plans, (4) requires certain disclosures when
substantial doubt is alleviated as a result of consideration of management’s plans, (5) requires an express statement and
other disclosures when substantial doubt is not alleviated, and (6) requires an assessment for a period of one year after the
date that the financial statements are issued (or available to be issued). ASU 2014-15 is effective for the annual period ending
after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company has
not elected to early adopt the provisions of ASU 2014-15, and accordingly, the requirements of ASU 2014-15 will apply beginning
with the year ended December 31, 2017. The Company is currently evaluating the effects, if any, that the application of ASU 2014-15
will have on disclosures associated with its consolidated financial statements.



In May
2014, the FASB issued ASU 2014-9 “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-9”), which
provides a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer
of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those
goods or services. This guidance is effective for annual reporting and interim periods beginning after December 15, 2017and
allows for either full retrospective or modified retrospective application, with early adoption not permitted. Accordingly, the
standard became effective for the Company on January 1, 2018.



In February
2016, the FASB issued its new lease accounting guidance in Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842).
Under the new guidance, the following will be required to be recognized for all leases (with the exception of short-term leases)
as of the commencement date:



●A
                                         lease liability, which is a lessee‘s obligation to make lease payments arising
                                         from a lease, measured on a discounted basis; and

●A
                                         right-of-use asset, which is an asset that represents the lessee’s right to use,
                                         or control the use of, a specified asset for the lease term.

●Under
                                         the new guidance, lessor accounting is largely unchanged. Certain targeted improvements
                                         were made to align, where necessary, lessor accounting with the lessee accounting model
                                         and Topic 606, Revenue from Contracts with Customers.

●The
                                         new lease guidance simplified the accounting for sale and leaseback transactions primarily
                                         because lessees must recognize lease assets and lease liabilities. Lessees will no longer
                                         be provided with a source of off-balance sheet financing.

Public
business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim
periods within those fiscal years (i.e., January 1, 2019, for a calendar year entity). The Company is currently evaluating the
effects, if any, that the application of ASU 2016-02 will have on disclosures associated with its consolidated financial statements.



In March
2016, the FASB issued Accounting Standards Update No. 2016-09, Compensation —Stock Compensation (Topic 718): Improvements
to Employee Share-Based Payment Accounting. The amendments are intended to improve the accounting for employee share-based payments
and affect all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based
payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity
or liabilities; and (c) classification on the statement of cash flows. For public companies, the amendments are effective for
annual periods beginning after December 15, 2016, and interim periods within those annual periods. For private companies, the
amendments are effective for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning
after December 15, 2018. Early adoption is permitted for any organization in any interim or annual period. The Company is currently
evaluating the effects, if any, that the application of ASU 2016-09 will have on disclosures associated with its consolidated
financial statements.






    21
    
    



In April
2016, the FASB issued Accounting Standards Update No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying
Performance Obligations and Licensing. The amendments clarify the following two aspects of Topic 606: (a) identifying performance
obligations; and (b) the licensing implementation guidance. The amendments do not change the core principle of the guidance in
Topic 606. This guidance is effective for annual reporting and interim periods beginning after December 15, 2017and allows
for either full retrospective or modified retrospective application, with early adoption not permitted. Accordingly, the standard
becomes effective for the Company on January 1, 2018.



In January
2017, FASB issued Accounting Standards Update (ASU) No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition
of a Business, clarifying the definition of a business. The amendments affect all companies and other reporting organizations
that must determine whether they have acquired or sold a business. For public companies, the amendments are effective for annual
periods beginning after December 15, 2017, including interim periods within those periods. The Company is currently evaluating
the effects, if any, that the application of ASU 2017-01 will have on disclosures associated with its consolidated financial statements.



Note 3.
Accounts Receivable, net



Accounts
receivable, net, was comprised of the following:





December
    31, 2017
    December
    31, 2016Gross
    accounts receivable
    $168,385
    $195,872Less:
    allowance for doubtful accounts
    (21,581)
    (31,421)Accounts
    receivable, net
    $146,804
    $164,451

For the
years ended December 31, 2017 and December 31, 2016, the Company had bad debt expense of ($89,715) and $118,641 and respectively.



Note 4
Inventory



Inventory
as of December 31, 2017 and 2016 consisted of the following:



December 31, 2017
    December 31, 2016Raw materials
    $—
    $16,614Finished goods
    35,757
    25,886Total
    $35,757
    $42,500

Note 5. Property and Equipment,
net



Property
and equipment, net, was comprised of the following:





December
    31, 2017
    December
    31, 2016Office
    equipment
    $8,482
    $7,472Furniture
    and fixtures
    7,240
    8,777Machinery
    and equipment
    7,336
    4,938Property
    and equipment, gross
    23,058
    21,187Less:
    accumulated depreciation
    (11,276)
    (10,148)Property
    and equipment, net
    $11,782
    $11,639






For the
year ended December 31, 2017 and December 31, 2016, the Company recorded depreciation expense of $4,487 and $5,173, respectively.



