UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-K/A



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|- | ------------------------------------------------------------------------------------
|þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the fiscal year ended December 31, 2015



or



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|- | -------------------------------------------------------------------------------
| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934



For the transition period from ____________ to ____________



Commission File Number: 000-54582



United Cannabis Corporation

(Exact name of registrant as specified in its charter)



|                                                               |                                     
|-------------------------------------------------------------- | ------------------------------------
|Colorado                                                       | 46-5221947                          
|(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification Number)



1600 Broadway, Suite 1600, Denver, Colorado 80202

(Address of principal executive offices)(Zip code)



(303) 386-7104

(Registrants telephone number, including area code)



Securities registered pursuant to Section 12(b) of the Act- None



Securities registered pursuant to Section 12(g) of the Act-Common Stock, no par value



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



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



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 þ  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 files).  Yes þ  No  ̈



Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the 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 definition of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (check one):



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



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



State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrants most recently completed second fiscal quarter:



As of June 30, 2015, based on the last reported closing price of $0.48 for the Companys common stock on the OTC Bulletin Board interdealer quotation system on that date, the aggregate market value of the approximately 6,207,500 shares held by non-affiliates was $2,979,600.



The number of shares outstanding of the registrants common stock, as of April 22, 2016, was 44,988,500.



List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g.,Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933.  The listed documents should be clearly described for identification purposes:



None.







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EXPLANATORY NOTE



The purpose of this amendment is to add certain information to Item 7 of this report.









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Table of Contents to Annual Report on Form 10-K/A

For the Fiscal Year Ended December 31, 2015



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|-------- | ----------------------------------------------------------------------------------------------------------- | -----------
|         |                                                                                                             | Page Number
|         |                                                                                                             |            
|         | PART I                                                                                                      |            
|         |                                                                                                             |            
|ITEM 1.  | BUSINESS                                                                                                    | 1          
|ITEM 1A. | RISK FACTORS                                                                                                | 6          
|ITEM 1B. | UNRESOLVED STAFF COMMENTS                                                                                   | 6          
|ITEM 2.  | PROPERTIES                                                                                                  | 6          
|ITEM 3.  | LEGAL PROCEEDINGS                                                                                           | 6          
|ITEM 4.  | MINE SAFETY DISCLOSURES                                                                                     |            
|         |                                                                                                             |            
|         | PART II                                                                                                     |            
|         |                                                                                                             |            
|ITEM 5.  | MARKET FOR REGISTRANTS COMMON EQUITY RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES | 7          
|ITEM 6.  | SELECTED FINANCIAL DATA                                                                                     | 7          
|ITEM 7.  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                       | 8          
|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                  | 10         
|ITEM 8.  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                                 | 10         
|ITEM 9.  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                        | 10         
|ITEM 9A. | CONTROLS AND PROCEDURES                                                                                     | 10         
|ITEM 9B. | OTHER INFORMATION                                                                                           | 11         
|         |                                                                                                             |            
|         | PART III                                                                                                    |            
|         |                                                                                                             |            
|         |                                                                                                             |            
|ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE                                                      | 12         
|ITEM 11. | EXECUTIVE COMPENSATION                                                                                      | 14         
|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS              | 16         
|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE                                   | 17         
|ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES                                                                      | 18         
|         |                                                                                                             |            
|         | PART IV                                                                                                     |            
|         |                                                                                                             |            
|ITEM 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES                                                                     | 19         









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PART I



FORWARD-LOOKING STATEMENTS



This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The forward-looking statements are only predictions and provide our current expectations or forecasts of future events and financial performance and may be identified by the use of forward-looking terminology, including the terms believes, estimates, anticipates, expects, plans, intends, may, will or should or, in each case, their negative, or other variations or comparable terminology, though the absence of these words does not necessarily mean that a statement is not forward-looking. Forward-looking statements include all matters that are not historical facts and include, without limitation statements concerning: our business strategy, outlook, objectives, future milestones, plans, intentions, goals, and future financial condition, including the period of time for which our existing resources will enable us to fund our operations.



We intend that all forward-looking statements be subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to many risks and uncertainties that could cause actual results to differ materially from any future results expressed or implied by the forward-looking statements. We caution you therefore against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance.



The forward-looking statements contained in this Report or the documents incorporated by reference herein speak only of their respective dates. Factors or events that could cause our actual results to differ may emerge from time to time and it is not possible for us to predict them all. Except to the extent required by applicable laws, rules or regulations, we do not undertake any obligation to publicly update any forward-looking statements or to publicly announce revisions to any of the forward-looking statements, whether as a result of new information, future events or otherwise.



ITEM 1.

BUSINESS.



Background



United Cannabis Corporation ("we", "our", "us", "UCANN", or the Company) a Colorado corporation, was originally formed as a California corporation under the name MySkin, Inc. on November 15, 2007. MySkin was engaged in the business of providing management services to a medical spa in Los Angeles, California which provided various advanced skin care services until March 31, 2014, when this business was sold to the prior President of the Company.



In early 2014 we decided to exit the medical spa management business and change our focus to providing products, services and intellectual property to the cannabis industry.



On March 26, 2014, we entered into a License Agreement with Earnest Blackmon, Tony Verzura and Chad Ruby pursuant to which Messrs. Blackmon, Verzura and Ruby licensed certain intellectual property to us in exchange for 38,690,000 shares of our common stock.



In connection with this transaction:



|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|· | Messrs. Blackmon, Verzura and Ruby licensed to us all of their knowledge and know-how relating to the design and buildout of cultivation facilities, growing/cultivation systems, seed-to-sale protocols and procedures, products, access to a genetic catalogue including over 150 different strains, an advanced (non-psychoactive) cannabinoid sequencing therapy program utilizing patent-pending Prana Bio Nutrient Medicinals called the A.C.T. Now Program (ACT Now or ACT Now Program), security, regulatory compliance, and other methods and processes which relate to the cannabis industry.
|· | The territory for this license is the entire world and the license runs in perpetuity. There are no royalty payments under the License Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|· | Mr. Blackmon was elected as our President, Mr. Ruby was elected as Chief Operating Officer and Mr. Verzura was elected as Vice President.                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|· | A total of 41,690,000 previously outstanding shares of common stock were cancelled resulting in a total of 43,620,000 shares of common stock outstanding on March 26, 2014.                                                                                                                                                                                                                                                                                                                                                                                                                                



Messrs. Blackmon, Verzura and Ruby were appointed to our board of directors effective April 7, 2014.



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In May, 2014 we changed our corporate domicile from California to Colorado and changed our name to United Cannabis Corporation.



Business Overview



We own distinct intellectual property relating to the legalized growth, production, manufacture, marketing, management, utilization and distribution of medical and recreational marijuana and marijuana infused products.  In our first year of operating in the marijuana industry we have entered into three significant agreements with partners outside of Colorado where we have agreed to provide intellectual property and consulting services and in which we have received an equity interest.  These businesses are located in Nevada, Jamaica, and Canada and the three agreements are described below.  We also have formalized strategic relationships with four other businesses in the marijuana industry and a description of these relationships is set forth below.



Our primary goal is to advance the use of phytocannabinoid therapeutics in medicine through research, product development and education. We are dedicated to improving the lives of patients. We provide the intellectual property, patent-pending technology, trusted brands, clinical data, technical training, sales tools and methodologies necessary to assist our clients businesses for success.  Our ACT Now Program utilizes our patent-pending Prana Bio Nutrient Medicinals with a HIPPAA compliant electronic health record (EHR) software that enables physicians to create comprehensive sequencing charts specific to their patients medical aliments. The ACT Now EHR software allows for global monitoring, patient management, and effective cannabinoid therapy protocols.



Our Products



We are focused on creating unique therapeutics for a wide range of diseases that can be utilized by patients globally.



Our Prana Bio Nutrient Medicinal products are designed to help supplement deficiencies related in the endocannabinoid system including pain, neuropathy, arthritis, MS, IBS, autism, seizures, eczema, sleep, anxiety, head trauma, opioid dependency and clinical endocannabinoid deficiencies. The endocannabinoid system is a signaling system within the human body that utilizes hundreds of receptors to help maintain homeostasis between the central nervous system and the immune system.



Our Prana Aromatherapy Transdermal Roll-on line uses a proprietary blend of essential oils infused with cannabinoids designed to provide targeted and large surface relief with combinations of aromatherapy. The transdermal is a part of the complete patent-pending Prana Bio Nutrient Medicinals line, which is offered in 5 categories (P1, P2, P3, P4, P5), with three delivery methods (sublingual, capsules, topical). Dosages range from 1mg to 50mg, are available in both raw or activated formulations, and paired with specific cannabis derived terpene profiles.



Our products are subject to all existing marijuana laws in the United States.



Our short term plan involves licensing the technology associated with our products to companies which are licensed to grow and sell medical marijuana in states where medical marijuana is legal.  As of April 20, 2016 we had signed license agreements with two companies.



Our long term plan is to perform clinical trials on the most promising products in our product line that are currently being manufactured in California. . We intend to perform our phase I clinical trials at the West Indies University in Jamaica.   We will fund the initial clinical trials by licensing our Prana product line to manufacturers in all legal territories in the United States and with revenue received for providing technical, financial and licensing consulting services. After our phase 1 clinical trials are complete, we plan on partnering with companies that have expertise in global pharmaceutical distribution and research for phase II and III clinical trials in the United States.



We work closely with many individuals and businesses in the medical marijuana industry.  Following is a summary of some of the key relationships which have been formalized with an agreement, letter of intent or memorandum of understanding.





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WeedMD (Canada)



On May 28, 2014, we signed a binding letter agreement with WeedMD RX Inc. (WeedMD), a private Canadian corporation, regarding the establishment of a strategic partnership with respect to growing, producing and selling medical marijuana in Canada.  WeedMD is a medical marijuana company which has secured pre-license approval from Health Canada to produce and distribute 2,500 kg of medical marijuana from its 25,000 square foot facility in Aylmer, Ontario.  In the letter agreement, we granted to WeedMD a royalty free license to use all of our intellectual property including our knowledge and know-how relating to the design and buildout of cultivation facilities, our catalogue of different strains of marijuana, our ACT Now Program, our growing expertise and other methods and processes which relate to the medical cannabis industry.  WeedMD plans to use our intellectual property and our consulting services in connection with their project in Aylmer and any other projects in Canada.  They have received the security approval from Health Canada for the Aylmer project and they are moving toward obtaining a cultivation license.



In consideration for the license to use our intellectual property and our consulting services, WeedMD issued us 1,187,500 shares of its common stock which represents approximately 3.6% of their shares outstanding and WeedMD issued to us warrants to purchase 3 million shares of common stock at an exercise price of CAD $.50 per share, however, these warrants expired on December 9, 2014.



On July 7, 2014, we borrowed $175,000 from WeedMD.  The loan was due and payable on demand.  On March 31, 2016, an unrelated third party agreed to assume all of our obligations pursuant to the loan in consideration for the transfer by us of 1,100,000 shares of the common stock of WeedMD to the unrelated third party.  WeedMD consented to the assumption of the loan and released us from any further liability with respect to the loan.



Harborside Health Center



Founded in 2006 by Steve DeAngelo, Harborside Health Center one of the largest medical cannabis dispensaries in the United States. Harborside has over 200,000 registered patients and was first in the nation to support education for seniors, veterans and families with severely ill children; first in the country to offer CBD-rich medicine; and the first to treat children with Dravet syndrome. Harborside continues to set an example of diversity and compliance, and is one of the prime advocates of diversity, sustainability and economic justice in the industry.



In November 2015 we granted Harborside the exclusive license to use our intellectual property and utility patent for the manufacture of our entire Prana Bio Nutrient Medicinal line, as well as affiliated Bubbleman products in California.



Westside Enterprises, LLC



On March 15, 2016 we signed a licensing agreement with Westside Enterprises LLC for the production and distribution of our Prana Bio Nutrient Medicinals products in Oregon.



Under the agreement, Westside has the exclusive license to use our intellectual property and our pending utility patent for the manufacture and sale of our entire Prana Bio Nutrient Medicinal line in Oregon.



Westside was established in 2015 in Eugene, Oregon to service the newly created recreational cannabis industry and to continue to serve the needs of the Oregon medical cannabis industry.  The Westside master grower has been growing and supplying cannabis for the Oregon medical community since 1999, drawing on 30 years of cultivation experience.



Jason Emo and Emotek



Jason Emo, located in Denver, Colorado, has created the first Colorado state approved hydrocarbon extraction machine.  Jason Emo produces hydrocarbon extraction machines for commercial production and he has also developed premium brands of cannabis products including Live Resin, Live Resin Shatter, Live Terp Resin, and CBD-Rich Food Grade Oil.



On June 20, 2014, we entered into a Production and Placement Agreement with Emotek LLC (Emotek) an entity controlled by Jason Emo, in which we agreed to help Emotek find licensed and permitted facilities with access to raw cannabis materials whereby Emotek could produce and distribute their products.  We also agreed to help build Emoteks brands and promote the use of Emotek equipment.  In return, Emotek agreed to pay us ongoing licensing and consulting fees.





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DNA Genetics



DNA Holding, LLC, (dba DNA Genetics) (DNA) headquartered in Amsterdam, is a company that possesses the capabilities, technical knowledge and owns or controls proprietary processes for creating certain products and strains from various parts of the cannabis plant, and also owns or controls the trademark DNA Genetics, the brand Reserva Pravda and other proprietary information and intellectual property.



On October 17, 2014, we signed a Licensing and Exclusive Distribution Agreement with DNA which gives us the right to serve as the exclusive agent for the marketing, production and distribution of DNA products in Colorado.  We will seek to procure contracts on behalf of DNA with cannabis retail locations and/or producers and distributors for the production, distribution and sale of DNA products through their designated retail locations and/or producers and distributors in exchange for licensing and consulting fees from DNA.



Marcus Richardson - Bubbleman



Bubbleman processes raw cannabis plant for industrial growers using its proprietary and patented processing technologies. Bubblemans methodologies utilize water, ice and dry-sifting to process plants, to ensure a pure resin end-product. Bubbleman markets the Original Bubble Bag filtration system for consumers. Mr. Richardson is the Chief Technology Officer of Cannabis Research and Development Limited, United Cannabis Corporations Jamaican-based business partner.



On September 1st 2015 we entered into a consulting and licensing Agreement with Marcus Richardson (Bubbleman) an individual that owns the Bubbleman brand of products, in which we agreed to help Bubbleman find licensed and permitted facilities with access to raw cannabis materials whereby they could produce and distribute their products.  We also agreed to help build Bubbleman brands and promote the use of Bubbleman equipment.  In return, Bubbleman agreed to pay us ongoing licensing and consulting fees.



Blue River Extracts



Blue River Extracts, headquartered in Colorado, provides a full spectrum of aromatherapy and essential oil profiles which are derived naturally from specific plant based cultivars utilizing a proprietary chemical-free process.  Terpenes are produced by countless plant species, prevalent in fruits, vegetables, herbs, spices, and other botanicals. Terpenes are also common ingredients in the human diet and have generally been recognized as safe to consume by the US Food and Drug Administration



On January 1, 2016, we granted a license to Blue River for the right to use our pending global utility patent for the use of terpenes as a diluent in aromatherapy, vaporization, essential oils, edibles, aerosols, and for product branding purposes.  We earn a fixed fee for the license, which expires on December 31, 2020. Earnest Blackmon and Tony Verzura, two of our officers and directors, are the principal owners of Blue River.



ACT Now Program



One of our primary goals is to advance the use of cannabinoids in medicine through research, product development and education.  Our intellectual property includes our ACT Now Program which is a comprehensive full spectrum cannabinoid therapy guide that utilizes the entire cannabis plant by controlling specific cannabinoid ratios, accurate dosing and multiple non-invasive delivery methods.  Our ACT Now Program offers a wide range of affordable patient driven programs with limitless combinations of cannabinoid-based products and nutritional recommendations to assist patients suffering from chronic pain, opiate dependency, inflammation, glaucoma, PTSD, neuropathy, multiple sclerosis, fibromyalgia, Crohns, IBS, seizures, epilepsy, paralysis, autoimmune, autism, tumors, HIV/AIDS and many types of cancer.



We own certain proprietary formulations, processes and other intellectual property which can be used to produce our Prana Bio Nutrient Medicinals in connection with our ACT Now Program.  These products, which are made with unique combinations of pharmaceutically active cannabinoids, provide a comprehensive solution designed to enable physicians and patients to design, implement and monitor effective therapy protocols.





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Competition



Currently, we are primarily engaged in the business of providing consulting and advisory services and licensing our intellectual property to businesses or persons who are already in the marijuana business or who desire to enter the business.  There are a large number of other public and private companies which compete with us in this area.  These competitors include MedBox, Inc., Advanced Cannabis Solutions, Inc., Growlife, Inc., Terra Tech Corp., American Cannabis Company, Americann, Inc. and Monarch America, Inc. (formerly Cannabis Kinetics, Inc.).  We believe that our principal competitive advantages are the reputations and experience of our principals in the industry.



The recent growth in the industry, particularly in Colorado, has attracted many businesses trying to enter the market.  Some of our competitors have greater capital resources and facilities which may enable them to compete more effectively in this market.  Due to this competition, there is no assurance that we will not encounter difficulties in generating revenues.  If we are unable to successfully compete with existing companies and new entrants to the market, this will have a negative impact on our business and financial condition.



Government Regulation



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



A Schedule I controlled substance is defined as a substance that has no currently accepted medical use in the United States, a lack of safety for use under medical supervision and a high potential for abuse.  The Department of Justice defines Schedule 1 controlled substances as the most dangerous drugs of all the drug schedules with potentially severe psychological or physical dependence.  If the federal government decides to enforce the Controlled Substances Act in Colorado with respect to marijuana, persons that are charged with distributing, possessing with intent to distribute, or growing marijuana could be subject to fines and terms of imprisonment, the maximum being life imprisonment and a $50 million fine.



As of March 21, 2016, 23 states and the District of Columbia allow their citizens to use Medical Marijuana.  Additionally, voters in the states of Colorado, Washington, Alaska, Oregon and the District of Columbia approved ballot measures to legalize cannabis for recreational use by adults.  The state laws are in conflict with the federal Controlled Substances Act, which makes marijuana use and possession illegal on a national level. The Obama administration has effectively stated that it is not an efficient use of resources to direct federal law enforcement agencies to prosecute those lawfully abiding by state-designated laws allowing the use and distribution of medical marijuana.   However, there is no guarantee that the administration will not change its stated policy regarding the low-priority enforcement of such federal laws. Additionally, any new administration that follows could change this policy and decide to enforce the federal laws strongly.  Any such change in the federal governments enforcement of current federal laws could cause significant financial damage to us and our shareholders.  While we do not intend to harvest, distribute or sell cannabis, we may be irreparably harmed by a change in enforcement by the federal or state governments or the enactment of new and more restrictive laws.



We are subject to federal, state, and local environmental laws and regulations, as well as the environmental laws and regulations of the foreign federal and local jurisdictions in which we have operations. We believe we are in material compliance with all such laws and regulations.



Compliance with federal, state, and local laws and regulations has not had, and is not expected to have, an adverse effect on our capital expenditures, competitive position, financial condition, or results of operations.



Intellectual Property



Our intellectual property includes our managements knowledge and know-how relating to the legalized growth, production, manufacture, marketing, management, utilization and distribution of medical and recreational marijuana and marijuana infused products.  It also includes a genetic catalogue including over 150 different strains of marijuana, and an advanced cannabinoid therapy program called A.C.T. Now.



We have also filed for utility patents related to the unique combinations of pharmaceutically active cannabinoids used to alleviate disorders of the nervous system, immune system and cancer with the U.S. Patent and Trademark office.





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Employees



As of December 31, 2015, we had a total of three employees. There is no union representation of our employees, and we have never experienced an involuntary work stoppage. We believe that our continued success depends, in part, on our ability to attract and retain qualified personnel. We consider our relations with our employees to be good.



Effect of Environmental Laws



We are subject to federal, state, and local environmental laws and regulations, as well as the environmental laws and regulations of the foreign federal and local jurisdictions in which we have operations. We believe we are in material compliance with all such laws and regulations.



Compliance with federal, state, and local laws and regulations has not had, and is not expected to have, an adverse effect on our capital expenditures, competitive position, financial condition, or results of operations.