Note 6.
Accrued and Other Current Liabilities



Accrued
and other current liabilities consisted of the following:





December 31, 2017
    December 31, 2016Accrued legal fees
    $—
    $8,835Accrued payroll liabilities
    8,323
    12,903Other Accrued Expenses & Payables
    44,029
    14,986Accrued and other current liabilities
    $52,352
    $36,724

Note
8. Related Party Transactions



During
the year ended December 31, 2017, and 2016, the Company incurred $66,000 and $34,250 of expenses respectively to Prince &
Tuohey CPA, LTD, an accounting firm in which, the Company’s Chief Financial Officer, was a partner. As of December 31, 2017,
the Company had $5,000 due to this related party.



Note
9. Commitments and Contingencies



On July
28, 2015, the Company entered into a 5-year lease for 6,500 square feet of office space to house its corporate offices. Under
the terms of the lease, payments are $4,500 per month for the first 36 months of the lease and escalate thereafter. As part of
this lease, the Company paid a $4,500 deposit, which is classified as an Other Asset.






    22
    
    



Rent expense
was $54,000 and, $54,084 for the years ended December 31, 2017 and 2016, respectively.



The following
table summarizes the Company’s future lease obligations:



Year
    Amount2017
    $54,0002018
    54,0002019
    56,3202020
    33,610Total
    $143,930

Note
10. Stock-based Compensation



During
the year ended December 31, 2017 and December 31, 2016, the Company issued stock-based compensation for employees and service
providers pursuant to its 2015 Equity Incentive Plan. As of December 31, 2017, the Company determined to issue employees and services
providers warrants instead of common stock. During the year ended December 31, 2017 and December 31, 2016, the Company’s
expense for restricted shares to Company employees and service providers was $893,857 and, $30,208, which was the result of the
following activity:



Restricted
Shares



From time
to time, the Company grants certain employees restricted shares of its common stock to provide further compensation in-lieu of
wages and to align the employee’s interests with the interests of its stockholders. Because vesting is based on continued
employment, these equity-based incentives are also intended to attract, retain and motivate personnel upon whose judgment, initiative
and effort the Company’s success is largely dependent. There were 430,227 shares granted as of December 31, 2017. The fair
value of restricted stock units is determined based on the quoted closing price of the Company’s common stock on the date
of grant.



The following
table summarizes the Company’s restricted share award activity during the years ended December 31, 2017 and 2016:



Restricted
    Shares
    
    
    Weighted
    AverageCommon
    Stock
    
    
    Grant
    Date Fair ValueOutstanding
    unvested at December 31, 2015
    
    
    164,981
    
    
    $
    0.21Granted
    
    
    267,172
    
    
    
    0.11Vested restricted
    shares
    
    
    (323,553
    )
    
    
    0.15Forfeited
    
    
    —
    
    
    
    —Outstanding unvested
    at December 31, 2016
    
    
    —
    
    
    
    —Granted
    
    
    430,227
    
    
    
    0.92Vested restricted
    shares
    
    
    430,227
    
    
    
    0.Forfeited
    
    
    —
    
    
    
    —Outstanding
    unvested at December 31, 2017
    
    
    430,227
    
    
    $
    0.92During the year ended December 31, 2017, the Company granted 430,227 restricted shares to Company employees and service providers
and recognized $391,702 in associated stock-based compensation expense. During the year ended December 31, 2016, the Company granted
152,500 restricted shares and recognized $16,240 in associated employee stock-based compensation expense.



Warrants



In connection
with his appointment to the Company’s board of directors, the Company granted its independent board member, Vincent “Tripp”
Keber, warrants 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, exercisable within five (5) years of the date of issuance on November 19, 2014 with a value of $228,250,



On August
31, 2017, the Company issued Anthony Baroud warrants to purchase up to fifty thousand (50,000) shares of common stock at an exercise
price of $0.93 in a cashless transaction. The warrants expired on March 1, 2018.



The Company
used the Black-Scholes valuation model to determine the fair value of warrants as of the grant date. Assumptions used in this
calculation for the warrant award to purchase 250,000 shares  of common stock include expected volatility of 144.2%, based
on an average of historical data of the Company’s stock price and the stock prices of three comparable companies that are
also included in the marijuana index, a risk-free rate of 1.23%, based on U.S. Treasury yields as published by the Federal
Reserve, a dividend yield of 0.0%, as the Company has not historically paid dividends nor does it have any plans to do so in the
foreseeable future, and an expected term of five years. The grant date fair value of the warrants, as calculated based on these
assumptions, was $0.91 per share.