Website Access



Our website address is www.unitedcannabis.us. We make available, free of charge on our website, our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to these reports as soon as reasonably practicable after filing such reports with, or furnishing them to, the Securities and Exchange Commission (SEC). Such reports are also available at www.sec.gov. Information contained on our website is not incorporated by reference in, or otherwise part of, this Annual Report on Form 10-K or any of our other filings with the SEC.



ITEM 1A.

RISK FACTORS.



As a smaller reporting company we are not required to provide the information required by this Item 1A.



ITEM 1B.

UNRESOLVED STAFF COMMENTS.



None.



ITEM 2.

PROPERTIES.



In May 2014 we entered into a month-to-month office lease agreement at 1600 Broadway, Suite 1600, Denver, Colorado 80202 with a lease payment of $269 per month. Our phone number is (303) 386-7104. We believe that this space will be sufficient for our initial needs, although as funding and revenues become available, and our operations grow, we anticipate finding other office space as needed.



ITEM 3.

LEGAL PROCEEDINGS.



We are not aware of any pending or threatened legal actions to which we are a party or of which our property is the subject that would, if determined adversely to us, have a material adverse effect on our business and operations.



We have from time to time been involved in disputes and proceedings arising in the ordinary course of business. In addition, as a public company, we are also potentially susceptible to litigation, such as claims asserting violations of securities laws. Any such claims, with or without merit, if not resolved, could be time-consuming and result in costly litigation. There can be no assurance that an adverse result in any future proceeding would not have a potentially material adverse effect on our business, results of operations or financial condition.



ITEM 4.

MINE SAFETY DISCLOSURES.



Not applicable.





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PART II



ITEM 5.

MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.



Market Information



Our common stock is quoted on the OTC Markets Group, Inc.s OTCBB tier under the symbol CNABE. The following is a summary of the high and low sales prices of our common stock for the periods indicated, as reported by the OTC Markets Group, Inc. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions and may not necessarily represent actual transactions.



|                             |  |      |       |  |     |   |      | 
|---------------------------- |  | ---- | ----- |  | --- | - | ---- | 
|                             |  | High |       |  | Low |  
|Year ended December 31, 2014 |  |      |       |  |     |   |      | 
|First Quarter                |  | $    | 10.00 |  |     | $ | 0.05 | 
|Second Quarter               |  | $    | 11.45 |  |     | $ | 0.75 | 
|Third Quarter                |  | $    | 4.25  |  |     | $ | 0.85 | 
|Fourth Quarter               |  | $    | 1.06  |  |     | $ | 0.36 | 
|                             |  |      |       |  |     |   |      | 
|Year ended December 31, 2015 |  |      |       |  |     |   |      | 
|First Quarter                |  | $    | 2.00  |  |     | $ | 0.56 | 
|Second Quarter               |  | $    | 1.09  |  |     | $ | 0.41 | 
|Third Quarter                |  | $    | 0.55  |  |     | $ | 0.27 | 
|Fourth Quarter               |  | $    | 0.43  |  |     | $ | 0.12 | 
|                             |  |      |       |  |     |   |      | 
|Year ended December 31, 2016 |  |      |       |  |     |   |      | 
|First Quarter                |  | $    | 0.79  |  |     | $ | 0.16 | 



The share prices above reflect our four-for-one stock split effective March 21, 2014.



On April 22, 2016, the closing sales price on the OTC Markets Group, Inc.s OTCBB tier for our common stock was $0.38.



Stockholders



As of April 22, 2016, we had approximately 57 shareholders of record and 44,988,500 shares of common stock outstanding.



Dividends



We have not declared or paid any cash dividends on our capital stock in our history as a public company. We currently intend to retain all future earnings to finance our business and do not anticipate paying cash or other dividends on our common stock in the foreseeable future.



Transfer Agent



Our transfer agent is Issuer Direct Corporation located at 500 Perimeter Park Drive, Morrisville, NC 27560 Tel: 919-481-4000.



Purchases of Equity Securities by the Issuer and Affiliated Purchasers



None.



ITEM 6.

SELECTED FINANCIAL DATA.



Not applicable.





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ITEM 7.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.



Certain statements set forth below under this caption constitute forward-looking statements. See Forward-Looking Statements preceding Item 1 of this Annual Report on Form 10-K for additional factors relating to such statements.



You should read the following discussion and analysis of financial condition and results of operations in conjunction with the consolidated financial statements and related notes appearing elsewhere in this Report.



Overview



We were originally formed as a California corporation under the name MySkin, Inc. on November 15, 2007. MySkin was engaged in the business of providing management services to a medical spa in Los Angeles, California which provided various advanced skin care services until March 31, 2014, when this business was sold to the prior President of the Company.



Following this sale, we changed our focus to providing products, services and intellectual property to the cannabis industry.



Results of Operations



The Year Ended December 31, 2015 Compared to the Year Ended December 31, 2014



Revenues and Cost of Revenues



Revenue increased by approximately $376,000 during the year ended December 31, 2015. This increase in revenue was due to an increase in the recognition of deferred revenue for consulting services of approximately $30,000, the sale of oil extractions in the amount of approximately $190,000, and an increase in licensing fees of approximately $156,000. Gross profit, as a percentage of total revenue, was 73% for the year ended December 31, 2015 as compared to 96% for the year ended December 31, 2014.



Sales and Marketing Expenses



Sales and marketing expenses were 17,100 and $101,962 the years ended December 31, 2015 and 2014, respectively. The decrease in sales and marking expenses was due to our focus on serving existing customers during the year ended December 31, 2015 as compared to our sales and marketing efforts applicable to new products and services throughout the year ended December 31.



Research and Development Expenses



Research and development expenses (R&D) were $329 and $182,601 for the years ended December 31, 2015 and 2014, respectively. The decrease in R&D was due to our focus on sales of existing products and services throughout the year ended December 31, 2015 as compared to our R&D efforts applicable to new products and services during the twelve months ended December 31. 2014.

General and Administrative Expenses



General and administrative expenses (G&A) were $1,816,804 and $1,709,040 for the years ended December 31, 2015 and 2014, respectively. The increase in general and administrative expenses was due for the most part to an increase in personnel costs for the year ended December 31, 2015 as compared to the same period for 2014.



Other Nonoperating Expense, net



Our other nonoperating expense of was $1,461, 566 and $595,390, net, for the years ended December 31, 2015 and 2014, respectively. The increase is due for the most part to the (i) $734,967 increase in the loss on the extinguishment of debt and repurchase of warrants incurred in connection with the issue and of 612,000 warrants to Typenex in connection with a warrant settlement agreement, (ii) $90,900 increase in the recognition of the net loss in our equity investment in the unconsolidated affiliate, CRD, and (ii) an increase in the loss on investment in non-marketable equity securities of $88,475.





8



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Discontinued Operations



On March 31, 2014, we sold all right, title and interest in the tangible and intangible assets, trademarks, customer lists, intellectual property and rights, which we owned and were related to our advanced skin care business. The assets were sold to MySkin Services, Inc. (MTA), a business partly owned by Ms. Stoppenhagen in exchange for a $15,000 payable we owed to Ms. Stoppenhagen and/or MTA.  In addition, MTA assumed all costs associated with these assets starting on March 31, 2014.



The following details our income (loss) from discontinued operations:



|                                                                |  |                          |   |  |      |   |         |  
|--------------------------------------------------------------- |  | ------------------------ | - |  | ---- | - | ------- | -
|                                                                |  | Years Ended December 31, |  
|                                                                |  | 2015                     |   |  | 2014 |  
|                                                                |  |                          |   |  |      |  
|Revenues                                                        |  | $                        |  |  |      | $ | 20,684  |  
|                                                                |  |                          |   |  |      |   |         |  
|Operating expenses:                                             |  |                          |   |  |      |   |         |  
|Selling, general and administrative                             |  |                          |  |  |      |   | 63,878  |  
|Depreciation                                                    |  |                          |  |  |      |   |        |  
|Loss on disposal of assets                                      |  |                          |  |  |      |   | 15,704  |  
|Total operating expenses                                        |  |                          |  |  |      |   | 79,576  |  
|                                                                |  |                          |   |  |      |   |         |  
|Income (loss) from discontinued operations, before income taxes |  |                          |  |  |      |   | (58,892 | )
|Provision for income taxes                                      |  |                          |  |  |      |   |        |  
|                                                                |  |                          |   |  |      |   |         |  
|Income (loss) from discontinued operations, net of income taxes |  | $                        |  |  |      | $ | (58,892 | )



The factors that will most significantly affect future operating results will be:



·

Regulatory changes to different territories in the United States

·

Political party influence and what party(s) will gain control of the United States.

·

Rescheduling of Cannabis by the DEA or congress.



Other than the foregoing we do not know of any trends, events or uncertainties that have had, or are reasonably expected to have, a material impact on our revenues or expenses.



Capital Resources and Liquidity

Our consolidated financial statements have been prepared on a going concern basis which assumes we will be able to realize our assets and discharge our liabilities in the normal course of business for the foreseeable future. During the year ended December 31, 2015 we incurred losses of $2,883,362 and used cash in operating activities of $525,148, respectively, compared to $2,468,364 of losses and $1,189,057 of cash used in our operating activities for the year ended December 31, 2014. At December 31, 2015 and 2014, we had a working capital deficit of $2,410,679 and $1,304,209, respectively, and an accumulated deficit of $5,508,329 at December 31, 2015.  Our ability to continue as a going concern is dependent upon our ability to generate profitable operations in the future and, or, obtaining the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. There is no assurance that these events will be satisfactorily completed.



Net cash used in operating activities for the years ended December 31, 2015 and 2014, was $525,148 and $1,189,057 respectively. This $663,909 decrease was primarily due to positive impacts to our operating cash flows resulting from an increase in sales and the resultant impact on gross profits and decreases in marketing and R&D expenses during the twelve months ended December 31, 2015 as compared to the same period in 2014.



Net cash used in investing activities for the years ended December 31, 2015 and 2014 was $17,685 and $52,309, respectively. This decrease was due to $14,385 of payments applicable to our trademarks and provisional patents during the twelve months ended December 31, 2015 compared to our $50,000 cash equity investment in Lone Mountain during the year ended December 31, 2014.



9



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Net cash provided by financing activities for the years ended December 31, 2015 and 2014 was $339,900 and $1,530,305 respectively. The decrease was primarily due to $900,000 from the sale of our common stock in 2014 compared to $0.0 during 2015, net of $339,900 of net proceeds from the issuance of convertible debt and warrants during the year ended December 31, 2015.



On December 18, 2014, we borrowed $600,000 from Slainte Ventures, LLC, an unrelated third party.  The loan was evidenced by an unsecured promissory note bearing interest at 12%.  In October 2015, we borrowed funds from a third party and did not apply the borrowed funds to the Slainte note resulting in a default under the terms of the note.  On March 16, 2016, we entered into an agreement with Slainte whereby Slainte waived default, and extended the maturity date of note until December 17, 2016. Slainte also agreed to accept a warrant in lieu of interest due on the loan.  See Note 20 to the financial statements included as part of this report for information concerning the terms of the warrant.



During the next 12 months, we anticipate that we will incur a minimum of $1.750 million of general and administrative expenses in order to execute our current business plans. We also plan to incur significant sales, marketing, research and development expenses during the next 12 months. We must obtain additional financing to continue our operations. We may not be able to obtain additional funding on terms that are favorable to us or at all. We may not be able to obtain sufficient funding to continue our operations, or if we do receive funding, to generate adequate revenues in the future or to operate profitably in the future. These conditions raise substantial doubt about our ability to continue as a going concern.



ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.



Not applicable.



ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.



See the consolidated financial statements and accompanying notes included with this Report.



ITEM 9.

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



On September July 22, 2014,  the board of directors dismissed Anton & Chia, LLP (Anton) as our independent registered public accounting firm and we appointed Cutler & Co., LLC (Cutler) as our new independent registered public accounting firm.



On November 10, 2015, Cutler & Co. resigned as our independent registered public accounting firm since Cutler merged its SEC auditing practice with Pritchett, Siler & Hardy, PC. On November 10, 2015, we engaged Pritchett, Siler & Hardy, P.C. as our new independent registered public accounting firm.



On March 23, 2016, we dismissed Pritchett as our independent registered public accounting firm.  Between November 10, 2015 and March 23, 2016 Pritchett did not perform an audit on our financial statements.



On March 18, 2016, we engaged BF Borgers CPA PC as our independent registered public accounting firm.



There were no disagreements with Anton, Cutler or Pritchett in respect of accounting and financial disclosure.



ITEM 9A.

CONTROLS AND PROCEDURES.



Disclosure Controls and Procedures



Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Securities Exchange Act is recorded, processed, summarized and reported, within the time period specified in the SEC rules and forms, and that such information is accumulated and communicated to management, including our CEO and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. Our management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management's control objectives.



Our management, with the participation of our CEO, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Annual Report. Based upon this evaluation, our CEO concluded that our disclosure controls and procedures were not effective as of December 31, 2015, because of the identification of a material weakness in our internal control over financial reporting which is described below. We intend to continue to review and document our disclosure controls and procedures, including our internal controls over financial reporting, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.





10



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Managements Report on Internal Control Over Financial Reporting



Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Rule 13a-15(f). Our internal control over financial reporting is a process designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with U.S. GAAP.



Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with  U.S. GAAP and our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our consolidated financial statements.



Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2015. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in their Internal Control-Integrated Framework. Based on this evaluation, our management concluded that that our internal control over financial reporting was not effective as of December 31, 2015.



Our CEO concluded we have a material weakness due to: (i) lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (ii) inadequate segregation of duties consistent with control objectives; and (iii) ineffective controls over period end financial disclosure and reporting processes. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.



While we strive to segregate duties as much as practicable, there is an insufficient volume of transactions at this point in time to justify additional full time staff. We believe that this is typical in many start-up companies. We may not be able to fully remediate our material weaknesses until we increase our operations at which time we would expect to hire more staff and consider increasing the number of directors on our board. We will continue to monitor and assess the costs and benefits of additional staffing. We have increased services and related staffing through our business and financial consulting contractor to remedy existing internal control and disclosure control deficiencies.



While we have not yet remediated these material weaknesses, we will continue our remediation efforts during fiscal 2016.



Notwithstanding the identified material weaknesses, our management believes the consolidated financial statements included in this Annual Report on Form 10-K fairly represent in all material respects our financial condition, results of operations and cash flows at and for the periods presented in accordance with U.S. GAAP.



This Annual Report does not include an attestation report of our 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 the SEC rules that permit us to provide only management's report in this Annual Report.



Changes in Internal Control Over Financial Reporting



There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2015, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



Limitations on Controls and Procedures



Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention of overriding controls. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.



ITEM 9B.

OTHER INFORMATION.



None.





11



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PART III



ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.



Our executive officers and directors are listed below. Directors are generally elected at our annual shareholders meeting and hold office until the next annual shareholders meeting, or until their successors are elected and qualified.  Our executive officers are elected by our directors and serve at the boards discretion.



|                 |  |     |  |                                                                        
|---------------- |  | --- |  | -----------------------------------------------------------------------
|Name             |  | Age |  | Positions                                                              
|Earnest Blackmon |  | 44  |  | CEO, President, principal financial and accounting officer and director
|Chad Ruby        |  | 40  |  | Chief Operating Officer, Secretary, Treasurer and director             
|Tony Verzura     |  | 38  |  | Vice President, Chief Technical Officer and director                   



The following is a brief summary of the background of each officer and director including their principal occupation during the five preceding years. Neither of these persons is a financial expert as that term is defined by the SEC. All directors will serve until their successors are elected and qualified or until they are removed.



Earnest Blackmon has been a director since April 2014. He was elected President in March 2014 and was elected CEO and principal financial officer in June 2014.  Mr. Blackmon is also the President and owner of Blue River Inc., a company under common control that is engaged in creating and retailing aroma therapy products in Denver, Colorado since February 2015.. He has served as the master grower and Chief Technical Officer/Member of RiverRock LLC, a company that was under common control that is engaged in growing and selling medical and recreational marijuana in Denver, Colorado, from November of 2009 to July 2015. He served as the Chief Operating Officer/Owner of Sweet Lawn and Landscaping in Tampa, Florida from January of 2004 to June of 2008 and from July 2008 until October 2009 he consulted with several collectives in California on their cultivation methods.  Mr. Blackmon attended Johns Hopkins University from 1991 to 1992.  We believe that his 20 years of experience in the commercial horticulture industry and more specifically in growing marijuana and his six years in the cannabis industry enable him to make valuable contributions to our board of directors.



Chad Ruby has been a director since April 2014. He was elected Chief Operating Officer in March 2014 and was elected Secretary and Treasurer in August 2014.  He has been a portfolio manager, real estate broker and appraiser for the last 13 years.  He started with Hudson Appraisals, Inc. in 2002 and became a partner and Chief Operating Officer in February of 2005, and he resigned as Chief Operating Officer in June of 2008.  Mr. Ruby was employed by NRT REO Experts, LLC, Orlando, Florida, as a portfolio manager from June of 2008 until April 2014.  During 2013 and 2014 he was a part-time consultant for RiverRock LLC, a company that was under common control that is engaged in growing and selling medical and recreational marijuana in Denver, Colorado.  Mr. Ruby graduated from the University of Central Florida in 2010 with a B.S. in Finance.  We believe that Mr. Rubys 13 years of real estate and business experience combined with his college degree in finance and his consulting experience with RiverRock LLC qualify him to serve as a member of our board of directors.



Tony Verzura has been a director since April 2014. He was elected Vice President and Chief Technical Officer in March 2014.  Mr. Verzura is also the Vice President and owner of Blue River Inc., a company under common control that is engaged in creating and retailing aroma therapy products in Denver, Colorado since February 2015.  He has served as the patient care facilitator and Chief Operating Officer for RiverRock LLC, a company that was under common control that is engaged in growing and selling medical and recreational marijuana in Denver, Colorado, from November of 2009 to July 2015. He worked as an independent contractor from January of 2004 to June of 2009.  Mr. Verzura attended Florida International University from 1999 to 2003.  We believe that Mr. Verzuras six years of experience as Chief Operating Officer of RiverRock LLC enables him to make valuable contributions to our board of directors.



None of the directors are independent directors as that term is defined in Section 803 of the NYSE MKT Company Guide.



Employment Agreements



We currently do not have any employment agreements with any of our directors or executive officers.



Significant Employees



None.



12



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Family Relationships



None.



Involvement in Certain Legal Proceedings



To our knowledge, our directors and executive officers have not been involved in any of the following events during the past ten years:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | Any bankruptcy petition filed by or against such person or any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;                                                                                                                                                                                                                                                   
| | · | Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);                                                                                                                                                                                                                                                                                                                     
| | · | Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting his involvement in any type of business, securities or banking activities or to be associated with any person practicing in banking or securities activities;                                                                                            
| | · | Being found by a court of competent jurisdiction in a civil action, the SEC or the Commodity Futures Trading Commission to have violated a Federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;                                                                                                                                                                                                              
| | · | Being subject of, or a party to, any Federal or state judicial or administrative order, judgment decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of any Federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
| | · | Being subject of or party to any sanction or order, not subsequently reversed, suspended, or vacated, of any self-regulatory organization, any registered entity or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.                                                                                                                                                 



Section 16(a) Beneficial Ownership Reporting Compliance



Section 16(a) of the Securities Exchange Act of 1934 requires that our executive officers and directors, and persons who own more than ten percent of a registered class of our equity securities, file reports of ownership and changes in ownership with the SEC. Executive officers, directors and greater-than-ten percent stockholders are required by SEC regulations to furnish us with all Section 16(a) forms they file. Specific due dates for these reports have been established and we are required to report in this Report any failure to file by these dates.  Based solely on our review of the copies of the forms received by us and written representations from certain reporting persons that they have complied with the relevant filing requirements, we believe that, during the year ended December 31, 2015, all of our executive officers, directors and greater-than-ten percent stockholders complied with all Section 16(a) filing requirements.



Code of Ethics



We have adopted a code of ethics that applies to our principal executive officers, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of our code of ethics may be obtained free of charge by contacting us at the address or telephone number listed on the cover page hereof.