During
2017 and 2016, the Company had the following warrant activity:





Common
                                         Stock Warrants
    
    Weighted
    Average
    Grant Date Fair ValueOutstanding
    at December 31, 2014
    
    250,000
    
    $
    0.91Granted
    
    —
    
    
    —Exercised
    
    —
    
    
    —Expired
    or forfeited
    
    —
    
    
    —Outstanding
    at December 31, 2015
    
    250,000
    
    $
    0.91Granted
    
    —
    
    
    —Exercised
    
    —
    
    
    —Expired
    or forfeited
    
    —
    
    
    —Outstanding
    at December 31, 2016
    
    250,000
    
    $
    0.91Granted
    
    790,000
    
    
    1.13Exercised
    
    —
    
    —Expired
    or forfeited
    
    —
    
    —Outstanding
    at December 31, 2017
    
    1,040,000
    
    $1.13Vested
    at December 31, 2017
    
    1,040,000
    $






    23
    
    



As of
December 31, 2017, the price per share exceeded the exercise price per share of our common shares, resulting in an aggregate intrinsic
value of $895,860  of the outstanding warrants.



Options



On January
22, 2018, the Company awarded Mr. Keber an option to purchase   three hundred thousand (300,000) shares of common stock
at an exercise price of sixty-three cents ($0.63) per share valued at $273,900. The options are effective January 22, 2018 and
terminate on November 19, 2019.



Note 11.
Income Taxes



The Tax
Cuts and Jobs Act (the Tax Legislation) in the United States enacted on December 22, 2017 significantly revised the United States
corporate income tax by, among other things, lowering the corporate income tax rate to 21% effective January 1, 2018, implementing
a modified territorial tax system and imposing a one-time repatriation tax on deemed repatriated earnings and profits of U.S.-owned
foreign subsidiaries (the Toll Charge). As a fiscal-year taxpayer, certain provisions of the Tax Legislation impacted us in fiscal
2018, including the change in the corporate income tax rate, while other provisions will be effective starting at the beginning
of fiscal 2019. Accordingly, our federal statutory income tax rate for fiscal 2018 reflected a blended rate of approximately 21%.



The following
table displays a reconciliation from the U.S. statutory rate to the effective tax rate and the provision for (benefit from) income
taxes   for the years ended December 31, 2017 and 2016, respectively:



December
    31, 2017
    December
    31, 2016Tax
    benefit at the US statutory rate of 34%
    $506,081
    $205,253State
    income tax benefit
    68,916
    27,951Non-deductible
    expenses including non-deductible pre-merger losses
    —
    —Change
    in valuation allowance
    (574,997)
    (233,204)Total
    income tax benefit
    $—
    $—

Deferred
tax assets (liabilities) consisted of the following:



December
    31, 2017
    December
    31, 2016Net
    operating loss carryforwards
    $1,354,949
    $1,141,773Beneficial
    conversion feature accumulated amortization
    13,791
    13,791Allowance
    for Doubtful Accounts
    7,855
    13,727Valuation
    allowance
    (1,376,595)
    (1,169,291)Total
    deferred tax assets
    $—
    $—

The Company
determined that it is not more likely than not that its deferred tax asset would be realizable. Accordingly, the Company recorded
a valuation allowance for the full amount of its deferred tax asset, resulting in a zero carrying value of the Company’s
deferred tax asset and no benefit from or provision for income taxes for the year ended December 31, 2017 and 2016. Federal and
state operating loss carry forwards of $1,354,949 and $1,141,773 as of December 31, 2017 and 2016, respectively, begin expiring
on 2034. The years 2010 to 2015 remain subject to examination by the Company’s major tax jurisdictions.



Utilization
of the net operating loss carry forwards and credits may be subject to a substantial annual limitation due to ownership change
limitations provided by Section 382 of the Internal Revenue Code of 1986, as amended, and similar state provisions.



Note
12. Stockholders’ Equity



Preferred
Stock



The 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 year ended December 31, 2017 and 2016.



Common
Stock



The American
Cannabis Company, Inc. is authorized to issue 100,000,000 shares of common stock at $0.00001   par value. As of December
31, 2017, and 2016, the Company had 51,434,050 and 49,847,593, shares issued and outstanding, respectively.



On January
4, 2017, the Company issued a total of 430,227 shares of restricted common stock to 9 employees and consultants pursuant to consulting
contracts and the Company’s 2015 Employee Incentive Plan.



On January
10, 2017, pursuant to the amended and restated Investment Agreement with Tangiers, the Company sold 588,841 shares of registered
common stock to Tangiers in exchange for $414,538.






    24
    
    



On February
22, 2017, pursuant to the amended   and restated Investment Agreement with Tangiers, the Company sold 320,549 registered
common shares to Tangiers in exchange for $188,146.



On June
12, 2017, pursuant to a written agreement, the Company issued 8,955 common shares to Jesus Quintero.



On August
31, 2017, pursuant to a written agreement, the Company issued Anthony Baroud 100,000 shares of common stock and a warrant to purchase
up to 50,000 shares valued at $0.76 per share, expiring on March 1, 2018.



On January
22, 2018, pursuant to a written agreement with Vincent “Tripp” Keber, the Company issued Mr. Keber an option to purchase
300,000 shares of common stock for a price of $0.63 per share. The option expires on November 19, 2019.



Note
13. Subsequent Events



Effective
January 18, 2018, Mr. Vincent “Tripp” Keber, III resigned as a director. On March 13, 2018, the Company’s Board
of Directors appointed Tad Mailander as a director.



On April
24, 2018, the Company terminated the engagement of its Chief Financial Officer, J. Michael Tuohey. On April 24, 2018, the Registrant
appointed R. Leslie Hymers, III as its Chief Financial Officer.



On June
18, 2018, R. Leslie Hymers, III, the Company’s Chief Financial Officer resigned his position. Concurrently, the Company
engaged Michael Schwanbeck as the Company’s Chief Financial Officer.



SUPPLEMENTARY
DATA



The Company
is a smaller reporting Company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required
under this item.



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



None.



ITEM
9A. CONTROLS AND PROCEDURES



Management
of the Company is responsible for maintaining disclosure controls and procedures that are designed to ensure that financial information
required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 (the “Exchange
Act”) is recorded, processed, summarized and reported within the timeframes specified in the Securities and Exchange Commission’s
rules and forms, consistent with Items 307 and 308 of Regulation S-K.



In addition,
the disclosure controls and procedures must ensure that such financial information is accumulated and communicated to the Company’s
management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding
required financial and other required disclosures.



As of
December 31, 2017, an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in
Rules 13(a)-15(e) and 15(d)-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”) was carried out under
the supervision and with the participation of our Chief Executive Officer, Chief Financial Officer, and other persons carrying
out similar functions for the Company. Based on the evaluation of the Company’s disclosure controls and procedures, the
Company concluded that during the period covered by this report, such disclosure controls and procedures were effective.



The Company
continues to employ and refine a structure in which critical accounting policies, issues and estimates are identified, and together
with other complex areas, are subject to multiple reviews by accounting personnel. In addition, the Company evaluates and assesses
its internal controls and procedures regarding its financial reporting, utilizing standards incorporating applicable portions
of the Public Company Accounting Oversight Board’s 2009 Guidance for Smaller Public Companies in Auditing Internal Controls
Over Financial Reporting as necessary and on an on-going basis.



Because
of its inherent limitations, internal control over financial reporting cannot provide absolute assurance of the prevention or
detection of misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.



This Annual
Report on Form 10-K does not include an attestation report of the Company’s independent registered public accounting firm
regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered
public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s
report in this Annual Report on Form 10-K.



Changes in Internal Controls
Over Financial Reporting



The Company
has no reportable changes to its internal controls over financial reporting for the period covered by this report.



The Company
will continually enhance and test its internal controls over financial reporting on a continuing basis. Additionally, the Company’s
management, under the control of its Chief Executive Officer and Chief Financial Officer, will increase its review of its disclosure
controls and procedures on an ongoing basis. Finally, the Company plans to designate, in conjunction with its Chief Financial
Officer, individuals responsible for identifying reportable developments and the process for resolving compliance issues related
to them. The Company believes these actions will focus necessary attention and resources in its internal accounting functions.



ITEM
9B. OTHER INFORMATION



None.






    25
    
    



PART
III.



ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE



Our Board of Directors



The following table sets forth
information regarding our current directors and each director as of December 31, 2017.





Name
    
    Principal
    Occupation
    
    Age
    
    Director
    SinceCorey Hollister(1)
    
    Chairman of the Board, American Cannabis Company,
    Inc.
    
    42
    
    2014Ellis Smith
    
    Chief Development Officer, American Cannabis
    Company, Inc.
    
    41
    
    2014Vincent “Tripp” Keber(2)
    
    Chief Executive Officer, Dixie Brands, Inc.
    
    49
    
    2014Terry Buffalo(3)
    
    Director, Principal Executive Officer
    
    53
    
    2017Tad Mailander(4)
    
    Director, Principal, Mailander Law Office, Inc.
    
    62
    
    2018

Corey
Hollister served as a director from May 2014 until May 30, 2017. In March 2013, Mr. Hollister co-founded American Cannabis
Company, Inc. (“ACC”), and from March 2013 to May 2014, Mr. Hollister served as a Managing Director of ACC. From September
2010 to July 2013, Mr. Hollister co-owned and was director of Colorado Kind Care LLC d/b/a The Village Green Society, a Colorado-based
Medical Marijuana Center. From October 2007 to September 2009, Mr. Hollister owned and operated Built-to-Last Fitness, a private
health and wellness company focused on exercise and nutritional guidance for individuals, companies and schools. Prior to this,
Mr. Hollister was based in Boston, MA and worked in Marketing and Advertising.