Stockholder Communications



Our board has determined not to adopt a formal methodology for communications from stockholders on the belief that any communication would be brought to the boards attention by each of our executive officers.



Audit Committee and Audit Committee Financial Expert



We do not currently have an audit committee or a committee performing similar functions. Our board as a whole participates in the review of financial statements and disclosure. We also do not have an audit committee financial expert.



13



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ITEM 11.

EXECUTIVE COMPENSATION.



Summary Compensation Table



As a smaller reporting company, we are required to disclose for fiscal years 2015 and 2014 the executive compensation of our Named Executive Officers, which consist of the following individuals: (i) any individual serving as our principal executive officer or acting in a similar capacity; (ii) our two other most highly compensated executive officers serving as executive officers at the end of the most recently completed fiscal year; and (iii) any additional individuals for whom disclosure would have been provided but for the fact the individual was not serving as an executive officer at the end of our most recently completed fiscal year.



The following Summary Compensation Table sets forth for fiscal 2015 and 2014, the compensation awarded to, paid to, or earned by our Named Executive Officers.



|                                                               |  |      |  |            |         |  |                       |  |         |                            |  |  |           |  |  |  |         | 
|-------------------------------------------------------------- |  | ---- |  | ---------- | ------- |  | --------------------- |  | ------- | -------------------------- |  |  | --------- |  |  |  | ------- | 
|Name and Principal Position                                    |  | Year |  | Salary
($) |         |  | Option Awards
($) (4) |  |         | All other
Compensation
($) |  |  | Total
($) | 
|                                                               |  |      |  |            |         |  |                       |  |         |                            |  |  |           | 
|Ernie Blackmon                                                 |  | 2015 |  |            | 173,854 |  |                       |  | 139,207 |                            |  |  |          |  |  |  | 313,140 | 
|CEO, President, principal financial officer and director (1)   |  | 2014 |  |            | 97,486  |  |                       |  | 139,221 |                            |  |  | 38,076    |  |  |  | 274,783 | 
|                                                               |  |      |  |            |         |  |                       |  |         |                            |  |  |           |  |  |  |         | 
|Chad Ruby                                                      |  | 2015 |  |            | 173,933 |  |                       |  | 139,207 |                            |  |  |           |  |  |  | 313,140 | 
|Chief Operating Officer, Secretary, Treasurer and director (2) |  | 2014 |  |            | 97,877  |  |                       |  | 139,221 |                            |  |  | 28,954    |  |  |  | 266,052 | 
|                                                               |  |      |  |            |         |  |                       |  |         |                            |  |  |           |  |  |  |         | 
|Tony Verzura                                                   |  | 2015 |  |            | 173,854 |  |                       |  | 139,207 |                            |  |  |           |  |  |  | 313,140 | 
|Vice President, Chief Technical Officer and director (3)       |  | 2014 |  |            | 96,350  |  |                       |  | 139,221 |                            |  |  | 31,742    |  |  |  | 267,313 | 



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Mr. Blackmon was elected as our President on March 26, 2014, he was elected as our CEO on June 24, 2014, and he has served as our principal financial officer since June 24, 2014. Mr. Blackmon was appointed as a director effective April 7, 2014.

Mr. Blackmons salary for the year ended December 31, 2015, was $173,854 (of which $69,604 was forgone by Mr. Blackmon and paid for with 350,000 stock options valued at $69,604) and during fiscal 2015 he earned stock option awards with a grant date fair value of $139,207 as more fully described in footnote (4).

Mr. Blackmons salary for the period May 16, 2014 through December 31, 2014, was $97,486 and during fiscal 2014 he earned stock option awards with a grant date fair value of $139,221 as more fully described in footnote (4). Mr. Blackmon also received $38,076 for services that he provided as an independent contractor during the period March 1, 2014 through May 15, 2014.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Mr. Ruby was elected as our Chief Operating Officer on March 26, 2014, he was elected Secretary and Treasurer on August 15, 2014, and he was appointed as a director on April 7, 2014.

Mr. Rubys salary for the year ended December 31, 2015, was $173,933 (of which $55,683 was forgone by Mr. Ruby and paid for with 280,000 stock options valued at $55,683) and during fiscal 2015 he earned stock option awards with a grant date fair value of $139,207 as more fully described in footnote (4).

Mr. Rubys salary for the period May 16, 2014 through December 31, 2014, was $97,877 and during fiscal 2014 he earned stock option awards with a grant date fair value of $139,221 as more fully described in footnote (4). Mr. Ruby also received $28,954 for services that he provided as an independent contractor during the period March 1, 2014 through May 15, 2014.





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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | Mr. Verzura was elected as our Vice President and Chief Technical Officer on March 26, 2014, and was appointed as a director effective April 7, 2014.

Mr. Verzuras salary for the year ended December 31, 2015, was $173,854 (of which $69,604 was forgone by Mr. Verzura and paid for with 350,000 stock options valued at $69,604) and during fiscal 2015 he earned stock option awards with a grant date fair value of $139,207 as more fully described in footnote (4).

Mr. Verzuras salary for the period May 16, 2014 through December 31, 2014, was $96,350 and during fiscal 2014 he earned stock option awards with a grant date fair value of $139,221 as more fully described in footnote (4). Mr. Verzura also received $31,742 for services that he provided as an independent contractor during the period March 1, 2014 through May 15, 2014.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | On November 20, 2014, our board of directors approved our 2014 Stock Incentive Plan (the Plan). The Plan provides officers, directors, selected employees and outside consultants an opportunity to acquire or increase a direct ownership interest in our operations and future success.

During fiscal 2015, Messrs. Blackmon, Verzura and Ruby each earned 700,000 stock options under the Plan. The options were granted on January 15, 2016, were fully vested at the time of grant and gave the option holder the right to purchase shares of our common stock at $0.20 per share during the ten year term. As more fully described in Footnote 20 to our consolidated financial statements included in Item 8 of this Report, we recognized the grant date fair value of approximately $0.20 per share as share-based compensation expense in fiscal 2015.

On January 3, 2016, Messrs. Blackmon and Verzura each agreed to forego $70,000 of 2015 salary in lieu of 350,000 stock options each under the Plan and Mr. Ruby agreed to forego $56,000 of 2015 salary in lieu of 280,000 stock options under the Plan. The options were granted on January 15, 2016, were fully vested at the time of grant and gave the option holder the right to purchase shares of our common stock at $0.20 per share during the ten year term. As more fully described in Footnote 20 to our consolidated financial statements included in Item 8 of this Report, we recognized the grant date fair value of approximately $0.20 per share as share-based compensation expense in fiscal 2015.

During fiscal 2014, Messrs. Blackmon, Verzura and Ruby each earned 200,000 stock options under the Plan. The options were granted on January 9, 2015, were fully vested at the time of grant and gave the option holder the right to purchase shares of our common stock at $0.70 per share during the ten year term of the option. As more fully described in Footnote 14 to our consolidated financial statements included in Item 8 of this Report, we recognized the grant date fair value of approximately $0.70 per share as share-based compensation expense in fiscal 2014.



The following shows the amounts we expect to pay to our officers during the twelve months ending December 31, 2016, and the amount of time these persons expect to devote to our business.



|               |  |              |  |                        
|-------------- |  | ------------ |  | -----------------------
|               |  | Projected    |  | % of time to be        
|Name           |  | Compensation |  | devoted to our business
|               |  |              |  |                        
|Ernie Blackmon |  | $265,000     |  | 50%                    
|Chad Ruby      |  | $265,000     |  | 60%                    
|Tony Verzura   |  | $265,000     |  | 70%                    



Employment Contracts, Termination of Employment, Change-in-Control Arrangements



As of the date hereof, we have not entered into any employment agreements with any of our Named Executive Officers.





15



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Outstanding Equity Awards



Outstanding equity awards as of the fiscal year ended December 31, 2015 are as follows:



|               |  |                                                                         |  |                                                                       |  |                                                                  |  |                           |  |                        | 
|-------------- |  | ----------------------------------------------------------------------- |  | --------------------------------------------------------------------- |  | ---------------------------------------------------------------- |  | ------------------------- |  | ---------------------- | 
|Name           |  | Number of securities underlying unexercised options
(#)
exercisable (1) |  | Number of securities underlying unexercised options
(#)
unexercisable |  | Number of securities underlying unexercised unearned options
(#) |  | Option exercise price
($) |  | Option expiration date | 
|               |  |                                                                         |  |                                                                       |  |                                                                  |  |                           |  |                        | 
|Ernie Blackmon |  | 200,000                                                                 |  |                                                                      |  |                                                                 |  | 0.70                      |  | 1/8/2024               | 
|               |  |                                                                         |  |                                                                       |  |                                                                  |  |                           |  |                        | 
|Chad Ruby      |  | 200,000                                                                 |  |                                                                      |  |                                                                 |  | 0.70                      |  | 1/8/2024               | 
|               |  |                                                                         |  |                                                                       |  |                                                                  |  |                           |  |                        | 
|Tony Verzura   |  | 200,000                                                                 |  |                                                                      |  |                                                                 |  | 0.70                      |  | 1/8/2024               | 



(1)

All stock options were fully vested on the date of grant, January 9, 2015.



Employee Pension, Profit Sharing or other Retirement Plans



We do not have a defined benefit, pension plan, profit sharing or other retirement plan, although we may adopt one or more of such plans in the future.



Compensation of Directors



During the fiscal year ended December 31, 2015, we did not compensate our directors for acting as such.



Risk Assessment in Compensation Programs



Beginning in fiscal year 2014 we changed our focus to providing products and services to the cannabis industry and we began paying compensation to our new employees, including executive and non-executive officers. Due to the size and scope of our business, and the amount of compensation involved, we do not have any employee compensation policies and programs to review to determine whether our policies and programs create risks that are reasonably likely to have a material adverse effect on us.



ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.



The following table shows the beneficial ownership of our common stock as of April 22, 2016, by (i) each person whom we know beneficially owns more than 5% of the outstanding shares of our common stock; (ii) each of our executive officers; (iii) each of our directors; and (iv) all of our executive officers and directors as a group.  Unless otherwise indicated, to our knowledge each of the stockholders listed below has sole voting and investment power over the shares beneficially owned. Unless otherwise specified, the address of each of the persons set forth below is in care of UCANN at 1600 Broadway, Suite 1600, Denver, Colorado 80202.



The percentage of class beneficially owned is based on 44,988,500 shares of common stock issued and outstanding as of April 22, 2016. Beneficial ownership has been determined in accordance with Rule 13d-3 under the Exchange Act. Pursuant to the rules of the SEC, shares of common stock which an individual or group has a right to acquire within 60 days pursuant to the exercise of options or warrants or the conversion of convertible securities are deemed to be outstanding for the purpose of computing the percentage ownership of such individual or group, but are not be deemed to be outstanding for the purpose of computing the percentage of the class by any other person.



|                                                                |  |  |                                     |            |  |                     |      
|--------------------------------------------------------------- |  |  | ----------------------------------- | ---------- |  | ------------------- | -----
|Name                                                            |  |  | Number of
Shares
Beneficially
Owned |            |  | Percentage
of Class
|Ernie Blackmon                                                  |  |  | 23,678,000                          | (1)        |  |                     | 51.2%
|Chad Ruby                                                       |  |  | 2,490,000                           | (2)        |  |                     | 5.4% 
|Tony Verzura                                                    |  |  | 16,202,000                          | (3)        |  |                     | 35.0%
|All executive officers and directors as a group (three persons) |  |  | 42,370,000                          | (1)(2) (3) |  |                     | 87.1%



(1)

Includes 1,250,000 shares underlying currently exercisable stock options held by Mr. Blackmon.

(2)

Includes 1,180,000 shares underlying currently exercisable stock options held by Mr. Ruby.

(3)

Includes 1,250,000 shares underlying currently exercisable stock options held by Mr. Verzura.



16



---





Securities Authorized for Issuance under Equity Compensation Plans



The following table shows information with respect to each equity compensation plan under which our common stock is authorized for issuance as of December 31, 2015:



|                                    
|------------------------------------
|Equity Compensation Plan Information



|                                                           |                                                                        |                                                                              |                                                                                             
|---------------------------------------------------------- | ---------------------------------------------------------------------- | ---------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------
|Plan Category                                              | Number of Securities
to be Issued
upon Exercise of
Outstanding Options | Weighted-Average
Exercise Price of
Outstanding Options,
Warrants, and Rights | Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plans
|                                                           |                                                                        |                                                                              |                                                                                             
|Equity compensation plans approved by security holders     | 600,000                                                                | $0.20                                                                        | 3,400,000                                                                                   
|                                                           |                                                                        |                                                                              |                                                                                             
|Equity compensation plans not approved by security holders |                                                                       |                                                                             |                                                                                            



Description of Equity Compensation Plan



For a description of our 2014 Equity Incentive Plan see Footnote 14 to our consolidated financial statements included in Item 8 of this Report



ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, DIRECTOR INDEPENDENCE.



Transactions with Officers and Directors



Other than the transactions described below, since January 1, 2014, there has not been, nor is there currently proposed, any transaction or series of similar transactions to which we were or will be a party:



| |   |                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | in which the amount involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years; and                                     
| | · | in which any director, executive officer, stockholder who beneficially owns 5% or more of our common stock or any member of their immediate family had or will have a direct or indirect material interest.



Messrs. Blackmon and Verzura have made loans to or equity investments in RiverRock LLC, a Colorado company which is licensed by the Colorado Department of Revenue to operate a dispensary, to manufacture marijuana infused products and to operate a cultivation facility.  We had sales of non-marijuana products to this entity in the amounts of $4,425 and $14,600 during 2015 and 2014, respectively.  During 2015, Messrs. Blackmon and Verzura divested those interests.  As Messrs. Blackmon and Verzura may have significant influence on management or operating polices of the customer, we have classified sales to this customer as revenues, affiliate, in our consolidated statements of operations and accounts receivable from this customer as due from related parties on our consolidated balance sheets.



In February 2015, Messrs. Blackmon, Verzura and Ruby formed Blue River Inc. (Blue River), a Colorado corporation in the cannabis industry that plans to manufacture and wholesale medicinal and recreational cannabis products including our Prana Bio Nutrient Medicinals products. On December 2, 2015, Mr. Ruby relinquished his ownership in Blue River, effective November 2, 2015. During the year ended December 31, 2015, we advanced Blue River $3,284 and included this amount in due from related parties. On January 1, 2016, our wholly owned subsidiary, UCANN California Corporation (UCANN CA), entered into a five year consulting and intellectual property licensing arrangement with Blue River whereby UCANN CA will provide consulting services to Blue River at hourly rates and a non-exclusive license to our intellectual property for $5,000 per month. The arrangement can be terminated by either party by written agreement.



On April 6, 2016, we borrowed $25,000 from Ernest Blackmon and $25,000 from Tony Verzura and used the proceeds to repay principal and interest applicable on our $102,000 convertible promissory note dated October 12, 2015, to JSJ Investments Inc. The loans, together with interest at 12% per year, are payable on December 30, 2016. We may prepay the loans at any time. If the loans are repaid on or before September 30, 2016, the principal amount which is being repaid will increase by 10%. If the loans are repaid after September 30, 2016, the principal amount which is being repaid will increase by 15%.





17



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ITEM 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES.



During the fiscal year ending December 31, 2013, Anton & Chia LLP ("Anton") was our independent registered public accounting firm and remained so through July 22, 2014. On July 22, 2014, we dismissed Anton and engaged the services of Cutler & Co., LLC (Cutler) as our independent registered public accounting firm.



During the fiscal year ending December 31, 2014, Cutler was our independent registered public accounting firm and remained so through November 10, 2015. On November 10, 2015, Cutler resigned as our independent registered public accounting firm, as Cutler merged with Pritchett, Siler & Hardy, PC (Pritchett) and on November 10, 2015, we engaged the services of Pritchett as our independent registered public accounting firm.



During the fiscal year ending December 31, 2015, Pritchett was our independent registered public accounting firm and remained so through March 23, 2016. On March 23, 2016, we dismissed Pritchett and on March 18, 2016, we engaged the services of B.F. Borgers, CPA PC., as our independent registered public accounting firm.



The following table sets forth fees billed to us by our independent registered public accounting firms during the fiscal years ended December 31, 2015 and December 31, 2014.



|                   |  |      |       |  |      |   |        | 
|------------------ |  | ---- | ----- |  | ---- | - | ------ | 
|Anton              |  | 2015 |       |  | 2014 |  
|Audit Fees         |  | $    | 2,500 |  |      | $ | 16,980 | 
|Audit-Related Fees |  | $    |      |  |      | $ |       | 
|Tax Fees           |  | $    |      |  |      | $ |       | 
|All Other Fees     |  | $    |      |  |      | $ |       | 



|                   |  |      |        |  |      |   |       | 
|------------------ |  | ---- | ------ |  | ---- | - | ----- | 
|Cutler             |  | 2015 |        |  | 2014 |  
|Audit Fees         |  | $    | 14,000 |  |      | $ | 3,000 | 
|Audit-Related Fees |  | $    |       |  |      | $ |      | 
|Tax Fees           |  | $    |       |  |      | $ |      | 
|All Other Fees     |  | $    |       |  |      | $ |      | 



|                   |  |      |       |  |      |   |   | 
|------------------ |  | ---- | ----- |  | ---- | - | - | 
|Pritchett          |  | 2015 |       |  | 2014 |  
|Audit Fees         |  | $    | 2,500 |  |      | $ |  | 
|Audit-Related Fees |  | $    |      |  |      | $ |  | 
|Tax Fees           |  | $    |      |  |      | $ |  | 
|All Other Fees     |  | $    |      |  |      | $ |  | 



Audit fees represent amounts invoiced for professional services rendered for the audit of our annual financial statements and the reviews of the financial statements included in our Form 10-Q Reports.



Policy on Audit Committee Pre-Approval of Audit and Permissible Non-audit Services of Independent Auditors



We do not have an audit committee to oversee the external audit process, which includes approving engagement letters, estimated fees and solely pre-approving all permitted audit and non-audit work performed by our principal accountant. Our entire board of directors oversees this process and has pre-approved all fees for audit and non-audit work performed.





18



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PART IV



ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.



(A) Documents filed as part of this Annual Report on Form 10-K are as follows:



1. Financial Statements:



Report of Cutler & Co., LLC

Report of B.F. Borgers, CPA PC

Consolidated Financial Statements:

Balance Sheets at December 31, 2015 and 2014

Statements of Operations for each of the two years in the period ended December 31, 2015

Statements of Stockholders (Deficit) Equity for each of the two years in the period ended December 31, 2015

Statements of Cash Flows for each of the two years in the period ended December 31, 2015

Notes to Consolidated Financial Statements



2. Financial Statement Schedules for each of the two years in the period ended December 31, 2015



NOTE:  All schedules have been omitted because they are either not required or the information is included in the financial statements and notes thereto.