Ellis
Smithfrom June 2014 to the present; Ellis Smith has served as our Chief Development Officer and as a director since September
2014. In March 2013, Mr. Smith co-founded ACC, and from March 2013 to May 2014, Mr. Smith served as a Managing Director of ACC.
From September 2010 to July 2013, Mr. Smith co-owned Colorado Kind Care LLC d/b/a The Village Green Society, a Colorado-based
Medical Marijuana Center, where he was responsible for managing the operations and protocols supporting the growth and production
of medical marijuana. From 2008 to 2010, Mr. Smith founded and operated The Happy Camper Organics Inc., a medical marijuana company
focused on the growth of wholesale cannabis for sale to medical marijuana businesses. From 2005 to 2010, Mr. Smith founded and
operated Bluebird Productions, a video production company. Mr. Smith has been published and recognized for his horticultural experience
and organic gardening in the cannabis industry, and he is known for assisting in identifying the Hemp Russet Mite and working
with SKUNK magazine to educate the industry. Our Board believes Mr. Smith’s qualifications to serve as an executive of the
Company and as a member of our Board include his past success in founding and operating businesses, his unique experience in horticultural
and organic gardening, and his recognized qualifications in the emerging medical cannabis markets.



Vincent
“Tripp” Keber served as a member of our board of directors from November 2014 until January 18, 2018. Mr.
Keber is a co-founder and Chief Executive Officer of Dixie Elixirs & Edibles, a Colorado licensed medical marijuana infused
products manufacturer. He is a founding director of the National Cannabis Industry Association, and, since 2013, has served as
a director of the Marijuana Policy Project. He is also an advisory board member of the Medical Marijuana Industry Group in Colorado.
In his current role as CEO of Dixie, Mr. Keber is responsible for the overall strategy, licensing, marketing, branding and expansion
efforts related to the Dixie brand, both domestically and internationally. Mr. Keber has been featured on CBS’s 60 Minutes
and CNBC. Since June 2014, Mr. Keber has also served as a Director of MassRoots, Inc. Prior to joining Dixie, Mr. Keber served
as Chief Operating Officer for Bella Terra Resort Development Company, and EVP of Business Development for Sagebrush Realty Development.
Mr. Keber has a Bachelor of Science in Political Science from Villanova University. Mr. Keber is involved in several charitable
organizations located within the Aspen and Denver communities, and assists in the research and development of cannabis support
for veterans suffering from post-traumatic stress disorder.



Terry
Buffalo from June 1, 2017 to present; Mr. Buffalo is an executive in the financial services industry, with extensive experience
including managing a hybrid FINRA broker-dealer and Registered Investment Advisor firm. Mr. Buffalo is regarded as an expert in
these fields with publications in Financial Advisor Magazine and NAIFA’s Advisor Today, as well as being a featured interview
in Boomer Market Advisor. Prior to founding Buffalo Financial Solutions, Mr. Buffalo was the Chief Executive Officer of a regional
broker dealer for over 10 years, where he took an underperforming firm and revamped the business model from a corporate to an
independent structure, with an emphasis on attracting brokers with established clienteles. While there, the firm consistently
produced net profits of 7%, compared to industry average among peers that ranged between negative to 1.5%, while expanding the
firm’s overall assets from $400 million to over $2 billion.



Tad
Mailander is an attorney licensed to practice before all of the Courts in the State of California. Mr. Mailander has been
in practice since 1991 and is a member of the State Bar of California, the bars of the United States District Court for the Southern
District of California, and the United States Court of Appeal for the Ninth Circuit.



(1) Effective
May 30, 2017, Corey Hollister resigned his position as Director of the Company and Co-Chairman of the Board of Directors.



(2) Effective
January 18, 2018, Vincent “Tripp” Keber resigned his position as Director of the Company.



(3) Effective
June 1, 2017, the Company’s Board of Directors appointed Mr. Terry Buffalo as a Director of the Company.



(4) Effective
March 13, 2018, the Company’s Board of Directors appointed Mr. Tad Mailander as a Director of the Company.



Our Executive Officers



We designate persons serving
in the following positions as our named executive officers: our chief executive officer, chief financial officer, chief development
officer, chief operating officer and chief technology officer. The following table sets forth information regarding our executive
officers as of December 31, 2017.





Name
    
    Principal
    Occupation
    
    Age
    
    Officer
    SinceTerry Buffalo
    
    Principal Executive Officer
    
    53
    
    2016Ellis Smith
    
    Chief Development Officer
    
    41
    
    2014J. Michael Tuohey1
    
    Chief Financial Officer
    
    55
    
    2016R. Leslie Hymers, III2
    
    Chief Financial Officer
    
    35
    
    2018Michael Schwanbeck3
    
    Chief Financial Officer
    
    26
    
    2018




    26
    
    



Ellis Smith’sbiographical
summary is included under “Our Board of Directors.”



Terry
Buffalo’sbiographical summary is included under “Our Board of Directors.”



J.
Michael Tuohey, Chief Financial Officer, is a graduate of the College of William and Mary. He is currently
a partner in the firm of Prince and Tuohey, CPA LTD in Hot Springs AR and a partner in Bolmgren Retireplan, a Registered Investment
Advisory firm located in Chicago IL. He has served in the role of CFO for several firms in the investment industry. He holds a
license as a Certified Public Accountant and a Series 66 certification from the North American Securities Administrators Association
(NASAA) exam administered by the Financial Industry Regulatory Authority (FINRA).



R.
Leslie Hymers, III, Chief Financial Officer, is a licensed CPA in the state of California. During his career as a tax
professional at Ernst & Young, LLP, Mr. Hymers provided tax services to several prominent entertainment and real estate companies.
His extensive experience with Entertainment and Private Equity industries together with his prolonged involvement with public
companies in different roles makes him a key asset to the Registrant. Mr. Hymers currently serves as a director and Chief Financial
Officer of Marijuana Company of America, Inc. (OTC: MCOA) and also previously served as the CFO of Global Hemp Group (OTC: GBHPF).
Mr. Hymers is the Managing Partner of Pinnacle Tax Services, LLC, and holds a Master of Science in Taxation degree and a Bachelor's
of Science degree in Accountancy from California State University, Northridge. He is the founding managing editor of the University's:
"Tax Development Journal." Mr. Hymers is one of nine professionals appointed to a newly formed Cannabis Advisory Taxation
Taskforce (CATT) to help the California state legislature develop and enhance new cannabis tax laws and regulations.



Michael
Schwanbeck, Chief Financial Officer, worked as a tax professional preparing and managing income tax returns for corporations,
s-corps, partnerships, and individuals. Mr. Schwanbeck also has experience in auditing business organizations, and managing business
taxes including sales tax, payroll tax, and property tax returns. Mr. Schwanbeck graduated from the University of Minnesota Duluth
in December of 2014 with a bachelor’s degree in Accountancy and a minor in Mathematics. Mr. Schwanbeck was certified as
a college business and math tutor though the College Reading & Learning Association. Mr. Schwanbeck is pending issuance of
his certified public accountancy license in Colorado.



(1) On
April 24, 2018, the Company terminated Mr. Tuohey’s engagement as Chief Financial Officer.



(2) On
April 24, 2018, the Company engaged R. Leslie Hymers, III as Chief Financial Officer.



(3) On
June 18, 2018, Mr. Hymers resigned as Chief Financial Officer and the Company engaged Michael Schwanbeck as Chief Financial Officer.



Section 16(a) Beneficial
Ownership Reporting Compliance



Section 16(a)
of the Exchange Act requires our executive officers and directors and persons who beneficially own more than 10% of our common
stock to file initial reports of beneficial ownership and reports of changes in beneficial ownership with the SEC. Such persons
are required by SEC regulations to furnish us with copies of all Section 16(a) forms filed by such persons.



Based
solely on our review of such forms furnished to us, and written representations from certain reporting persons, we believe that
all filing requirements applicable to our executive officers, directors and greater than 10% stockholders during the fiscal year
ended December 31, 2017 were satisfied.



ITEM
11. EXECUTIVE COMPENSATION





Summary
Compensation Table



The following
table sets forth information concerning the compensation of our principal executive officer, our principal financial officer and
each of our other executive officers during 2017.





Non-EquityStock
    Incentive
    Plan
    All
    OtherSalary
    Bonus
    Awards
    Compensation
    Compensation
    TotalName
    and Principal Position
    Year
    ($)
    ($)
    ($)
    ($)
    ($)
    ($)Corey Hollister,
    Principal Executive
    2017
    30,115
    1,116
    ―
    ―
    ―
    31,231Officer(1)
    2016
    87,000
    ―
    ―
    ―
    ―
    85,8462015
    84,346
    1,500
    ―
    ―
    ―
    75,513J. Michael Tuohey,
    Chief Financial
    2017
    66,000
    ―
    ―
    ―
    ―
    66,000Officer(4)
    2016
    34,250
    ―
    ―
    ―
    ―
    34,2502015
    ―
    ―
    ―
    ―
    ―
    ―Ellis Smith, Chief
    Development
    2017
    85,000
    23,732
    ―
    ―
    12,030
    120,762Officer
    2016
    86,949
    ―
    
    
    
    86,9492015
    79,808
    1,500―
    ―
    ―
    81,308Terry Buffalo, Principal
    Executive
    2017
    80,000
    7,522
    
    ―
    ―
    87,522Officer(5)
    2016
    62,152
    ―
    3,330
    ―
    ―
    65,4522015
    ―
    ―
    1,590
    ―
    ―
    1,590

(1)Mr.
                                         Hollister resigned as our Principal Executive Officer effective January 1, 2017.