(B) Exhibits:



|        |  |                                                                                                                                             
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Description                                                                                                                                 
|3.1     |  | Articles of Incorporation of Registrant (California) dated November 15, 2007. (1)                                                           
|3.2     |  | Bylaws of Registrant (California). (1)                                                                                                      
|3.3     |  | Audit Committee Charter dated May 27, 2008. (1)                                                                                             
|3.4     |  | Articles of Incorporation of Registrant (Colorado) dated March 25, 2014 (10).                                                               
|3.5     |  | Bylaws of Registrant (Colorado) dated March 27, 2014 (11).                                                                                  
|4.1     |  | Secured Convertible Promissory Note dated August 13, 2014, issued to Typenex Co-Investment, LLC. (7)                                        
|4.2     |  | Warrant #1 to Purchase Shares of Common Stock dated August 13, 2014, issued to Typenex Co-Investment, LLC. (8)                              
|4.3     |  | Convertible Promissory Note, dated October 6, 2015, made by United Cannabis Corporation and payable to Vis Vires Group, Inc. (11)           
|4.4     |  | Convertible Promissory Note, dated October 8, 2015, made by United Cannabis Corporation and payable to JSJ Investments, Inc. (13)           
|4.5     |  | Convertible Promissory Note, dated December 9, 2015, made by United Cannabis Corporation and payable to Tangiers Investment Group, LLC. (15)
|10.1    |  | Facilities and Management Services Agreement dated March 1, 2009. (1)                                                                       
|10.2    |  | Revolving Promissory Note and Security Agreement with Marichelle Stoppenhagen dated December 28, 2011. (1)                                  
|10.3    |  | Convertible Note in favor of NYX Capital Advisors, Inc. Dated September 30, 2013. (2)                                                       
|10.4    |  | License Agreement with Earnest Blackmon, Tony Verzura and Chad Ruby dated March 26, 2014. (3)                                               
|10.5    |  | Asset Assignment and Purchase Agreement dated March 31, 2014. (4)                                                                           
|10.6    |  | Plan of Merger dated April 10, 2014. (5)                                                                                                    
|10.7    |  | Consultancy Agreement on Products Related to Neural Stem Cells dated May 6, 2014. (6)                                                       
|10.8    |  | Securities Purchase Agreement, dated as of August 13, 2014, by and between Typenex Co-Investment, LLC and United Cannabis Corporation. (8)  
|10.9    |  | Security Agreement, dated as of August 13, 2014, by and between Typenex Co-Investment, LLC and United Cannabis Corporation. (8)             
|10.10   |  | Investor Note #1 dated August 13, 2014. (8)                                                                                                 
|10.11   |  | Promissory Note, dated December 18, 2014, made by United Cannabis Corporation and payable to Sláinte Ventures, LLC. (9)                     
|10.12   |  | Royalty and Consulting Services Agreement between United Cannabis Corporation and FoxBarry Farms, LLC dated December 28, 2014. (10)         
|10.13   |  | Securities Purchase Agreement, dated September 24, 2015, by and between Vis Vires Group, Inc. and United Cannabis Corporation. (12)         
|10.14   |  | Securities Agreement, dated December 11, 2015, by and between Tangiers Investment Group, LLC and United Cannabis Corporation. (15)          



19



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|        |  |                                                                                                                                                                                                                         
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.15   |  | First Amendment to Promissory Note together with Form of Warrant, dated March 18, 2016, by and between United Cannabis Corporation and its wholly owned subsidiaries and Sláinte Ventures, LLC. (16)                    
|10.16   |  | Assignment of Debt Agreement, dated March 24, 2016, by and between Buckingham Group Limited, WeedMD Rx Inc. and United Cannabis Corporation. (17)                                                                       
|10.17   |  | Promissory Note, dated March 30, 2016, made by United Cannabis Corporation and payable to Sláinte Ventures, LLC. (17)                                                                                                   
|10.18   |  | Promissory Note, dated April 6, 2016, made by United Cannabis Corporation and payable to Sláinte Ventures, LLC. (18)                                                                                                    
|10.19   |  | Promissory Note, dated April 6, 2016, made by United Cannabis Corporation and payable to Earnest Blackmon. (18)                                                                                                         
|10.20   |  | Promissory Note, dated April 6, 2016, made by United Cannabis Corporation and payable to Tony Verzura. (18)                                                                                                             
|14.1    |  | Code of Ethics, dated May 27, 2008. (1)                                                                                                                                                                                 
|16.1    |  | Letter from Anton & Chia addressed to SEC, dated as of August 4, 2014 (7)                                                                                                                                               
|16.2    |  | Letter from Cutler & Co. LLC addressed to SEC, dated November 13, 2015 (14)                                                                                                                                             
|16.3    |  | Letter from Pritchett, Siler & Hardy, P.C. addressed to SEC, dated April 25, 2016 (19)                                                                                                                                  
|21.1    |  | Subsidiaries of United Cannabis Corporation (20).                                                                                                                                                                       
|31      |  | Certification of the Chief Executive Officer and Principal Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|32      |  | Certification of the Chief Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                  
|101.INS |  | XBRL Instance Document (21)                                                                                                                                                                                             
|101.SCH |  | XBRL Taxonomy Extension Schema Document (21)                                                                                                                                                                            
|101.CAL |  | XBRL Taxonomy Extension Calculation Linkbase Document (21)                                                                                                                                                              
|101.DEF |  | XBRL Taxonomy Extension Definition Linkbase Document (21)                                                                                                                                                               
|101.LAB |  | XBRL Taxonomy Extension Label Linkbase Document (21)                                                                                                                                                                    
|101.PRE |  | XBRL Taxonomy Presentation Linkbase Document (21)                                                                                                                                                                       



|     |                                                                                                                                   
|---- | ----------------------------------------------------------------------------------------------------------------------------------
|(1)  | Incorporated by reference to the Registrants Registration Statement on Form 10 filed on January 17, 2012.                        
|(2)  | Incorporated by reference to the Registrants Form 10-Q filed on November 13, 2013.                                               
|(3)  | Incorporated by reference to the Registrants Form 8-K dated March 26, 2014, filed March 28, 2014.                                
|(4)  | Incorporated by reference to the Registrants Form 8-K dated March 31, 2014, filed April 3, 2014.                                 
|(5)  | Incorporated by reference to Appendix A of the Registrants Definitive Schedule 14C dated April 11, 2014, filed on April 11, 2014.
|(6)  | Incorporated by reference to the Registrants Form 8-K dated May 2, 2014, filed May 8, 2014.                                      
|(7)  | Incorporated by reference to the Registrants Form 8-K dated July 22, 2014, filed August 5, 2014.                                 
|(8)  | Incorporated by reference to the Registrants Form 8-K dated August 13, 2014, filed August 19, 2014.                              
|(9)  | Incorporated by reference to the Registrants Form 8-K dated December 22, 2014, filed January 6, 2015.                            
|(10) | Incorporated by reference to the Registrants Form 8-K dated December 28, 2014, filed January 7, 2015.                            
|(11) | Incorporated by reference to the Registrants Form 10-K filed on April 15, 2015.                                                  
|(12) | Incorporated by reference to the Registrants Form 8-K dated October 6, 2015, filed on October 10, 2015.                          
|(13) | Incorporated by reference to the Registrants Form 8-K dated October 12, 2015, filed on October 16, 2015.                         
|(14) | Incorporated by reference to the Registrants Form 8-K dated November 10, 2015, filed on November 16, 2015.                       
|(15) | Incorporated by reference to the Registrants Form 8-K dated December 9, 2015, filed on December 22, 2015.                        
|(16) | Incorporated by reference to the Registrants Form 8-K dated March 18, 2016, filed on March 24, 2016.                             
|(17) | Incorporated by reference to the Registrants Form 8-K dated March 30, 2016, filed on April 5, 2016.                              
|(18) | Incorporated by reference to the Registrants Form 8-K dated April 6, 2016, filed on April 13, 2016.                              
|(19) | Incorporated by reference to the Registrants Form 8-K dated March 23, 2016, filed on April 25, 2016.                             
|(20) | Incorporated by reference to Exhibit 21.1 filed with the Registrants 10-K report for the year ended December 31, 2014.           
|(21) | Previously filed.                                                                                                                 





20



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UNITED CANNABIS CORPORATION

Audited Financial Statements



TABLE OF CONTENTS



|                                                          |  |      | 
|--------------------------------------------------------- |  | ---- | 
|                                                          |  | Page | 
|                                                          |  |      | 
|Reports of Independent Registered Public Accounting Firms |  | F-2  | 
|                                                          |  |      | 
|Consolidated Balance Sheets                               |  | F-4  | 
|                                                          |  |      | 
|Consolidated Statements of Operations                     |  | F-5  | 
|                                                          |  |      | 
|Consolidated Statements of Stockholders' (Deficit) Equity |  | F-6  | 
|                                                          |  |      | 
|Consolidated Statements of Cash Flows                     |  | F-7  | 
|                                                          |  |      | 
|Notes to Consolidated Financial Statements                |  | F-9  | 









F-1



---







[cnab_10k001.jpg]



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



Board of Directors

United Cannabis Corporation

Denver, Colorado



We have audited the accompanying consolidated balance sheet of United Cannabis Corporation (formerly MySkin, Inc.) and subsidiary company (collectively the Company) as of December 31, 2014, and the related consolidated statement of operations, changes in stockholders (deficit)/ equity and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.



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



In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of United Cannabis Corporation (formerly MySkin, Inc.) and subsidiary company as of December 31, 2014, and the related statement of operations and cash flows for the for the year then ended in conformity with accounting principles generally accepted in the United States of America.



The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements the Company has suffered losses from operations and currently does not have sufficient available funding to fully implement its business plan. These factors raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.



[cnab_10k002.jpg]



Wheat Ridge, Colorado

April 15, 2015







9605 West 49thAve, Suite 200 Wheat Ridge, Colorado 80033 ~ Phone 303-968-3281 ~ Fax 303-456-7488 ~ www.cutlercpas.com





F-2



---





REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To the Board of Directors and Stockholders of United Cannabis Corporation:



We have audited the accompanying consolidated balance sheets of United Cannabis Corporation (the Company) as of December 31, 2015 and the related statement of operations, stockholders equity (deficit) and cash flows for the year then ended. 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.



We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.



In our opinion, the financial statement referred to above present fairly, in all material respects, the financial position of United Cannabis Corporation, as of December 31, 2015, and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles in the United States of America.



The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the Company's internal control over financial reporting.  Accordingly, we express no such opinion.



The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has suffered recurring losses from operations and has a significant accumulated deficit. In addition, the Company continues to experience negative cash flows from operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.





/s/ B F Borgers CPA PC

B F Borgers CPA PC

Lakewood, CO 
April 26, 2016







F-3



---





UNITED CANNABIS CORPORATION

CONSOLIDATED BALANCE SHEETS



|                                                                                                                                 |  |              |            |   |      |   |            |  
|-------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ---------- | - | ---- | - | ---------- | -
|                                                                                                                                 |  | December 31, |           
|                                                                                                                                 |  | 2015         |            |   | 2014 |  
|ASSETS                                                                                                                           |  |              |            |   |      |  
|Current assets:                                                                                                                  |  |              |            |   |      |  
|Cash and cash equivalents                                                                                                        |  | $            | 118,420    |   |      | $ | 321,353    |  
|Accounts receivable, net                                                                                                         |  |              | 53,435     |   |      |   | 6,245      |  
|Due from related parties                                                                                                         |  |              | 8,284      |   |      |   | 44,012     |  
|Prepaid expenses                                                                                                                 |  |              | 56,341     |   |      |   | 177,400    |  
|Deferred financing costs, net                                                                                                    |  |              | 32,400     |   |      |   |           |  
|Total current assets                                                                                                             |  |              | 268,880    |   |      |   | 549,010    |  
|                                                                                                                                 |  |              |            |   |      |   |            |  
|Intangible assets                                                                                                                |  |              | 32,273     |   |      |   | 18,210     |  
|Investments in non-marketable equity securities                                                                                  |  |              | 205,275    |   |      |   | 593,750    |  
|Equity method investments                                                                                                        |  |              | 88,000     |   |      |   | 138,000    |  
|Total assets                                                                                                                     |  | $            | 594,428    |   |      | $ | 1,298,970  |  
|                                                                                                                                 |  |              |            |   |      |   |            |  
|LIABILITIES & STOCKHOLDERS' DEFICIT                                                                                              |  |              |            |   |      |   |            |  
|Current liabilities:                                                                                                             |  |              |            |   |      |   |            |  
|Accounts payable                                                                                                                 |  | $            | 104,238    |   |      | $ | 27,424     |  
|Accrued expenses                                                                                                                 |  |              | 928,533    |   |      |   | 550,795    |  
|Derivative liabilities                                                                                                           |  |              | 383,581    |   |      |   |           |  
|Current portion of deferred revenue                                                                                              |  |              | 380,000    |   |      |   | 500,000    |  
|Notes payable                                                                                                                    |  |              | 775,000    |   |      |   | 775,000    |  
|Convertible notes payable, net of $272,793 and $0 debt discount, respectively                                                    |  |              | 108,207    |   |      |   |           |  
|Total current liabilities                                                                                                        |  |              | 2,679,559  |   |      |   | 1,853,219  |  
|                                                                                                                                 |  |              |            |   |      |   |            |  
|Long term liabilities:                                                                                                           |  |              |            |   |      |   |            |  
|Deferred revenue, net of current portion                                                                                         |  |              | 383,750    |   |      |   | 443,750    |  
|Total liabilities                                                                                                                |  |              | 3,063,309  |   |      |   | 2,296,969  |  
|                                                                                                                                 |  |              |            |   |      |   |            |  
|Stockholders' deficit:                                                                                                           |  |              |            |   |      |   |            |  
|Preferred stock, no par value; 10,000,000 shares authorized; none issued and outstanding                                         |  |              |           |   |      |   |           |  
|Common stock, no par value; 100,000,000 shares authorized; 44,988,500 and 44,060,000 shares issued and outstanding, respectively |  |              | 3,039,448  |   |      |   | 1,626,968  |  
|Accumulated deficit                                                                                                              |  |              | (5,508,329 | ) |      |   | (2,624,967 | )
|Total stockholders' deficit                                                                                                      |  |              | (2,468,881 | ) |      |   | (997,999   | )
|Total liabilities and stockholders' deficit                                                                                      |  | $            | 594,428    |   |      | $ | 1,298,970  |  







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



F-4



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UNITED CANNABIS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS



|                                                              |  |                          |            |   |      |   |            |  
|------------------------------------------------------------- |  | ------------------------ | ---------- | - | ---- | - | ---------- | -
|                                                              |  | Years Ended December 31, |           
|                                                              |  | 2015                     |            |   | 2014 |  
|Revenues:                                                     |  |                          |            |   |      |  
|Revenues, non-affiliates                                      |  | $                        | 558,248    |   |      | $ | 171,957    |  
|Revenues, affiliate                                           |  |                          | 4,425      |   |      |   | 14,600     |  
|Total revenues                                                |  |                          | 562,673    |   |      |   | 186,557    |  
|Cost of revenues:                                             |  |                          |            |   |      |   |            |  
|Cost of revenues, non-affiliate                               |  |                          | 75,672     |   |      |   | 7,031      |  
|Cost of revenues, affiliate                                   |  |                          | 74,564     |   |      |   |           |  
|Total cost of revenues                                        |  |                          | 150,236    |   |      |   | 7,031      |  
|Gross profit                                                  |  |                          | 412,437    |   |      |   | 179,526    |  
|                                                              |  |                          |            |   |      |   |            |  
|Operating expenses:                                           |  |                          |            |   |      |   |            |  
|Sales and marketing                                           |  |                          | 17,100     |   |      |   | 101,962    |  
|Research and development                                      |  |                          | 329        |   |      |   | 182,606    |  
|General and administrative                                    |  |                          | 1,816,804  |   |      |   | 1,709,040  |  
|Total operating expenses                                      |  |                          | 1,834,233  |   |      |   | 1,993,608  |  
|                                                              |  |                          |            |   |      |   |            |  
|Loss from operations                                          |  |                          | (1,421,796 | ) |      |   | (1,814,082 | )
|                                                              |  |                          |            |   |      |   |            |  
|Other income (expense):                                       |  |                          |            |   |      |   |            |  
|Interest income                                               |  |                          | 252        |   |      |   | 37,837     |  
|(Loss) gain on derivative liabilities                         |  |                          | (23,593    | ) |      |   | 6,099      |  
|Loss on origination of derivative liability                   |  |                          |           |   |      |   | (12,810    | )
|Interest expense                                              |  |                          | (107,748   | ) |      |   | (131,479   | )
|Amortization of debt discount                                 |  |                          | (82,500    | ) |      |   | (161,402   | )
|Equity in net loss of unconsolidated affiliate                |  |                          | (90,900    | ) |      |   |           |  
|Loss on extinguishment of debt and repurchase of warrants     |  |                          | (768,602   | ) |      |   | (33,635    | )
|Loss on investment in non-marketable equity securities        |  |                          | (388,475   | ) |      |   | (300,000   | )
|Total other income (expense), net                             |  |                          | (1,461,566 | ) |      |   | (595,390   | )
|                                                              |  |                          |            |   |      |   |            |  
|Loss from continuing operations                               |  |                          | (2,883,362 | ) |      |   | (2,409,472 | )
|                                                              |  |                          |            |   |      |   |            |  
|Net loss from discontinued operations                         |  |                          |           |   |      |   | (58,892    | )
|                                                              |  |                          |            |   |      |   |            |  
|Net loss                                                      |  | $                        | (2,883,362 | ) |      | $ | (2,468,364 | )
|                                                              |  |                          |            |   |      |   |            |  
|Basic and diluted net loss per share:                         |  |                          |            |   |      |   |            |  
|Continuing operations                                         |  | $                        | (0.06      | ) |      | $ | (0.06      | )
|Discontinued operations                                       |  |                          | na         |   |      |   | (0.00      | )
|Net loss per share                                            |  | $                        | (0.06      | ) |      | $ | (0.06      | )
|                                                              |  |                          |            |   |      |   |            |  
|Basic and diluted weighted-average common shares outstanding: |  |                          | 44,793,510 |   |      |   | 38,256,438 |  







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



F-5



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UNITED CANNABIS CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS (DEFICIT) EQUITY



|                                            |  |              |   |        |             |   |         |   |            |       |  |   |            |  
|------------------------------------------- |  | ------------ | - | ------ | ----------- | - | ------- | - | ---------- | ----- |  | - | ---------- | -
|                                            |  | Common Stock |   |        | Accumulated |   |         |   |            |      
|                                            |  | Shares       |   | Amount |             |   | Deficit |   |            | Total | 
|                                            |  |              |   |        |             |   |         |   |            |       |  |   |            |  
|Balance, December 31, 2013                  |  | 6,020,000    |   | $      | 165,495     |   |         | $ | (156,603   | )     |  | $ | 8,892      |  
|                                            |  |              |   |        |             |   |         |   |            |       |  |   |            |  
|Shares issued for conversion of debt        |  | 40,000,000   |   |        | 50,000      |   |         |   |           |       |  |   | 50,000     |  
|Shares cancelled                            |  | (41,690,000  | ) |        |            |   |         |   |           |       |  |   |           |  
|Shares issued for license agreement         |  | 38,690,000   |   |        |            |   |         |   |           |       |  |   |           |  
|Shares and warrants issued for cash         |  | 600,000      |   |        | 900,000     |   |         |   |           |       |  |   | 900,000    |  
|Warrants issued with convertible debt       |  |             |   |        | 694,525     |   |         |   |           |       |  |   | 694,525    |  
|Shares issued for services                  |  | 400,000      |   |        | 305,100     |   |         |   |           |       |  |   | 305,100    |  
|Purchase and cancellation of warrants       |  |             |   |        | (576,152    | ) |         |   |           |       |  |   | (576,152   | )
|Shares issued for equity method investments |  | 40,000       |   |        | 88,000      |   |         |   |           |       |  |   | 88,000     |  
|Net loss                                    |  |             |   |        |            |   |         |   | (2,468,364 | )     |  |   | (2,468,364 | )
|                                            |  |              |   |        |             |   |         |   |            |       |  |   |            |  
|Balance, December 31, 2014                  |  | 44,060,000   |   |        | 1,626,968   |   |         |   | (2,624,967 | )     |  |   | (997,999   | )
|                                            |  |              |   |        |             |   |         |   |            |       |  |   |            |  
|Shares issued for repurchase of warrant     |  | 621,000      |   |        | 987,390     |   |         |   |           |       |  |   | 987,390    |  
|Cancellation of warrant                     |  |             |   |        | (218,788    | ) |         |   |           |       |  |   | (218,788   | )
|Shares issued for services                  |  | 307,500      |   |        | 226,215     |   |         |   |           |       |  |   | 226,215    |  
|Stock options issued for compensation       |  |             |   |        | 417,663     |   |         |   |           |       |  |   | 417,663    |  
|Net loss                                    |  |             |   |        |            |   |         |   | (2,883,362 | )     |  |   | (2,883,362 | )
|                                            |  |              |   |        |             |   |         |   |            |       |  |   |            |  
|Balance December 31, 2015                   |  | 44,988,500   |   | $      | 3,039,448   |   |         | $ | (5,508,329 | )     |  | $ | (2,468,881 | )