(2)Mr.
                                         Buffalo was our Chief Operations Officer during 2016. Effective January 1, 2017, Mr.
                                         Buffalo was appointed our Principal Executive Officer.

(3)Mr.
                                         Tuohey was appointed our Chief Financial Officer on November 28, 2016.




    27
    
    



Retirement Benefits



We do not currently provide
our named executive officers with supplemental or other retirement benefits.



Outstanding Equity Awards
at December 31, 2017



As of December 31, 2017, we
had not granted any stock-based compensation awards to any of our named executive officers.





    28
    
    



Compensation of Directors



The following table sets forth
information concerning the compensation earned during 2017 by each individual who served as a non-employee director at any time
during the fiscal year:



2017
DIRECTOR COMPENSATION



Name
    Fees
                                         Earned or Paid in Cash ($)
    Stock
                                         Awards(1) ($)
    Total
                                         ($)Vincent
    “Tripp” Keber
    30,000
    0
    30,000
(1)In
                                         connection with Mr. Keber’s appointment to the board of directors, on November
                                         19, 2014, he was awarded warrants to purchase up to two hundred and fifty thousand (250,000)
                                         shares of our common stock at an exercise price of sixty-three cents ($0.63) per share
                                         exercisable within five (5) years of the date of issuance.

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



The following
table sets forth information known to us regarding the beneficial ownership of our common stock as of December 31, 2017 by (1) each
stockholder who is known by us to beneficially own more than 5% of our common stock, (2) each of our directors, (3) each
of our executive officers named in the Summary Compensation Table above, and (4) all of our directors and executive officers
as a group.





Number
    ofSharesBeneficiallyBeneficial
    Owner(1)
    Owned(2)
    Percent(3)Named
    Executive Officers and Directors:Corey
    Hollister
    11,864,654
    23.067%Ellis
    Smith
    11,816,741
    22.974%Terry
    Buffalo
    230,000
    0.4471%J.
    Michael Tuohey
    ―
    ―Vincent
    “Tripp” Keber, III
    ―
    ―Tad
    Mailander
    ―
    ―-All
    executive officers and directors as a group (6 persons)
    23,911,395
    46.489%

(1)
    Except
                           as otherwise indicated, the persons named in this table have sole voting and investment power with
                           respect to all shares of common stock shown as beneficially owned by them, subject to community property
                           laws where applicable and to the information contained in the footnotes to this table.(2)
    Under
        SEC rules, a person is deemed to be the beneficial owner of shares that can be acquired by such person within 60 days
        upon the exercise of options or the settlement of other equity awards.(3)
    Calculated on the
    basis of 51,434,050 shares of common stock outstanding as of December 31, 2017, plus any additional shares of common stock
    that a stockholder has the right to acquire within 60 days after December 31, 2017.

Equity Compensation Plan
Information



Plan
                                         Category
    Number
                                         of securities to be issued upon exercise of outstanding options, warrants and rights(1)
    Weighted-average
                                         exercise price of outstanding options, warrants and rights(2)
    Number
                                         of securities remaining available for issuance under equity compensation plans (excluding
                                         securities reflected in column (a))(3)Equity
    compensation plans approved by security holders
    —
    —
    —Equity
    compensation plans not approved by security holders
    250,000
    $0.63
    —300,000
    $0.63
    —Total
    550,000
    $0.63
    —
(1)Historically,
                                         the Company has granted restricted shares that are subject to forfeiture. Pursuant to
                                         SEC guidance, these RSUs are not reportable in the table above.

(2)Historically,
                                         the Company has granted restricted shares that are subject to forfeiture. Pursuant to
                                         SEC guidance, these RSUs are not reportable in the table above. Restricted shares subject
                                         to forfeiture have a weighted average exercise price of $0.00.

(3)The
                                         Company equity compensation grants to date have been approved on a grant-by-grant basis,
                                         as opposed to under an umbrella equity compensation plan establishing a total number
                                         of grants available.



    29
    
    



ITEM
13. CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS, AND DIRECTOR INDEPENDENCE



Since
Inception on March 5, 2013, there has not been, and there is not currently proposed, any transaction or series of similar transactions
to which we were or will be a party in which the amount involved exceeded or will exceed $120,000 and in which any of our directors,
executive officers, holders of more than 5% of any class of our voting securities or any member of the immediate family of the
foregoing persons had or will have a direct or indirect material interest. We believe that we have executed all of the transactions
described therein on terms no less favorable to us than we could have obtained from unaffiliated third parties.