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



F-6



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UNITED CANNABIS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                                          |  |                          |            |   |      |   |            |  
|----------------------------------------------------------------------------------------- |  | ------------------------ | ---------- | - | ---- | - | ---------- | -
|                                                                                          |  | Years Ended December 31, |           
|                                                                                          |  | 2015                     |            |   | 2014 |  
|Operating activities:                                                                     |  |                          |            |   |      |  
|Net loss                                                                                  |  | $                        | (2,883,362 | ) |      | $ | (2,468,364 | )
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |  |                          |            |   |      |   |            |  
|Loss on sale of assets of discontinued operations                                         |  |                          |           |   |      |   | 15,704     |  
|Provision for losses on accounts receivable                                               |  |                          | 24,185     |   |      |   |           |  
|Amortization of debt discount                                                             |  |                          | 82,500     |   |      |   | 161,402    |  
|Amortization of deferred financing costs                                                  |  |                          | 8,700      |   |      |   |           |  
|Non-cash interest expense                                                                 |  |                          | 4,694      |   |      |   | 15,320     |  
|Notes payable issued for debt issuance costs                                              |  |                          |           |   |      |   | 46,000     |  
|Loss on origination of derivative liability                                               |  |                          |           |   |      |   | 12,810     |  
|Share-based compensation                                                                  |  |                          | 1,030,681  |   |      |   | 551,685    |  
|Value of non-marketable equity securities recognized as revenue                           |  |                          | (180,000   | ) |      |   | (150,000   | )
|Loss (gain) on revaluation of derivative liabilities                                      |  |                          | 23,593     |   |      |   | (6,099     | )
|Loss on non-marketable equity securities                                                  |  |                          | 388,475    |   |      |   | 300,000    |  
|Equity in net loss of unconsolidated affiliate                                            |  |                          | 90,900     |   |      |   |           |  
|Loss on extinguishment of debt and repurchase of warrants                                 |  |                          | 768,602    |   |      |   | 33,635     |  
|Changes in operating assets and liabilities:                                              |  |                          |            |   |      |   |            |  
|Accounts receivable                                                                       |  |                          | (68,263    | ) |      |   | (6,245     | )
|Due from related party                                                                    |  |                          | (8,284     | ) |      |   | (33,238    | )
|Prepaid expenses                                                                          |  |                          | (3,394     | ) |      |   | (6,321     | )
|Accounts payable and accrued expenses                                                     |  |                          | 195,825    |   |      |   | 144,654    |  
|Deferred revenue                                                                          |  |                          |           |   |      |   | 200,000    |  
|Net cash provided by (used in) operating activities                                       |  |                          | (525,148   | ) |      |   | (1,189,057 | )
|                                                                                          |  |                          |            |   |      |   |            |  
|Investing activities:                                                                     |  |                          |            |   |      |   |            |  
|Purchase of intangible assets                                                             |  |                          | (17,685    | ) |      |   | (2,309     | )
|Purchase of equity method investments                                                     |  |                          |           |   |      |   | (50,000    | )
|Net cash provided by (used in) investing activities                                       |  |                          | (17,685    | ) |      |   | (52,309    | )
|                                                                                          |  |                          |            |   |      |   |            |  
|Financing activities:                                                                     |  |                          |            |   |      |   |            |  
|Net proceeds from issuance of notes payable                                               |  |                          |           |   |      |   | 761,500    |  
|Net proceeds from issuance of convertible debt and warrants                               |  |                          | 339,900    |   |      |   | 225,000    |  
|Repayment of convertible debt and repurchase of warrants                                  |  |                          |           |   |      |   | (356,195   | )
|Proceeds from issuance of common shares and warrants                                      |  |                          |           |   |      |   | 900,000    |  
|Net cash provided by (used in) financing activities                                       |  |                          | 339,900    |   |      |   | 1,530,305  |  
|                                                                                          |  |                          |            |   |      |   |            |  
|Net increase (decrease) in cash                                                           |  |                          | (202,933   | ) |      |   | 288,939    |  
|                                                                                          |  |                          |            |   |      |   |            |  
|Cash, beginning of period                                                                 |  |                          | 321,353    |   |      |   | 32,414     |  
|                                                                                          |  |                          |            |   |      |   |            |  
|Cash, end of period                                                                       |  | $                        | 118,420    |   |      | $ | 321,353    |  





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



F-7



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UNITED CANNABIS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                               |  |                          |          |   |      |   |          |  
|------------------------------------------------------------------------------ |  | ------------------------ | -------- | - | ---- | - | -------- | -
|                                                                               |  | Years Ended December 31, |         
|                                                                               |  | 2015                     |          |   | 2014 |  
|Supplemental schedule of cash flow information:                                |  |                          |          |   |      |  
|Cash paid for interest                                                         |  | $                        |         |   |      | $ |         |  
|Cash paid for income taxes                                                     |  | $                        |         |   |      | $ |         |  
|                                                                               |  |                          |          |   |      |   |          |  
|Supplemental disclosure of non-cash investing and financing activities:        |  |                          |          |   |      |   |          |  
|Intangible asset costs included in accounts payable                            |  | $                        | 12,279   |   |      | $ | 15,901   |  
|Non-marketable equity securities received as consideration for future services |  | $                        |         |   |      | $ | 893,750  |  
|Issuance of common stock for equity method investment                          |  | $                        |         |   |      | $ | 88,000   |  
|Issuance of common stock for services                                          |  | $                        | 47,880   |   |      | $ | 83,600   |  
|Issuance of common stock for prepaid professional fees                         |  | $                        | 187,335  |   |      | $ | 221,500  |  
|Issuance of common stock for repurchase of warrant                             |  | $                        | 987,390  |   |      | $ |         |  
|Warrants cancelled                                                             |  | $                        | (218,788 | ) |      | $ | (576,152 | )
|Warrants issued for debt discount                                              |  | $                        |         |   |      | $ | 694,525  |  
|Issuance of stock options for compensation                                     |  | $                        | 417,664  |   |      | $ |         |  
|Issuance of note payable for debt issuance costs                               |  | $                        |         |   |      | $ | 13,500   |  
|Issuance of convertible note payable for debt issuance costs                   |  | $                        | 41,000   |   |      | $ | 32,500   |  
|Debt conversion feature issued for debt discount                               |  | $                        | (355,293 | ) |      | $ | (151,937 | )
|Conversion of note payable, related party, into common stock                   |  | $                        |         |   |      | $ | 50,000   |  







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



F-8



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UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1 BUSINESS ORGANIZATION AND NATURE OF OPERATIONS



On March 19, 2014, we effected a four-for-one stock split of our outstanding shares of common stock. All references to shares of our common stock in our consolidated financial statements refer to the number of shares of common stock after giving effect to the stock split (unless otherwise indicated).



Background and Current Operations



United Cannabis Corporation ("we", "our", "us", or "UCANN") a Colorado corporation, was originally formed as a California corporation under the name MySkin, Inc. (MySkin) on November 15, 2007. MySkin was engaged in the business of providing management services to a medical spa in Los Angeles, California which provided various advanced skin care services until March 31, 2014, when this business was sold.



In early 2014, we decided to exit the medical spa management business and change our focus to providing products, services and intellectual property licenses to the cannabis industry.



On March 26, 2014, we entered into a License Agreement with Earnest Blackmon, Tony Verzura and Chad Ruby pursuant to which Messrs. Blackmon, Verzura and Ruby licensed certain intellectual property to us in exchange for a total of 38,690,000 shares of our common stock.



In connection with this transaction:



|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|· | Messrs. Blackmon, Verzura and Ruby licensed to us all of their knowledge and know-how relating to the design and buildout of cultivation facilities, growing/cultivation systems, seed-to-sale protocols and procedures, products, a genetic catalogue including over 150 different strains, an advanced cannabinoid therapy program called "A.C.T. Now", security, regulatory compliance, and other methods and processes which relate to the cannabis industry.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|· | The territory for this license is the entire world and the license runs in perpetuity. There are no royalty payments under the License Agreement.                                                                                                                                                                                                                                                                                                                
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|· | Messrs. Blackmon, Verzura and Ruby were appointed to our board of directors effective April 7, 2014.                                                                                                                                                                                                                                                                                                                                                             
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|· | Mr. Blackmon was elected as our President, Mr. Ruby was elected as Chief Operating Officer and Mr. Verzura was elected as Vice President.                                                                                                                                                                                                                                                                                                                        
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|· | A total of 41,690,000 previously outstanding shares of common stock were cancelled resulting in a total of 43,620,000 shares of common stock outstanding on March 26, 2014.                                                                                                                                                                                                                                                                                      



UCANN was formed as a Colorado corporation on March 25, 2014, and on May 2, 2014, MySkin merged into UCANN, a wholly-owned subsidiary of MySkin, for the purpose of changing domicile from California to Colorado and changing the corporation's name to United Cannabis Corporation.



On March 31, 2014, we sold all right, title and interest in the tangible and intangible assets, trademarks, customer lists, intellectual property and rights, which we owned and were related to our advanced skin care business since we have entered into a new business and we no longer have any use for these assets. The assets were sold to MySkin Services, Inc. (MTA), a business partly owned by Marichelle Stoppenhagen, our former officer and director, in exchange for the $15,000 payable which we owed to Ms. Stoppenhagen and/or MTA.  In addition, MTA assumed all costs associated with these assets starting on March 31, 2014.



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







F-9



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UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





As of December 31, 2015, 23 states and the District of Columbia allow their citizens to use medical marijuana, and four states and the District of Columbia have legalized marijuana for recreational use. The state laws are in conflict with the federal Controlled Substances Act, which makes marijuana use and possession illegal on a national level. The Obama administration has effectively stated that it is not an efficient use of resources to direct federal law enforcement agencies to prosecute those lawfully abiding by state-designated laws allowing the use and distribution of medical and recreational marijuana. However, there is no guarantee that the current administration will not change its stated policy regarding the low-priority enforcement of federal laws, or that any future administration would not change this policy and decide to enforce the federal laws vigorously.  Any such change in the federal governments enforcement of current federal laws could cause significant financial damage to us.



NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Principles of Consolidation  Our consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries UC Nevada L.L.C., UC Colorado Corporation and UCANN California Corporation. All intercompany accounts and transactions have been eliminated. Our consolidated financial statements are stated in United States dollars and have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP).



Use of Estimates - The preparation of our consolidated financial statements in conformity with U.S. GAAP requires us to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of our consolidated financial statements and the reported amounts of revenues and expenses during the periods presented.



We make our estimate of the ultimate outcome for these items based on historical trends and other information available when our consolidated financial statements are prepared. We recognize changes in estimates in accordance with the accounting rules for the estimate, which is typically in the period when new information becomes available. We believe that our significant estimates, assumptions and judgments are reasonable, based upon information available at the time they were made. Our actual results could differ from these estimates, making it possible that a change in these estimates could occur in the near term.



Fair Value of Financial Instruments-  Our financial instruments consist principally of cash and cash equivalents, accounts receivable, non-marketable equity securities, accounts payable, notes payable and other current assets and liabilities. We value our financial assets and liabilities using fair value measurements. Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are categorized based on whether the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial instruments within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The hierarchy is prioritized into three levels (with Level 3 being the lowest) defined as follows:



Level 1: Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.Level 2: Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated with observable market data.Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies, and similar techniques that use significant unobservable inputs.



The carrying amount of our cash and cash equivalents, accounts receivable, accounts payable, and other current assets and liabilities in our consolidated financial statements approximates fair value because of the short-term nature of the instruments. Investments in non-marketable equity securities are carried at cost less other-than-temporary impairments. The carrying amount of our notes payable and convertible debt at December 31, 2015, approximates their fair values based on our incremental borrowing rates.

There have been no changes in Level 1, Level 2, and Level 3 categorizations and no changes in valuation techniques for these assets or liabilities for the years ended December 31, 2015 and 2014.



Cash and Cash Equivalents - We consider investments with original maturities of 90 days or less to be cash equivalents. We do not have any cash equivalents as of December 31, 2015 or December 31, 2014.



F-10



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UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





Accounts Receivable  Our accounts receivable consists primarily of trade accounts arising in the normal course of business. No interest is charged on past due accounts. Accounts for which no payments have been received after 30 days are considered delinquent and customary collection efforts are initiated. Accounts receivable are carried at original invoice amount less a reserve made for doubtful accounts based on a review of all outstanding amounts on a monthly basis. We determine our allowance for doubtful accounts by regularly evaluating individual customer receivables and considering the customers financial condition and credit history, and current economic conditions.



Our allowance for doubtful accounts was $4,340 and $0 as of December 31, 2015 and 2014, respectively. We recorded bad debt expense, included in general and administrative expenses, of $24,185 and $0 during the years ended December 31, 2015 and 2014, respectively.



Prepaid Expenses -Prepaid expenses are 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.



Property and Equipment  Our property and equipment are recorded at cost. Maintenance and repairs are expensed as incurred. Depreciation is computed using the straight-line method over estimated useful lives of three to five years. Assets acquired under capital leases are depreciated over the lesser of the useful life of the asset or the lease term. At the time of retirement or other disposition of property and equipment, the cost and accumulated depreciation are removed from our accounts and any resulting gain or loss is reflected in our consolidated statements of operations.



Intangible Assets Our intangible assets, consisting of applications for trademarks, design mark and provisional patents are recorded at cost, and once approved, will be amortized using the straight-line method over an estimated useful life of 10 to 20 years.



Investments in Non-Marketable Equity Securities  Our investments in non-marketable equity securities are carried at cost, less write-down-for-impairments, if any. Impairments are based on methodologies, including the valuation achieved in the most recent private placement by the investee, an assessment of the impact of industry and general private equity market conditions, and discounted projected future cash flows. Investments in non-marketable equity securities that expire in less than 12 months, for example stock options or warrants, are classified as current assets; otherwise, we classify investments in non-marketable equity securities as other noncurrent assets.



Long-Lived Assets  Our intangible assets and other long-lived assets are subject to an impairment test if there is an indicator of impairment. The carrying value and ultimate realization of these assets is dependent upon our estimates of future earnings and benefits that we expect to generate from their use. If our expectations of future results and cash flows are significantly diminished, intangible assets and other long-lived assets may be impaired and the resulting charge to operations may be material. When we determine that the carrying value of intangibles or other long-lived assets may not be recoverable based upon the existence of one or more indicators of impairment, we use the projected undiscounted cash flow method to determine whether an impairment exists, and then measure the impairment using discounted cash flows.



We have not recorded any impairment charges related to long-lived assets as of December 31, 2015 or December 31, 2014.



Equity Method Investments Our investments in entities representing ownership of at least 20% but not more than 50%, where we exercise significant influence, are accounted for under the equity method.



Deferred Revenue - We defer revenue for which product or service has not yet been delivered or is subject to refund until such time that we and our customer jointly determine that the product or service has been delivered or no refund will be required.



Revenue Recognition-We recognize revenue in accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 605, Revenue Recognition, which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on our management's judgments regarding the fixed nature of the selling prices of the products and services delivered and the collectability of those amounts.





F-11



---





UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





Revenue for services with a payment in the form of stock, warrants or other financial assets is recognized when the services are performed. The value of revenue paid for with warrants is measured using the Black-Scholes-Merton pricing model. Revenue from product sales, including delivery fees, is recognized when an order has been obtained, the price is fixed and determinable, the product is shipped, title has transferred and collectability is reasonably assured. Generally, our suppliers drop-ship orders to our clients with origin terms. For any shipments with destination terms, we defer revenue until delivery is made to the customer. During the years ended December 31, 2015 and 2014, sales returns were not significant and as such, no sales return allowance had been recorded as of December 31, 2015 or December 31, 2014.



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 are included in cost of revenues. 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 our consolidated statement of operations on a net basis.



Cost of Revenues Our policy is to recognize cost of revenues in the same manner as, and in conjunction with, revenue recognition. Our cost of revenues includes the costs directly attributable to revenue recognized and includes expenses related to the production, packaging and labeling of our Prana medicinals products and personnel-related costs, fees for third-party services, travel and other consulting costs related to our advisory services.



Shipping and Handling Costs -For product sales, shipping and handling costs are included as a component of cost of revenues. During the years ended December 31, 2015 and 2014, we incurred shipping and handling costs of $1,013 and $0, respectively.



Advertising Costs - All advertising costs are expensed as incurred. During the years ended December 31, 2015 and 2014, we incurred $16,500 and $304 of advertising costs, respectively, and included these costs in sales and marketing expense in our consolidated statements of operations.



Research and Development Expenses -Research and development (R&D) costs are charged to expense as incurred. Our R&D expenses include, but are not limited to, consulting service fees and materials and supplies used in the development of our proprietary products and services.



Sales and Marketing Expenses  Sales and marketing expenses consist primarily of fees for professional and consulting services, promotional events and advertising costs.



General and Administrative Expenses - General and administrative expenses consist primarily of personnel-related costs, fees for professional and consulting services, travel costs, rent, bad debt expense, general corporate costs, and other costs of administration such as human resources, finance and administrative roles.



Share-Based Compensation - We periodically issue shares of our common stock to non-employees in non-capital raising transactions for fees and services. We account for stock issued to non-employees in accordance with ASC 505, Equity, whereas the value of the stock compensation is based upon the measurement date as determined at either (a) the date at which a performance commitment is reached, or (b) at the date at which the necessary performance to earn the equity instruments is complete.



We account for stock option grants issued and vesting to employees based on ASC 718, Compensation  Stock Compensation, whereas the award is measured at its fair value at the date of grant and is amortized ratably over the vesting period. Accounting for share-based compensation to employees requires the measurement and recognition of compensation expense for all share-based payment awards made to employees based on estimated fair values. We estimate the fair value of all stock option awards on the date of grant using the Black-Scholes-Merton pricing model, which is affected by our stock price, as well as assumptions regarding a number of complex and subjective variables. These variables include our expected stock price volatility over the term of the awards, actual and projected employee option exercise behaviors, risk free interest rates and expected dividends. We also estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from our estimates





F-12



---





UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





Income Taxes - Income taxes are recorded using the asset and liability method. Under the asset and liability method, tax assets and liabilities are recognized for the tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Future tax assets and liabilities are measured using the enacted tax rates expected to apply when the asset is realized or the liability settled. The effect on future tax assets and liabilities of a change in tax rates is recognized in income in the period that enactment occurs. To the extent that we do not consider it more likely than not that a future tax asset will be recovered, we will provide a valuation allowance against the excess.



We follow the provisions of ASC 740, Income Taxes. As a result of the ASC 740, we make a comprehensive review of our portfolio of tax positions in accordance with recognition standards established by ASC 740. As a result of the implementation of ASC 740, we recognized no material adjustments to liabilities or stockholders deficit.



When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in our consolidated financial statements in the period during which, based on all available evidence, we believe it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.



Interest and penalties associated with unrecognized tax benefits, if any, are classified as interest expense and penalties and are included in selling, general and administrative expenses in our consolidated statements of operations.



Commitments and Contingencies - Certain conditions may exist as of the date our consolidated financial statements are issued, which may result in a loss but which will only be resolved when one or more future events occur or fail to occur.  We assess such contingent liabilities, and such assessment inherently involves an exercise of judgment.  In assessing loss contingencies related to legal proceedings that are pending against us or unasserted claims that may result in such proceedings, we evaluate the perceived merits of the legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.



If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in our consolidated financial statements.  If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.



Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed.



Net Loss Per Share - We compute net loss per share in accordance with ASC 260, Earnings per Share. Under the provisions of ASC 260, basic net loss per share includes no dilution and is computed by dividing the net loss available to common stockholders for the period by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share takes into consideration shares of common stock outstanding (computed under basic net loss per share) and potentially dilutive securities that are not anti-dilutive.



Potentially dilutive securities outlined in the table below have been excluded from the computation of diluted net loss per share, because the effect of their inclusion would have been anti-dilutive.



|                                      |  |                          |           |  |      |  |           | 
|------------------------------------- |  | ------------------------ | --------- |  | ---- |  | --------- | 
|                                      |  | Years Ended December 31, |          
|                                      |  | 2015                     |           |  | 2014 | 
|Warrants to purchase common stock     |  |                          | 3,000,000 |  |      |  | 3,997,692 | 
|Stock options                         |  |                          | 600,000   |  |      |  |          | 
|Total potentially dilutive securities |  |                          | 3,600,000 |  |      |  | 3,997,692 | 





F-13



---





UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





Other Comprehensive Income (Loss) We report as other comprehensive income (loss) those revenues, gains and losses not included in the determination of net income.  During the years ended December 31, 2015 and 2014, we did not have any gains and losses resulting from activities or transactions that resulted in other comprehensive income or loss.



Segment Reporting UCANN operates as one segment.



Concentration of Credit Risk - Financial instruments that potentially subject us to credit risk consist of cash. We maintain our cash with high credit quality financial institutions; at times, such balances with any one financial institution may not be insured by the FDIC.



The following tables show significant concentrations in our revenues and accounts receivable for the periods indicated:



Percentage of Revenue:



|           |  |                          |    |   |      |  |    |  
|---------- |  | ------------------------ | -- | - | ---- |  | -- | -
|           |  | Years Ended December 31, |   
|           |  | 2015                     |    |   | 2014 | 
|Customer A |  |                          | 36 | % |      |  |   | %
|Customer B |  |                          | 32 | % |      |  | 80 | %
|Customer C |  |                          | 18 | % |      |  | 4  | %



Percentage of Accounts Receivable:



|           |  |                          |    |   |      |  |    |  
|---------- |  | ------------------------ | -- | - | ---- |  | -- | -
|           |  | Years Ended December 31, |   
|           |  | 2015                     |    |   | 2014 | 
|Customer D |  |                          | 56 | % |      |  |   | %
|Customer E |  |                          | 41 | % |      |  |   | %
|Customer F |  |                          |   | % |      |  | 46 | %
|Customer G |  |                          |   | % |      |  | 33 | %
|Customer H |  |                          | 1  | % |      |  | 21 | %



Recently Issued Accounting Pronouncements - From time to time, the FASB or other standards setting bodies issue new accounting pronouncements. Updates to the FASB ASCs are communicated through issuance of an Accounting Standards Update ("ASU"). Unless otherwise discussed, we believe that the impact of recently issued guidance, whether adopted or to be adopted in the future, is not expected to have a material impact on our consolidated financial statements upon adoption.



In May 2014, the FASB issued guidance on revenue from contracts with customers, which implements a five step process of how an entity should recognize revenue in order 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. This guidance will be effective for us at the beginning of fiscal year 2018, and early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. We are currently evaluating the impact that the adoption will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method nor have we determined the effect of the standard on our ongoing reporting.



In August 2014, the FASB issued guidance on disclosure of uncertainties about an entity's ability to continue as a going concern. This guidance requires management to perform interim and annual assessments of an entity's ability to continue as a going concern within one year of the date the financial statements are issued and provides guidance on determining when and how to disclose going concern uncertainties in the financial statements. Certain disclosures will be required if conditions give rise to substantial doubt about an entity's ability to continue as a going concern. The guidance is effective for us at the beginning of fiscal year 2017, with early adoption permitted. We do not expect that the adoption of this standard will have a material effect on our consolidated financial statements.



In April 2015, the FASB issued guidance requiring us to present debt issuance costs in the balance sheet as a reduction from the related debt liability rather than as an asset. Amortization of these costs will continue to be reported as interest expense. This guidance is effective for us at the beginning of fiscal year 2016, and early adoption is allowed. Retrospective application is required. Upon adoption, the deferred financing costs associated with our notes payable will be reclassified from Deferred financing costs to Notes payable, net.





F-14



---





UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





In November 2015, the FASB issued guidance requiring entities to present deferred tax assets and liabilities as noncurrent in a classified balance sheet instead of separating into current and noncurrent amounts. This guidance is effective for us at the beginning of fiscal year 2017, on a prospective or retrospective basis. Early adoption is permitted for all companies in any interim or annual period. We have not determined in what period it will adopt or what adoption method we will use and we are currently assessing the impact that this guidance may have on our consolidated financial statements.



In February 2016, the FASB issued guidance on leases which requires entities to recognize right-of-use assets and lease liabilities on the balance sheet for the rights and obligations created by all leases, including operating leases, with terms of more than 12 months. The new guidance also requires additional disclosures on the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative information. The new guidance will be effective for us at the beginning of fiscal year 2019. Early adoption is permitted. We are in the process of evaluating the impact the adoption of this guidance will have on our consolidated financial statements and related disclosures.



NOTE 3  GOING CONCERN



Our consolidated financial statements have been prepared on a going concern basis which assumes we will be able to realize our assets and discharge our liabilities in the normal course of business for the foreseeable future. During the year ended December 31, 2015, we incurred losses of $2,883,362 and used cash of $525,148 in our operating activities. As at December 31, 2015, we had a working capital deficit of $2,410,679 and an accumulated deficit of $5,508,329.  Our ability to continue as a going concern is dependent upon our ability to generate profitable operations in the future and, or, obtaining the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. There is no assurance that these events will be satisfactorily completed.



Currently we are not in compliance with the covenants under our debt agreements. As a result, we are proactively working with our lenders and evaluating options for maintaining compliance, which include requesting covenant amendments, waivers or forbearances, and could include a possible reduction of our debt level, including the payment of prepayment penalties. Our failure to comply with these covenants would be an event of default that, if not waived, could result in the acceleration of most our outstanding indebtedness, including the acceleration of our convertible notes and certain notes payable. If the lenders were to make such a demand for repayment, we would be unable to pay the obligations as we do not have existing facilities or sufficient cash on hand to satisfy these obligations. Due to this material uncertainty, there is substantial doubt about our ability to continue as a going concern. While we will continue to work with our existing lenders, there can be no assurance that we will be successful.



NOTE 4  INVESTMENTS IN NON-MARKETABLE EQUITY SECURITIES



On June 9, 2014, we received 1,187,500 common shares and 3,000,000 warrants to purchase common shares of WeedMD RX Inc. (WMD), a private Canadian company in the cannabis industry, in exchange for future consulting services and use of our intellectual property. The shares represented a 4.29% equity investment in WMD at the time of the investment and we do not have significant influence over the investee. We recorded our investment in these non-marketable equity securities at estimated cost, based on our estimate of the fair value of the securities on the date of the transaction.



The WMD common shares were recorded at $0.50 per share, or $593,750 in total, taking into consideration WMDs most recent sale of their common shares prior to the date of the transaction (CAD $0.50). In December 2015, we determined that WMDs lack of operating activities during 2015 resulted in a significant adverse effect on our carrying value of these securities (an impairment indicator) and accordingly, we recorded an other-than-temporary impairment charge of $388,475 and included this amount in loss on investments in non-marketable securities in our consolidated statements of operations. The remaining balance, $205,275, or $0.17 per share, was determined based on the consideration we received in our subsequent sale of 1,100,000 WMD shares in March 2016, and this amount is classified as investment in non-marketable equity securities on our consolidated balance sheets. See also Note 20, Subsequent Events.



The warrants we received entitled us to purchase WMD shares for CAD $0.50 (USD $0.46 on the date of the related agreement) each for a period of six months from the date the warrant was issued.



The WMD warrants were recorded at $0.10 per warrant utilizing the Black Scholes option pricing model and the following assumptions on the date of valuation:



|                        |  |  |      |  
|----------------------- |  |  | ---- | -
|Risk free interest rate |  |  | 0.60 | %
|Expected term (years)   |  |  | 0.5  |  
|Expected volatility     |  |  | 70   | %
|Expected dividends      |  |  | 0    | %





F-15



---





UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





On December 9, 2014, the 3,000,000 WMD warrants expired unexercised and we recorded a $300,000 loss on investment in non-marketable equity securities in our consolidated statements of operations.



NOTE 5  PREPAID EXPENSES



Our prepaid expenses consist of:



|                                    |  |              |        |  |      |   |         | 
|----------------------------------- |  | ------------ | ------ |  | ---- | - | ------- | 
|                                    |  | December 31, |       
|                                    |  | 2015         |        |  | 2014 |  
|Prepaid investor relations services |  | $            | 1,667  |  |      | $ | 121,500 | 
|Prepaid licensing fees              |  |              | 35,000 |  |      |   | 39,000  | 
|Other prepaid services and fees     |  |              | 19,674 |  |      |   | 16,900  | 
|                                    |  | $            | 56,341 |  |      | $ | 177,400 | 



NOTE 6  INTANGIBLES



Our intangible assets are comprised of provisional patent applications and applications for a design mark and trademarks. Our intangible assets will be amortized on a straight-line basis over estimated useful lives of 20 years for patents and 10 years for design marks and trademarks once the applications are approved. Costs associated with applications that are not approved will be expensed in the period that the application is rejected or abandoned.



NOTE 7  EQUITY METHOD INVESTMENTS



Our equity method investments consist of:



|                                                                  |  |              |        |  |      |   |         | 
|----------------------------------------------------------------- |  | ------------ | ------ |  | ---- | - | ------- | 
|                                                                  |  | December 31, |       
|                                                                  |  | 2015         |        |  | 2014 |  
|Lone Mountain Partners, LLC  25% interest                        |  | $            |       |  |      | $ | 50,000  | 
|Cannabinoid Research & Development Company Limited  50% interest |  |              | 88,000 |  |      |   | 88,000  | 
|Total equity method investments                                   |  | $            | 88,000 |  |      | $ | 138,000 | 



Lone Mountain



On August 14, 2014, we acquired a 25% membership interest in Lone Mountain Partners, LLC, (Lone Mountain) for $50,000 and a commitment to provide future services, including, but not limited to, assisting with the application to obtain licenses to operate a medical marijuana entity in Nevada and to provide  standard operating procedures, security protocols, extract processing and equipment design, cultivation and processing center management, staffing and assistance with ongoing management of Lone Mountain. During the second half of 2014, we advanced Lone Mountain $40,900 for license application fees. As of December 31, 2014, Lone Mountain did not have any operations or operating activities. We accounted for our $50,000 cash contribution as an equity method investment and the $40,900 advance as amounts due from related parties on our consolidated balance sheets.



During the first half of 2015, Lone Mountain incurred operating losses in excess of $400,000. We recognized our 25% share of these losses up to the carrying amount of our equity method investment and advances to Lone Mountain and included this total $90,900 expense in equity in net loss of unconsolidated affiliate in our consolidated statements of operations.



We entered into a settlement agreement effective July 16, 2015, as amended on September 9, 2015, whereby we transferred our 25% equity interest in LMP to one of the LMP members in exchange for a mutual release from all claims against us, LMP and the other LMP members. This transaction did not impact our consolidated financial statements as we had previously written off our investment in and advances to LMP.



CRD



On August 15, 2014, we acquired a 50% interest in Cannabinoid Research & Development Company Limited (CRD), a Jamaican company, in exchange for 40,000 shares of our common stock valued at $88,000 based on the previous days closing price of our stock. We also committed to provide expertise on design-build, genetics, cultivation, production, processing, productizing, labeling, packaging, marketing, branding and distribution of products, as well as use of our intellectual property in the operations of CRD. As of December 31, 2015, CRD did not have any operations or operating activities. We accounted for this $88,000 as an Equity method investment on our consolidated balance sheets.



F-16



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UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 8  ACCRUED EXPENSES



Our accrued expenses consist of:



|                          |  |              |         |  |      |   |         | 
|------------------------- |  | ------------ | ------- |  | ---- | - | ------- | 
|                          |  | December 31, |        
|                          |  | 2015         |         |  | 2014 |  
|Accrued consulting fees   |  | $            | 110,000 |  |      | $ | 110,000 | 
|Accrued wages and related |  |              | 629,780 |  |      |   | 433,963 | 
|Accrued interest expense  |  |              | 101,185 |  |      |   | 6,832   | 
|Accrued other expenses    |  |              | 87,568  |  |      |   |        | 
|Total accrued expenses    |  | $            | 928,533 |  |      | $ | 550,795 | 



NOTE 9  FAIR VALUE MEASUREMENTS AND DERIVATIVE LIABILITIES



The following table provides the liabilities carried at fair value measured on a recurring basis as of December 31, 2015:



|                       |         |   |         |   |         |  |       |         |  |   |         | 
|---------------------- | ------- | - | ------- | - | ------- |  | ----- | ------- |  | - | ------- | 
|                       | Level 1 |   | Level 2 |   | Level 3 |  | Total |        
|Derivative liabilities | $       |  |         | $ |        |  | $     | 383,581 |  | $ | 383,581 | 



We did not have any liabilities carried at fair value measured on a recurring basis as of December 31, 2014.



2015 Derivative Liabilities



We valued our derivative liabilities related to embedded conversion features applicable to our borrowings of $381,000 under our 2015 convertible notes payable (see Note 12 below) and accrued interest payable of $5,121 thereon in accordance with fair value measurement guidelines. For the year ended December 31, 2015, the following table reconciles the beginning and ending balances for our financial instruments that are carried at fair value measured on a recurring basis:



|                                                                                                          |  |   |         | 
|--------------------------------------------------------------------------------------------------------- |  | - | ------- | 
|Derivative liabilities as of December 31, 2014                                                            |  | $ |        | 
|Additions to derivative liabilities for convertible debt conversion features recorded as debt discount    |  |   | 355,293 | 
|Additions to derivative liabilities for interest payable conversion features recorded as interest expense |  |   | 4,695   | 
|Loss on revaluation of derivative liabilities during the year                                             |  |   | 23,593  | 
|Derivative liabilities as of December 31, 2015                                                            |  | $ | 383,581 | 



The estimated fair value of the derivative liabilities related to our 2015 convertible notes payable was measured as the aggregate estimated fair value of each component of the compound embedded derivative liabilities (see Note 12 below), based on Level 2 and Level 3 inputs, using a binomial lattice pricing model. Changes in the fair value of the compound embedded derivative liability at each reporting date are included in gain/ (loss) on derivative liabilities in our consolidated statement of operations.



2014 Derivative Liability



We valued our derivative liability related to embedded conversion features applicable to our initial borrowing of $282,500 under the Typenex convertible note payable (see Note 12 below) and accrued interest payable of $28,473 thereon in accordance with the Level 3 guidelines. For the year ended December 31, 2014, the following table reconciles the beginning and ending balances for our financial instruments that are carried at fair value measured on a recurring basis:



|                                                                                                       |  |   |          |  
|------------------------------------------------------------------------------------------------------ |  | - | -------- | -
|Derivative liability as of December 31, 2013                                                           |  | $ |         |  
|Additions to derivative liability for convertible debt conversion feature recorded as debt discount    |  |   | 151,937  |  
|Additions to derivative liability for interest payable conversion feature recorded as interest expense |  |   | 15,320   |  
|Gain on revaluation of derivative liability during the year                                            |  |   | (6,099   | )
|Settlement of derivative liability on December 29, 2014                                                |  |   | (161,158 | )
|Derivative liability as of December 31, 2014                                                           |  | $ |         |  





F-17



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UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





The fair values of embedded conversion features issued with our Typenex convertible note and accrued interest payable were estimated using the Black-Scholes option pricing model. The key inputs to this valuation model during the year ended December 31, 2014, were as follows:



|                        |              
|----------------------- | -------------
|Risk-free interest rate | 0.43%  0.72%
|Dividend yield          |             
|Volatility              | 146%  172%  
|Expected life in years  | 1.72  2.09  
|Exercise price          | $3.00        



NOTE 10  DEFERRED REVENUE



Our deferred revenue consists of:



|                                         |  |              |          |   |      |   |          |  |  |  |  |  | 
|---------------------------------------- |  | ------------ | -------- | - | ---- | - | -------- |  |  |  |  |  | 
|                                         |  | December 31, |         
|                                         |  | 2015         |          |   | 2014 |  
|Deferred revenue  WeedMD                |  | $            | 563,750  |   |      | $ | 743,750  | 
|Deferred revenue - FoxBarry              |  |              | 200,000  |   |      |   | 200,000  | 
|                                         |  |              | 763,750  |   |      |   | 943,750  | 
|Less  current portion                   |  |              | (380,000 | ) |      |   | (500,000 | 
|Deferred revenue, net of current portion |  | $            | 383,750  |   |      | $ | 443,750  | 



As described in Note 4 above, on September 9, 2014, we received 1,187,500 common shares and 3,000,000 warrants to purchase common shares of WMD in exchange for future consulting services and use of our intellectual property. We recorded the $893,750 fair value of these securities as deferred revenue and we recognized $150,000 of this amount as revenue during the period July 1, 2014 through December 31, 2014, based upon our initial three year estimate of the service period involved. Based on recent discussions with WMD, we now expect to deliver the remaining consulting services and use of our intellectual property to WMD on a relatively consistent monthly basis during the four year period January 1, 2015 through December 31, 2018. Accordingly, we are now recognizing $15,000 of deferred revenue per month. During the years ended December 31, 2015 and 2014, we recognized $180,000 and $150,000, respectively, of revenue applicable to this arrangement. At December 31, 2015, we expect to recognize $180,000 of the remaining $563,750 WMD deferred revenue during the next twelve months and accordingly, we have classified the $180,000 as a current liability on our consolidated balance sheets.



On December 28, 2014, we entered into a royalty and consulting services agreement with FoxBarry Farms, LLC (FoxBarry) whereby we received a $200,000 prepaid royalty payment from FoxBarry. At the time, we planned to recognize deferred royalty revenue based on actual applicable sales as defined in the agreement. During the years ended December 31, 2015 and 2014, we did not recognize any deferred revenue related to this agreement. In August 2015, we discontinued providing consulting services to FoxBarry as our initial project with FoxBarry was abandoned due to operational issues. At the same time we entered into discussions with FoxBarry to earn the $200,000 prepaid royalty through new projects or as a potential termination fee associated with our original agreement. We have classified the $200,000 as a current liability on our consolidated balance sheets as we expect to recognize this amount during the next twelve months.



NOTE 11  NOTES PAYABLE



Our notes payable consist of:



|                       |  |              |         |  |      |   |         | 
|---------------------- |  | ------------ | ------- |  | ---- | - | ------- | 
|                       |  | December 31, |        
|                       |  | 2015         |         |  | 2014 |  
|Note payable - WeedMD  |  | $            | 175,000 |  |      | $ | 175,000 | 
|Note payable  Slainte |  |              | 600,000 |  |      |   | 600,000 | 
|Total notes payable    |  | $            | 775,000 |  |      | $ | 775,000 | 



On July 7, 2014, we issued a $175,000, unsecured, demand promissory note bearing interest at 5% to WeedMD for cash used in our business development activities. Interest expense during the years ended December 31, 2015 and 2014, applicable to this note was $8,750 and $4,267, respectively. Accrued interest payable at December 31, 2015 and 2014 was $13,017 and $4,267, respectively, and these amounts are included in accrued expenses on our consolidated balance sheets.



F-18



---





UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





On December 18, 2014, we issued a $600,000 unsecured promissory note (the Slainte Note) bearing interest at 12% to Slainte Ventures, LLC (Slainte). The principal and accrued interest were due on the earlier of December 17, 2015, or  upon the closing of certain capital raising transactions as described in the note. The default rate of interest under the note is 18%. Debt issuance costs of $13,500 were immediately recognized as interest expense as, at the time, we expected to close on a capital raising transaction in early 2015.  Additional interest expense during the years ended December 31, 2015 and 2014, applicable to this note was $80,482 and $2,565, respectively. Accrued interest payable at December 31, 2015 and 2014, was $83,047 and $2,565, respectively.



On October 6, 2015, we borrowed funds from a third party and did not apply the borrowed funds to the Slainte Note resulting in a default under the terms of the note. On March 18, 2016, we received a default waiver from Slainte as further described in Note 20, Subsequent Events.



NOTE 12  CONVERTIBLE NOTES PAYABLE



2015 Convertible Notes



From time to time during 2015, we issued convertible promissory notes (the 2015 Notes) to unaffiliated third parties. The net proceeds from these transactions are used for general working capital purposes. The difference between the face amount of the 2015 Notes and the net proceeds is recorded as deferred financing costs on our consolidated balance sheets if such difference is the result of payments related to debt issuance costs. Deferred financing costs are amortized on a straight-line basis, which approximates the effective interest rate method, during the first 180 days that the 2015 Notes are outstanding and this amortization is included in interest expense in our consolidated statements of operations.