ITEM
14. PRINCIPAL ACCOUNTING FEES AND SERVICES



The following
table sets forth the aggregate fees billed to us for the fiscal year ended December 31, 2017 by Malone Bailey, LLP, and L&L,
CPAs:





Year
    Ended
    Year
    EndedDecember
    31,
    December
    31,2017
    2016Audit fees(1)
    39,000
    30,000Audit-related fees(2)
    ―
    ―Tax fees(3)
    ―
    5,000All other fees(4)
    ―
    ―

(1)Audit
                                         fees consist of fees billed for professional services rendered for the audit of our annual
                                         financial statements, the review of the interim financial statements included in quarterly
                                         reports and services that are normally provided by Malone Bailey, LLP and L&L, CPAs
                                         in connection with statutory and regulatory filings or engagements, consultations in
                                         connection with acquisitions and issuances of auditor consents and comfort letters in
                                         connection with SEC registration statements and related SEC and non-SEC securities offerings.

(2)Audit-related
                                         fees consist of fees billed for assurance and related services that are reasonably related
                                         to the performance of the audit or review of our consolidated financial statements and
                                         are not reported under “Audit fees.”

(3)Tax
                                         fees consist of fees billed for professional services rendered for tax compliance, tax
                                         advice and tax planning (domestic and international). These services include assistance
                                         regarding federal, state and international tax compliance, acquisitions and international
                                         tax planning.

(4)All
                                         other fees consist of fees for products and services other than the services reported
                                         above.

ITEM
15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES



(a)(1) Financial Statements



The following consolidated
financial statements of American Cannabis Company, Inc. are included in “Item 8. Financial Statements and Supplementary
Data.”



Report of Independent Registered
Public Accounting Firm



Consolidated Balance Sheets



Consolidated Statements of
Operations



Consolidated Statements of
Changes in Stockholders’ Equity (Deficit)



Consolidated Statements of
Cash Flows



Notes to Consolidated Statements



(a)(2) Financial Statement
Schedules



None.





    30
    
    



(a)(3) Exhibits



Exhibit
                                         No
    Exhibit
                                         Title
    Filed
                                         Herewith
    Form
    Filing
                                         Date2
    Plan of Acquisition, Reorganization, Arrangement, Liquidation or Recession
    
    14A
    5/16/20002.1
    Plan of Acquisition, Reorganization, Arrangement, Liquidation or Recession
    
    14c
    4/16/20132.2
    Plan of Acquisition, Reorganization, Arrangement, Liquidation or Recession
    
    14c
    9/09/20143(i)
    Articles
    of Incorporation
    
    SB-2
    10/12/19953(i)(a)
    Amendment to Articles of Incorporation
    
    14A
    5/16/20003(i)(b)
    Amendment to Articles of Incorporation
    
    14c
    4/16/20133(i)(c)
    Amendment to Articles of Incorporation
    
    14c
    9/09/20143(i)(c)
    Amendment to Articles of Incorporation
    
    8-K
    10/3/20143(ii)
    By
    Laws
    
    SB-2
    10/12/199510
    Material Contracts
    
    14c
    9/09/201416
    Letter RE Change in Certifying Public Accountant
    
    8-K
    02/17/201517
    Disclosures on Departures of Directors
    
    8-K
        
        14c
    10/03/2014
        
        9/09/201431.1
    Certification
    of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a)
    X31.2
    Certification
    of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a)
    X32.1
    Certification
    of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.
    X32.2
    Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
    X





* In accordance with Rule 406T
of Regulation S-T, the information in these exhibits is furnished and deemed not filed or part of a registration statement or
prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of
the Exchange Act of 1934, and otherwise is not subject to liability under these sections.





    31
    
    



SIGNATURES



Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.



Date:  December 26, 2018
    AMERICAN CANNABIS COMPANY, INC.By:
    /s/Terry
                                         BuffaloTerry BuffaloPrincipal Executive
    Officer

KNOW ALL
PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Corey Hollister and Jesus M
Quintero and each of them, with full power of substitution and re-substitution and full power to act without the other, as his
or her true and lawful attorney-in-fact and agent to act in his or her name, place and stead and to execute in the name and on
behalf of each person, individually and in each capacity stated below, and to file, any and all documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing, ratifying and confirming all that said attorneys-in-fact and agents
or any of them or their and his or her substitute or substitutes, may lawfully do or cause to be done by virtue thereof.



Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.





Signature
    Title
    Date/S/ Terry
    Buffalo
    Principal Executive Officer and Director
    December 26, 2018Terry Buffalo/S/ Michael
    Schwanbeck
    Principal Financial Officer
    December 26, 2018Michael Schwanbeck/S/ Ellis
    Smith
    Chief Development Officer and Director
    December 26, 2018Ellis Smith/S/ Tad
    Mailander
    Director
    December 26, 2018Tad Mailander





    32