The following table summarizes our convertible promissory notes issued during the year ended December 31, 2015:



|                                                 |                                |                           |                |                |                         |                        |                        |                       |  |           |           
|------------------------------------------------ | ------------------------------ | ------------------------- | -------------- | -------------- | ----------------------- | ---------------------- | ---------------------- | --------------------- |  | --------- | ----------
|Issue Date                                       | Issued to                      |                           | Maturity 
Date | Interest 
Rate | Default 
Interest 
Rate | Base 
Conversion 
Rate | VCR
Look 
back 
Period | VCR
Calculated 
Using |  | Principal
|10/6/2015                                        | Vis Viers Group, Inc.          | Unsecured                 | 6/30/2016      | 8%             | 22%                     | 58%                    | 10 days                | 3 lowest closing bids |  | $         | 59,000.00 
|10/12/15                                         | JSJ Investments Inc.           | Unsecured                 | 7/8/2016       | 12%            | 18%                     | 55%                    | 10 days                | 5 lowest trades       |  |           | 102,000.00
|12/9/15                                          | Tangiers Investment Group, LLC | Secured by Certain Assets | 12/8/2016      | 10%            | 20%                     | 55%                    | 10 days                | 3 lowest closing bids |  |           | 220,000.00
|Total principal outstanding at December 31, 2015 |                                | $                         | 381,000.00    



The 2015 Notes, including accrued interest payable, may be converted into shares of our common stock at the Conversion Price, as defined below, in whole, or in part, at any time beginning 180 days after the date of issuance, at the option of the holder (the Conversion Feature).



The Conversion Price is equal the Base Conversion Rate specified in the table above multiplied by the Variable Conversion Rate (VCR) which is equal to the average of the number of lowest trading prices or closing bid prices of our common stock (specified in the table above) during the ten trading day period prior to the date of conversion divided by the closing price of our common stock on the day of conversion.



Both of these conversion rates results in a beneficial conversion features (BCF) recorded as unamortized convertible debt discount which is required to be valued and amortized to interest expense over the term of the Note. We amortize our convertible debt discount on a straight-line basis, which approximates the effective interest rate method, during the first 180 days that each 2015 Note is outstanding and this amortization is included in amortization of debt discount in our consolidated statements of operations. If a 2015 Note is repaid during the first 180 days, the remaining unamortized deferred financing costs and unamortized debt discount are expensed on the date of repayment.





F-19



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UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





The 2015 Notes are convertible into an unlimited number of unregistered, restricted common shares (Unlimited Shares Feature). The difference between the closing price of our common stock and the VCR is referred to as the Variable Conversion Rate Differential (VCRD). Both the Unlimited Shares Feature and the VCRD meet the definition of an embedded derivative and together are referred to as a compound embedded derivative liability or, hereafter, simply a derivative liability.



In accordance with U.S. GAAP, our derivative liabilities are recorded at fair value on the date of issuance and subsequently remeasured to fair value each reporting period with any change in fair value being recognized as gain (loss) on derivative liabilities in our consolidated statement of operations.



Similarly, accrued interest payable applicable to the 2015 Notes is convertible into shares of our our common stock, without limit, at the same Conversion Price. The fair value of the derivative liabilities applicable to accrued interest payable is measured and recognized at each reporting date as derivative liabilities with a corresponding charge to interest expense.  As noted above, all derivative liabilities are re-measured in subsequent reporting periods with any change in fair value being included in gain (loss) on derivative liabilities.



The 2015 Notes also contain prepayment options whereby we may, during the first 180 days that each note is outstanding, prepay the note by paying prepayment premiums ranging from 10% to 40% of the principal then outstanding depending on the date of prepayment.



In general, per the terms of our 2015 Notes, The note holders may not make any conversions that would result in the note holder holding more than 9.99% of our issued and outstanding common stock at any one time.



At December 31, 2015, we have reserved 10.2 million shares of our authorized but unissued common stock for potential conversion of the 2015 Notes.



Should we default on a conversion or repayment of a 2015 Note, the note, accrued interest and default penalties and fees are immediately due and payable.  The minimum default penalty amount ranges from 25% to 50% (or more, under certain circumstances) times the then outstanding principal and unpaid interest.



During the year ended December 31, 2015, we recorded deferred financing fees of $41,100 in connection with the issuance of our 2015 Notes and we recognized $8,700 of amortization of deferred financing costs during the year ended December 31, 2015. This amount is included in interest expense in our consolidated statements of operations.



The aggregate fair value of the derivative liabilities applicable to our 2015 Notes on the dates of issuance was $355,293 and was recorded as derivative liabilities on our consolidated balance sheets. The related BCF debt discount was recorded as a reduction to our convertible notes payable on our consolidated balance sheets. During the year ended December 31, 2015, we recognized $82,500 of amortization related to the 2015 Notes and recorded this amount as amortization of debt discount in our consolidated statements of operations.



We recognized $5,121 of interest expense applicable to our 2015 Notes during the year ended December 31, 2015, and included this amount of accrued interest payable as accrued expenses on our consolidated balance sheets. During the same period, we recorded an additional $4,694 of interest expense and an increase to our derivative liabilities related to the recognition of the BCF applicable to the $5,121 of interest payable.



During the year ended December 31, 2015, we recognized $82,500 of BCF debt discount amortization and recorded this as an increase to our convertible notes payable, net of debt discount on our consolidated balance sheets.



2014 Typenex Note



On August 13, 2014, we entered into a Securities Purchase Agreement with Typenex Co-Investment, LLC ("Typenex"), for the sale of a 10% convertible promissory note (the Typenex Note) in the principal amount of $1,657,500 (the Closing Amount) convertible into shares of our common stock. The Typenex Note had an original issue discount (OID) of $150,000. Typenex retained $7,500 of the Closing Amount for due diligence and legal bills related to the transaction and paid $25,000 on our behalf to a third party for brokerage fees (together, the Fees). The financing closed on August 13, 2014 (the Closing Date). The Typenex Note was secured by all of our assets.



On August 13, 2014, in conjunction with the $1,657,500 Typenex Note, we received five, unsecured, $250,000 Investor Notes bearing interest at 8% per annum, totaling $1,250,000 that were scheduled to mature with respect to principal and interest on September 13, 2016. On December 29, 2014, we settled the amounts owing under the Typenex Note and the amounts owed to us under the Investor Notes as more fully described in below.



F-20



---





UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





During the year ended December 31, 2014, we recognized $37,807 of interest income applicable to these Investor Notes.



The Typenex Notes interest rate was 10% per annum. All interest and principal was required to be paid twenty-five months after the date of the first borrowing under the Typenex Note (the Maturity Date). The outstanding balance on the Typenex Note was convertible into our common stock, at Typenexs option, at $3.00 per share (the Optional Conversion).



The Typenex Note also contained repayment requirements beginning six months after the first borrowing under the Typenex Note. The repayment requirements gave us the option of making periodic repayments in cash or with shares of our common stock at a price discounted to market in accordance with the terms of the Typenex Note.



In addition, we issued to Typenex warrants (the Typenex Warrants) to purchase 997,692 shares of our common stock, subject to adjustment in the event of a cashless exercise, as defined in the Typenex Warrants. Warrant #1 to Purchase Shares of Common Stock (Typenex Warrant #1) for 170,044 shares was immediately exercisable with the remainder (Typenex Warrants #2 - #6) only becoming exercisable, in five tranches, if and when the Investor Notes were paid. The Typenex Warrants were exercisable at $3.00 per share (the Exercise Price) until August 31, 2017, on a cash or cashless basis. Under the terms of the Typenex Warrants, if we, at any time while the Typenex Warrants were outstanding, sell or issue our common stock or securities convertible into or exercisable for shares of our common stock, including common stock issued under the Typenex Note, at an effective price per share less than the Exercise Price, then, subject to a few exceptions set forth in the Typenex Warrants, the Exercise Price will be reduced to such lower price provided that the number of shares of common stock issuable under the Typenex Warrants could not exceed a number of shares equal to three times the number of shares of common stock issuable under the Typenex Warrants as of the Closing Date.



On August 15, 2014, we received net cash proceeds from our initial borrowing under the Typenex Note of $225,000 as follows: total initial borrowing of $282,500 less the $32,500 of Fees and less $25,000 of OID applicable to the initial borrowing. We expensed the Fees immediately as interest expense as the initial borrowing and all subsequent tranches were immediately convertible into our common stock by the lender.



With regards to our $282,500 initial borrowing, on August 15, 2014, we recorded the $25,000 of OID plus the $118,373 fair value of the Typenex Warrant #1, plus $139,127 of the $151,937 fair value of the initial borrowing BCF, or, in total, $282,500, as debt discount and recorded the excess, $12,810, as loss on origination of derivative liability in our consolidated statements of operations. We were amortizing the $282,500 debt discount associated with the initial borrowing on a straight line basis, which approximates the effective interest method, over the nine month repayment term of the initial borrowing.



With regards to the remaining $1,375,000 liability owed under the Typenex Note, we recorded the remaining $125,000 of OID as debt discount. We were amortizing the $125,000 debt discount on a straight line basis, which approximates the effective interest method, over the twenty-five month term of the Typenex Note. We also recorded the $576,152 fair value of the Typenex Warrants #2 - #6 as debt discount. Debt discount amortization relating to these warrants would be recognized on a straight line basis over the term of each future borrowing under the Typenex Note.



On December 29, 2014, we paid off the Typenex Note and accrued interest thereon and we repurchased and cancelled the Typenex Warrants #2 - #6 for the purchase of 827,648 of our shares of common stock held by Typenex. Principal and interest owed to us under the Investor Notes were offset against the principal and interest we owed to Typenex under the Typenex Note and, in addition, we paid Typenex $381,714 in cash. We removed the assets and liabilities, including the derivative liability related to the Typenex Note and interest payable conversion features, from our consolidated balance sheets and reduced our common stock balance by the amount previously assigned to the Typenex Warrants #2 - #6 and recorded a loss on extinguishment of debt and repurchase of warrants as follows:



|                                     |  |  |  |  |  |   |            |  
|------------------------------------ |  |  |  |  |  | - | ---------- | -
|Convertible note payable             |  |  |  |  |  | $ | 1,657,500  |  
|Less: unamortized discount           |  |  |  |  |  |   | (822,250   | )
|Accrued interest payable             |  |  |  |  |  |   | 63,326     |  
|Derivative liability                 |  |  |  |  |  |   | 161,158    |  
|Typenex Warrants #2 - #6 repurchased |  |  |  |  |  |   | 576,152    |  
|Less: investor notes receivable      |  |  |  |  |  |   | (1,250,000 | )
|Less: accrued interest receivable    |  |  |  |  |  |   | (37,807    | )
|Less: cash paid                      |  |  |  |  |  |   | (381,714   | )
|Loss on extinguishment of debt       |  |  |  |  |  | $ | 33,635     |  



During the year ended December 31, 2014, we recognized $161,402 of debt discount amortization and interest expense totaling $63,326 applicable to the Typenex Note.





F-21



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UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





During the year ended December 31, 2014, the fair value of the BCF applicable to Typenex Note accrued interest was $15,320 and this amount was recorded as interest expense and an increase to our derivative liability in our consolidated financial statements.



NOTE 13  NOTES PAYABLE, RELATED PARTIES



On September 30, 2013, we issued a Convertible Note (the "Convertible Note") for $50,000 to NYX Capital Advisors, Inc. (NYX), an entity owned by the husband of our former President and director, in connection with $50,000 cash paid by NYX.  The Convertible Note bears no interest and was convertible at any time, at the option of the holder, into 10,000,000 shares of our common stock at $0.005 per share.  The Convertible Note was converted into our common shares on February 24, 2014.



NOTE 14  STOCKHOLDERS DEFICIT



2014 Change of Control



On February 27, 2014, NYX and Mr. Paul Enright, our former President, entered into a Stock Purchase Agreement, pursuant to which NYX sold to Mr. Enright an aggregate of 40,000,000 shares of our common stock, representing approximately 87% of our issued and outstanding shares as of that date.



On March 26, 2014, we cancelled 41,690,000 previously outstanding shares of our common stock and issued 38,690,000 shares to Messrs. Blackmon, Ruby and Verzura, representing approximately 89% of our issued and outstanding shares as of that date.



2014 Stock Split



On March 21, 2014, we effected a four-for-one stock split of our common stock in the form of a stock dividend of three shares of common stock for each share of common stock outstanding to stockholders of record on March 19, 2014.



2014 Equity Offering



On March 26, 2014, we sold 600,000 Units for a total amount of $900,000 to 45 accredited investors. Each Unit consisted of one share of our common stock, two A Warrants and three B Warrants. Each A Warrant entitles the holder to purchase one share of our common stock at a price of $7.50 per share during the two year period commencing April 1, 2014. The A Warrants are callable once our common stock has traded at a price of at least $15.00 for 20 consecutive trading days.  Each B Warrant entitles the holder to purchase one share of our common stock at a price of $15.00 per share during the three year period commencing April 1, 2014. The B Warrants are callable once our common stock has traded at a price of at least $22.00 for 20 consecutive trading days.



2014 Change in Authorized Share Capital



Effective May 2, 2014, we increased the authorized number of our preferred shares from five million to ten million and the authorized number of our common shares from 50 million to 100 million. At the same time we also changed the par value of both our preferred and common stock from $0.001 per share to no par value per share.



Common Stock Issued For Warrant Outstanding



On February 10, 2015, we issued 621,000 shares of our common stock, valued at $987,390 based on the previous days closing price, to Typenex in exchange for the return of Typenex Warrant #1 that we issued to Typenex on August 13, 2014, as part of a financing arrangement described in Note 12 above.



On February 10, 2015, we calculated the fair value of Typenex Warrant #1 to be $218,788, or approximately $1.29 per underlying share, utilizing the Black Scholes option pricing model and the following assumptions on the date of valuation:



|                        |  |   |      |  
|----------------------- |  | - | ---- | -
|Stock price             |  | $ | 1.59 |  
|Exercise price          |  | $ | 3.00 |  
|Risk free interest rate |  |   | 1.05 | %
|Expected term (years)   |  |   | 2.6  |  
|Expected volatility     |  |   | 183  | %
|Expected dividends      |  |   | 0    | %





F-22



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UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





Typenex Warrant #1 gave Typenex the right to purchase 170,044 shares of our common stock on the issuance date and provided for adjustments to the number of shares underlying the warrant upon occurrence of certain events including subsequent sales of our common stock. Our repurchase of Typenex Warrant #1 resulted in Typenex forgoing its potential right to receive shares in excess of the original 170,044 shares underlying the warrant on the issuance date. On February 10, 2015, we recorded the $987,390 fair value of the common shares issued as an increase to common stock and the $218,788 fair value of Typenex Warrant #1 reacquired and cancelled as a decrease to common stock and the difference, $768,602, as a loss on extinguishment of debt and repurchase of warrants in our consolidated statements of operations.



Common Stock Issued For Equity Method Investment



On August 25, 2014, we issued 40,000 shares of common stock valued at $88,000, based on the previous trading days closing price, as consideration for a 50% ownership interest in CRD. The $88,000 is included in equity method investments on our consolidated balance sheets.



Common Stock Issued For Services



On August 14, 2014, we issued 10,000 shares of common stock valued at $9,200, based on the previous trading days closing price, as consideration for marketing services. The $9,200 was recorded as share-based compensation expense and is included in sales and marketing expense in our consolidated statements of operations.



On August 15, 2014, we issued 20,000 shares of common stock valued at $24,800, based on the previous trading days closing price, as consideration for consulting services. The $24,800 was recorded as share-based compensation expense and is included in included in general and administrative expenses in our consolidated statements of operations.



On September 17, 2014, we issued 150,000 shares of common stock valued at $162,000, based on the previous trading days closing price, as consideration for prepaid investor relations services. The $162,000 was amortized on a straight-line basis over the 12 month term of the investor relations service agreement. During the year ended December 31, 2015 and 2014, we recorded $121,500 and $40,500, respectively, of amortization as share-based compensation expense and included this in general and administrative expenses in our consolidated statements of operations.



On October 17, 2014, we issued 100,000 shares of common stock valued at $40,000, based on the previous trading days closing price, as consideration for prepaid product distribution fees. The $40,000 is being amortized on a straight-line basis over the ten year term of the licensing and distribution agreement. During the year ended December 31, 2015 and 2014, we recorded $4,000 and $1,000, respectively, of amortization as share-based compensation expense and included this in cost of revenues in our consolidated statements of operations. The remaining $35,000 as at December 31, 2015, is included in prepaid expenses on our consolidated balance sheets.



On October 22, 2014, we issued 50,000 shares of common stock valued at $24,000, based on the previous trading days closing price, as consideration for consulting services. The $24,000 was recorded as share-based compensation expense and is included in included in general and administrative expenses in our consolidated statements of operations.



On October 24, 2014, we issued 20,000 shares of common stock valued at $11,800, based on the previous trading days closing price, as consideration for consulting services. The $11,800 was recorded as share-based compensation expense and is included in included in general and administrative expenses in our consolidated statements of operations.



On December 1, 2014, we issued 30,000 shares of common stock valued at $19,500, based on the previous trading days closing price, as consideration for prepaid consulting services. The $19,500 was recognized as share-based compensation expense as services were rendered. During the year ended December 31, 2015 and 2014, we recorded $10,579 and $8,921, respectively, of share-based compensation expense and these amounts are included in general and administrative expenses in our consolidated statements of operations.



On December 30, 2014, we issued 20,000 shares of common stock valued at $13,800, based on the previous trading days closing price, as consideration for consulting services. The $13,800 was recorded as share-based compensation expense and is included in included in general and administrative expenses in our consolidated statements of operations.



On March 2, 2015, we issued 30,000 shares of common stock valued at $42,600, based on the previous trading days closing price, as consideration for consulting services from an independent contractor. The $42,600 of share-based compensation expense is included in included in general and administrative expenses in our consolidated statements of operations.





F-23



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UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





On April 23, 2015 we issued 60,000 shares of common stock valued at $47,400, based on the previous trading days closing price, as consideration for prepaid consulting fees. The $47,400 was recognized as share-based compensation expense as services were rendered. During the year ended December 31, 2015, we recorded $47,400 of share-based compensation expense and included this amount in general and administrative expenses in our consolidated statements of operations.



On April 23, 2015, we issued 126,500 shares of common stock valued at $99,935, based on the previous trading days closing price, as consideration for prepaid corporate finance fees. The $99,935 was recognized as share-based compensation expense as services were rendered. During the year ended December 31, 2015, we recorded $99,935 of share-based compensation expense and included this amount in general and administrative expenses in our consolidated statements of operations.



On August 17, 2015 we issued 50,000 shares of common stock valued at $19,000, based on the previous trading days closing price, as consideration for prepaid consulting fees. The $19,000 was recognized as share-based compensation expense as services were rendered. During the year ended December 31, 2015, we recognized $19,000 of share-based compensation expense and included this amount in general and administrative expenses in our consolidated statements of operations.



On August 24, 2015, we issued a total of 11,000 shares of common stock valued at $5,280, based on the previous trading days closing price, as consideration for consulting services from two independent contractors. The $5,280 of share-based compensation expense is included in included in general and administrative expense in our consolidated statements of operations.



On October 19, 2015, we issued 30,000 shares of common stock valued at $12,000, based on the previous trading days closing price, as consideration for prepaid product distribution fees. The $12,000 is being amortized on a straight-line basis over the remaining nine year term of the related licensing and distribution agreement. During the year ended December 31, 2015, we recorded $375 of share-based compensation expense and included this in cost of revenues in our consolidated statements of operations. The remaining $11,625 as at December 31, 2015, is included in prepaid expenses on our consolidated balance sheets.



Warrants:



The following table summarizes our share warrants outstanding as of December 31, 2015 and 2014:



|                                          |  |                         |           |      |                                 |   |                  |  |           |                                 |  |   |       | 
|----------------------------------------- |  | ----------------------- | --------- | ---- | ------------------------------- | - | ---------------- |  | --------- | ------------------------------- |  | - | ----- | 
|                                          |  | Year Ended December 31, |          
|                                          |  | 2015                    |           | 2014 |                                
|                                          |  | Number of
Shares        |           |      | Weighted
Average
Exercise
Price |   | Number of
Shares |  |           | Weighted
Average
Exercise
Price | 
|Warrants outstanding, beginning of period |  |                         | 3,170,044 |      |                                 | $ | 11.52            |  |          |                                 |  | $ |      | 
|Issued                                    |  |                         |          |      |                                 |   |                 |  | 3,997,692 |                                 |  |   | 9.75  | 
|Exercised                                 |  |                         |          |      |                                 |   |                 |  |          |                                 |  |   |      | 
|Repurchased and cancelled                 |  |                         | (170,044  | )    |                                 |   | 3.00             |  | (827,648  | )                               |  |   | 3.00  | 
|Expired                                   |  |                         |          |      |                                 |   |                 |  |          |                                 |  |   |      | 
|Warrants outstanding, end of period       |  |                         | 3,000,000 |      |                                 | $ | 12.00            |  | 3,170,044 |                                 |  | $ | 11.52 | 
|Warrants exercisable, end of period       |  |                         | 3,000,000 |      |                                 | $ | 12.00            |  | 3,170,044 |                                 |  | $ | 11.52 | 



The weighted-average remaining contractual life for warrants outstanding and exercisable at December 31, 2015, is 0.25 years. The aggregate intrinsic value of warrants outstanding and exercisable at December 31, 2015 is $0.



As described in Note 12 above, on August 13, 2014, we issued Typenex warrants to purchase 997,692 of our common shares and recorded the $694,525 fair value of these warrants as an increase to common stock on our consolidated balance sheets. On December 29, 2014, we repurchased 827,648 of these warrants, cancelled them and recorded a $576,152 decrease in common stock.





F-24



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UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





The warrants were recorded at approximately $0.70 per warrant utilizing the Black Scholes option pricing model and the following assumptions on the date of valuation:



|                        |  |   |      |  
|----------------------- |  | - | ---- | -
|Stock price             |  | $ | 1.03 |  
|Exercise price          |  | $ | 3.00 |  
|Risk free interest rate |  |   | 0.88 | %
|Expected term (years)   |  |   | 3.05 |  
|Expected volatility     |  |   | 146  | %
|Expected dividends      |  |   | 0    | %



2004 Equity Incentive Plan



On November 20, 2014, our board of directors approved our 2014 Stock Incentive Plan (the Plan) and the Plan became effective on November 19, 2015. The Plan provides officers, directors, selected employees and outside consultants an opportunity to acquire or increase a direct ownership interest in our operations and future success. Our board of directors currently administers the Plan and makes all decisions concerning which officers, directors, employees and other persons are granted awards, how many to grant to each recipient, when awards are granted, the terms and conditions applicable to awards, how the Plan should be interpreted, whether to amend or terminate the Plan and whether to delegate administration of the Plan to a committee. A maximum of 4,000,000 common shares are subject to the Plan. The Plan provides for the grant of stock options, stock awards, restricted stock units and stock appreciation rights. Stock options may be non-qualified stock options or incentive stock options except that stock options granted to outside directors, consultants or advisers providing services to us shall in all cases be non-qualified stock options. The Plan will terminate on November 20, 2024, unless the administrator terminates the Plan earlier. As of December 31, 2015, 3,400,000 common shares were available for issue under the Plan.



Stock Options



On January 9, 2015, we awarded 200,000 stock options to each of Messrs. Blackmon, Verzura and Ruby under our 2014 Stock Incentive Plan. The options were fully vested at the time of grant and give the option holder the right to purchase shares of our common stock at $0.70 per share during the ten year term of the option.



We calculated the fair value of each option to be approximately $0.70 per option utilizing the Black Scholes option pricing model and the following assumptions on the date of valuation:



|                        |  |   |      |  
|----------------------- |  | - | ---- | -
|Stock price             |  | $ | 0.70 |  
|Exercise price          |  | $ | 0.70 |  
|Risk free interest rate |  |   | 1.98 | %
|Expected term (years)   |  |   | 10.0 |  
|Expected volatility     |  |   | 173  | %
|Expected dividends      |  |   | 0    | %



At December 31, 2014, the fair value of these 600,000 options totaling $417,664 was included in accrued expenses on our consolidated balance sheets. On January 9, 2015, the option grant date, we increased common stock and decreased accrued expenses by this amount to account for the issuance of the 600,000 options on that date.



The following table summarizes our stock options outstanding as of December 31, 2015:



|                                               |  |                              |         |  |                                 |   |      | 
|---------------------------------------------- |  | ---------------------------- | ------- |  | ------------------------------- | - | ---- | 
|                                               |  | Year Ended December 31, 2015 |        
|                                               |  | Number of
Shares             |         |  | Weighted
Average
Exercise
Price |  
|Stock options outstanding, beginning of period |  |                              |        |  |                                 | $ |     | 
|Issued                                         |  |                              | 600,000 |  |                                 |   | 0.70 | 
|Exercised                                      |  |                              |        |  |                                 |   |     | 
|Expired                                        |  |                              |        |  |                                 |   |     | 
|Stock options outstanding, end of period       |  |                              | 600,000 |  |                                 | $ | 0.70 | 
|Stock options exercisable, end of period       |  |                              | 600,000 |  |                                 | $ | 0.70 | 





F-25



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UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





The weighted-average remaining contractual life for stock options outstanding and exercisable at December 31, 2015, is 9.0 years. The aggregate intrinsic value of options outstanding and exercisable at December 31, 2015 is $0.



NOTE 15  SHARE-BASED COMPENSATION



Share-based Compensation



We recognize share-based compensation expense in cost of revenues, sales and marketing expenses, R&D expenses and general and administrative expenses based on the fair value of common shares issued for services. In addition, we accrue share-based compensation expense for estimated share-based awards earned during the years ended December 31, 2015 and 2014, under our 2014 Equity Incentive Plan. Share-based compensation expense for the years ended December 31, 2015 and 2014 is as follows:



|                                                                                       |  |                         |           |  |      |   |         | 
|-------------------------------------------------------------------------------------- |  | ----------------------- | --------- |  | ---- | - | ------- | 
|                                                                                       |  | Year Ended December 31, |          
|                                                                                       |  | 2015                    |           |  | 2014 |  
|Share-based compensation expense  shares issued for services                          |  | $                       | 47,880    |  |      | $ | 83,600  | 
|Share-based compensation expense  amortization of shares issued for prepaid services  |  |                         | 302,789   |  |      |   | 50,421  | 
|Share-based compensation expense  accrual of shares to be issued for services         |  |                         | 67,500    |  |      |   |        | 
|Share-based compensation expense  accrual of estimated share-based awards to officers |  |                         | 612,512   |  |      |   | 417,664 | 
|                                                                                       |  | $                       | 1,030,681 |  |      | $ | 551,685 | 



NOTE 16 COMMITMENTS AND CONTINGENCIES



Contractual Obligations and Commercial Commitments



On May 6, 2014, we entered into a consultancy agreement with two third party consultants that has a nine month term which can be renewed and/or extended by mutual agreement; currently, the renewal of the agreement is under negotiations. The agreement provides for a $50,000 payment at signing, which has been paid, and for three more $50,000 payments (a total of $200,000) and the issuance of 100,000 shares of our common stock upon the achievement of certain goals as set forth in appendix II of the agreement. During the years ended December 31, 2015 and 2014, we recognized $0 and $160,000 of expense applicable to this agreement and this amount is included in R&D expenses in our consolidated statements of operations. At December 31, 2015 and 2014, the project was approximately 80% complete and $110,000 is included in accrued expenses on our consolidated balance sheets. The value of the 100,000 shares will be recognized upon achievement of the goals. The project has been suspended and it is unknown when it will resume.



Legal Proceedings



We are involved in disputes and legal actions arising in the normal course of our business. There have been no material developments in legal proceedings in which we are involved during the year ended December 31, 2015.



NOTE 17  INCOME TAXES



The Internal Revenue Code (IRC) allows net operating losses (NOL's) to be carried forward and applied against future profits for a period of twenty years. The change of ownership following our merger with MySkin may limit our ability to utilize these NOLs under the terms of IRC Section 381.



We did not provide any current or deferred federal income tax provision or benefit for any of the periods presented in our consolidated financial statements because we have experienced losses since our inception. When it is more likely than not, that a tax asset cannot be realized through future income, we must record an allowance against any potential future tax benefit. We provided a full valuation allowance against our net deferred tax assets, consisting of net operating loss carry forwards, because we determined that it is more likely than not that we will not earn income sufficient to realize the deferred tax assets during the carry forward periods.



We have not taken a tax position that, if challenged, would have a material effect on our consolidated financial statements for the years ended December 31, 2015 and 2014, as defined under ASC 740. We did not recognize any adjustment to our liability for uncertain tax positions and therefore did not record any adjustment to the beginning balance of our accumulated deficit on our consolidated balance sheets.





F-26



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UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





Our provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before provision for income taxes. The sources and tax effects of the differences for the periods presented are as follows:



|                                          |  |                          |   |  |      |  
|----------------------------------------- |  | ------------------------ | - |  | ---- | -
|                                          |  | Years Ended December 31, |  
|                                          |  | 2015                     |   |  | 2014 |  
|Statutory U.S. federal tax rate           |  | 39%                      |   |  | 39%  |  
|Effect of increase in valuation allowance |  | (39%                     | ) |  | (39% | )
|                                          |  | %                       |   |  | %   |  



Changes in our cumulative net deferred tax assets consist of the following:



|                       |  |              |            |   |      |   |          |  
|---------------------- |  | ------------ | ---------- | - | ---- | - | -------- | -
|                       |  | December 31, |           
|                       |  | 2015         |            |   | 2014 |  
|Net loss carry forward |  | $            | 1,124,511  |   |      | $ | 962,662  |  
|Valuation allowance    |  |              | (1,124,511 | ) |      |   | (962,662 | )
|                       |  | $            |           |   |      | $ |         |  



A reconciliation of our income taxes computed at the statutory rate is as follows:



|                              |  |                          |            |   |      |   |          |  
|----------------------------- |  | ------------------------ | ---------- | - | ---- | - | -------- | -
|                              |  | Years Ended December 31, |           
|                              |  | 2015                     |            |   | 2014 |  
|Tax benefit at statutory rate |  | $                        | 1,124,511  |   |      | $ | 962,662  |  
|Valuation allowance           |  |                          | (1,124,511 | ) |      |   | (962,662 | )
|                              |  | $                        |           |   |      | $ |         |  



NOTE 18 RELATED PARTY TRANSACTIONS



Affiliate Customer



During 2010, Messrs. Blackmon and Verzura have made loans to, or equity investments in, one of our customers and, effective June 30, 2015, Messrs. Blackmon and Verzura had completely divested themselves of those interests. As Messrs. Blackmon and Verzura may have had significant influence on management or operating polices of the customer until June 30, 2015; we have classified sales to this customer as revenues, affiliate, in our consolidated statements of operations and accounts receivable from this customer as due from related parties on our consolidated balance sheets.



Lone Mountain



During the year ended December 31, 2014, we made certain payments on behalf of Lone Mountain during the organizational phase of this venture and we classified these payments as due from related parties on our consolidated balance sheets. As further described in Note 6 above, during the first half of 2015, we expensed our $40,900 advance to Lone Mountain and included this amount in equity in net loss of unconsolidated affiliate in our consolidated statements of operations.



CRD



On April 20, 2015, we advanced CRD $5,000 and included this amount in due from related parties.



Blue River Inc.



In February 2015, Messrs. Blackmon, Verzura and Ruby formed Blue River Inc. (Blue River), a Colorado corporation in the cannabis industry that plans to manufacture and wholesale medicinal and recreational cannabis products including our Prana medicinals products. During the year ended December 31, 2015, we advanced Blue River $3,284 and included this amount in due from related parties.





F-27



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UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





Amounts due from related parties consist of:



|                               |  |              |       |  |      |   |        | 
|------------------------------ |  | ------------ | ----- |  | ---- | - | ------ | 
|                               |  | December 31, |      
|                               |  | 2015         |       |  | 2014 |  
|Affiliated customer            |  | $            |      |  |      | $ | 3,112  | 
|Lone Mountain                  |  |              |      |  |      |   | 40,900 | 
|Blue River                     |  |              | 3,284 |  |      |   |       | 
|CRD                            |  |              | 5,000 |  |      |   |       | 
|Total due from related parties |  | $            | 8,284 |  |      | $ | 44,012 | 



NOTE 19 DISCONTINUED OPERATIONS



On March 31, 2014, we sold all right, title and interest in the tangible and intangible assets, trademarks, customer lists, intellectual property and rights, which we owned and were related to the advanced skin care business. The assets were sold to MySkin Services, Inc. (MTA), a business partly owned by Ms. Stoppenhagen, our former President and director, in exchange for a $15,000 payable we owed to Ms. Stoppenhagen and/or MTA. In addition, MTA assumed all costs associated with these assets starting on March 31, 2014. See Note 1 for further detail on our change in operations.



The following details our loss from discontinued operations:



|                                                       |  |                          |   |  |      |   |         |  
|------------------------------------------------------ |  | ------------------------ | - |  | ---- | - | ------- | -
|                                                       |  | Years Ended December 31, |  
|                                                       |  | 2015                     |   |  | 2014 |  
|Revenues                                               |  | $                        |  |  |      | $ | 20,684  |  
|                                                       |  |                          |   |  |      |   |         |  
|Operating expenses:                                    |  |                          |   |  |      |   |         |  
|Selling, general and administrative                    |  |                          |  |  |      |   | 63,872  |  
|Depreciation                                           |  |                          |  |  |      |   |        |  
|Loss on disposal of assets                             |  |                          |  |  |      |   | 15,704  |  
|Total operating expenses                               |  |                          |  |  |      |   | 79,576  |  
|                                                       |  |                          |   |  |      |   |         |  
|Loss from discontinued operations, before income taxes |  |                          |  |  |      |   | (58,892 |  
|Provision for income taxes                             |  |                          |  |  |      |   |        |  
|                                                       |  |                          |   |  |      |   |         |  
|Loss from discontinued operations, net of income taxes |  | $                        |  |  |      | $ | (58,892 | )



NOTE 20  SUBSEQUENT EVENTS



On January 15, 2016, we awarded 1,050,000 stock options to each of Messrs. Blackmon and Verzura and 980,000 stock options to Mr. Ruby under our 2014 Stock Incentive Plan. The options were fully vested at the time of grant and gave the option holder the right to purchase shares of our common stock at $0.20 per share during the ten year term of the option.



We calculated the fair value of each option to be approximately $0.20 per option utilizing the Black Scholes option pricing model and the following assumptions on the date of valuation:



|                        |  |   |      |  
|----------------------- |  | - | ---- | -
|Stock price             |  | $ | 0.20 |  
|Exercise price          |  | $ | 0.20 |  
|Risk free interest rate |  |   | 2.03 | %
|Expected term (years)   |  |   | 10.0 |  
|Expected volatility     |  |   | 173  | %
|Expected dividends      |  |   | 0    | %



On March 18, 2016, we entered into an agreement with Slainte whereby we released Slainte from any and all claims relating to the Slainte Note and Slainte waived default, amended the terms and extended the maturity date of the Slainte Note until December 17, 2016, and agreed to accept a warrant in lieu of interest due on the loan.





F-28



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UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





The warrant allows Slainte to purchase 416,667 shares of our common stock; plus that number of shares of our common stock equal in number to (i) the product of the then-applicable interest rate under the Slainte Note and the amount of principal outstanding on the Note, calculated on a daily basis and paid for actual days elapsed, during the period beginning on December 18, 2015, and ending on the date on which the Note is paid in full, divided by (ii) $0.18; plus that number of shares of our common stock equal in number to (i) the product of 0.02 and the sum of the amount of principal and interest outstanding on the Note on the first day of each calendar month, beginning with February 1, 2016, divided by (ii) $0.18.



The warrant is exercisable at a price of $0.18 per share, subject to adjustment in the event of stock splits, the sale of our shares of common stock at a price below $0.18 per share or the sale of equity securities with a conversion price of less than $0.18 per share.



The warrant can be exercised at any time during the five year period following the full repayment of the loan; the exercise price can be paid in cash or through a cashless exercise feature; and the warrant grants certain registration rights to Slainte applicable to all shares of our common stock owned or controlled by Slainte, including shares issued upon exercise of the warrant.



In addition, Slainte granted us a put option, exercisable upon repayment of the loan prior to December 17, 2016, that requires Slainte to purchase from us, for $100,000, that number of shares of our common stock equal in number to (i) $100,000.00 divided by (ii) the product of 0.80% and the average price of our common stock for the 30 trading days immediately prior to the date the put option is exercised.



On March 24, 2016, an unrelated third party agreed to assume all of our obligations pursuant to the $175,000 note payable to WeedMD dated July 7, 2014, in consideration for the transfer by us of 1,100,000 shares of the common stock of WeedMD to the unrelated third party. WeedMD consented to the assumption of the loan and released us from any further liability with respect to the loan.



On March 30, 2016, we borrowed $81,978, from Slainte and used the proceeds to repay principal and accrued interest applicable to our $59,000 convertible promissory note dated October 6, 2015, to Vis Vires Group, Inc.



The loan, together with interest at 12% per year, is payable on December 30, 2016. We can prepay the loan at any time. If the loan is repaid on or before September 30, 2016, the principal amount which is being repaid will increase by 10%. If the loan is repaid after September 30, 2016, the principal amount which is being repaid will increase by 15%. The amount of the principal increase may be paid with shares of our common stock. The number of shares to be issued for such purpose will be determined by dividing the average closing price of our common stock (which in no case can be greater than $0.45) for the ten trading days preceding the prepayment date.



If the loan is not paid when due, then at any time on or before January 10, 2017, Slainte may convert the outstanding principal and interest on the loan into shares of our common stock. The number of shares to be issued on conversion will be determined by dividing the average closing price of our common stock (which in no case can be greater than $0.45) for the ten trading days preceding the conversion date by the outstanding principal and interest on the loan on the conversion date.



On April 6, 2016, we borrowed $75,000, from Slainte and used the proceeds to repay principal and accrued interest applicable to our $102,000 convertible promissory note dated October 12, 2015, to JSJ Investments Inc.



The loan, together with interest at 12% per year, is payable on December 30, 2016. We may prepay the loan at any time. If the loan is repaid on or before September 30, 2016 the principal amount which is being repaid will increase by 10%. If the loan is repaid after September 30, 2016 the principal amount which is being repaid will increase by 15%. The amount of the principal increase may be paid with shares of our common stock. The number of shares to be issued for such purpose will be determined by dividing the average closing price of our common stock (which in no case can be greater than $0.45) for the ten trading days preceding the prepayment date.



If the loan is not paid when due, then at any time on or before January 10, 2017, Slainte may convert the outstanding principal and interest on the loan into shares of our common stock. The number of shares to be issued on conversion will be determined by dividing the average closing price of our common stock (which in no case can be greater than $0.45) for the ten trading days preceding the conversion date by the outstanding principal and interest on the loan on the conversion date.





F-29



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UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





On April 6, 2016, we borrowed $25,000 from Ernest Blackmon and $25,000 from Tony Verzura and used the proceeds to repay principal and interest applicable used to our $102,000 convertible promissory note dated October 12, 2015, to JSJ Investments Inc. The loans, together with interest at 12% per year, are payable on December 30, 2016. We may prepay the loans at any time. If the loans are repaid on or before September 30, 2016, the principal amount which is being repaid will increase by 10%. If the loans are repaid after September 30, 2016, the principal amount which is being repaid will increase by 15%.



In accordance with ASC 855-10 we have analyzed its operations subsequent to December 31, 2015, to the date these consolidated financial statements were issued, and has determined that, other that as disclosed above, we do not have any material subsequent events to disclose in these consolidated financial statements.



































F-30



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SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K/A to be signed on its behalf by the undersigned, thereunto duly authorized.



|                         |                             |                        
|------------------------ | --------------------------- | -----------------------
|                         | UNITED CANNABIS CORPORATION
|                         |                             |                        
|Date: September 22, 2016 | By:                         | /s/Earnest Blackmon    
|                         |                             | Earnest Blackmon       
|                         |                             | Chief Executive Officer
|                         |                             |                        





Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual 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/Earnest Blackmon |  |                                                                                                 |  |                   
|Earnest Blackmon    |  | Chief Executive Officer, Principal Financial Officer, Principal Accounting Officer and Director |  | September 22, 2016
|                    |  |                                                                                                 |  |                   
|/s/ Chadwick Ruby   |  |                                                                                                 |  |                   
|Chadwick Ruby       |  | Director                                                                                        |  | September 22, 2016
|                    |  |                                                                                                 |  |                   
|/s/ Tony Verzura    |  |                                                                                                 |  |                   
|Tony Verzura        |  | Director                                                                                        |  | September 22, 2016