UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q /A
AMENDMENT 1



(Mark One)



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



For the quarterly period ended September
30, 2017



| | o | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | ----------------------------------------------------------------------------------



For the transition period from to



Commission file number: 000-27039



MARIJUANA COMPANY OF AMERICA, INC.

(Exact name of registrant as specified in its
charter)



|Utah                                                           |  | 98-1246221                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



1340 West Valley Parkway

Suite 205

Escondido, CA 92029

(Address of principal executive offices) (zip
code)



(888) 777-4362

(Registrant’s telephone number, including
area code)



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



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



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



|Large accelerated filer | ☐ |  | Accelerated filer         | ☐
|----------------------- | - |  | ------------------------- | -
|Non-accelerated filer   | ☐ |  | Smaller reporting company | ☒
|Emerging growth company | ☒ |  |                           |  



Indicate by check mark whether the registrant is
an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities
Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging
growth company ☒

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



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



As of November 14, 2017, there were 2,066,347,197
shares of registrant’s common stock outstanding .





Explanatory Note:

This Amendment No. 1 on
Form 10-Q/A, amends the Registrant’s Quarterly Report on Form 10-Q, filed by the Registrant on November 14, 2017 with the
Securities and Exchange Commission, to include as a material contract and exhibit, the Settlement and Mutual Release of All Claims
Agreement entered into by the Registrant and Tangiers Global, LLC on October 10, 2017. All other items remain unchanged.



1







|PART I.  | FINANCIAL INFORMATION |                                                                                                                             |   
|-------- | --------------------- | --------------------------------------------------------------------------------------------------------------------------- | --
|         |                       |                                                                                                                             |   
|         | ITEM 1.               | Financial Statements                                                                                                        |   
|         |                       |                                                                                                                             |   
|         |                       | Condensed consolidated balance sheets as of September 30, 2017 (unaudited) and December 31, 2016 (audited)                  |   
|         |                       |                                                                                                                             |   
|         |                       | Condensed consolidated statements of operations for the three and nine months ended September 30, 2017 and 2016 (unaudited) |   
|         |                       |                                                                                                                             |   
|         |                       | Condensed consolidated statement of stockholders’ deficit for the nine months ended September 30, 2017 (unaudited)          |   
|         |                       |                                                                                                                             |   
|         |                       | Condensed consolidated statements of cash flows for the nine months ended September 30, 2017 and 2016 (unaudited)           |   
|         |                       |                                                                                                                             |   
|         |                       | Notes to condensed consolidated financial statements (unaudited)                                                            |   
|         |                       |                                                                                                                             |   
|         | ITEM 2.               | Management’s Discussion and Analysis of Financial Condition and Results of Operations                                       |   
|         | ITEM 3.               | Quantitative and Qualitative Disclosures about Market Risk                                                                  |   
|         | ITEM 4.               | Controls and Procedures                                                                                                     |   
|         |                       |                                                                                                                             |   
|PART II. | OTHER INFORMATION     |                                                                                                                             |   
|         |                       |                                                                                                                             |   
|         | ITEM 1.               | Legal Proceedings                                                                                                           |   
|         | ITEM 1A.              | Risk Factors                                                                                                                |   
|         | ITEM 2.               | Unregistered Sales of Equity Securities and Use of Proceeds                                                                 |   
|         | ITEM 3.               | Defaults Upon Senior Securities                                                                                             |   
|         | ITEM 4.               | Mine Safety Disclosures                                                                                                     |   
|         | ITEM 5.               | Other Information                                                                                                           |   
|         | ITEM 6.               | Exhibits                                                                                                                    |   
|         |                       |                                                                                                                             |   
|         | SIGNATURES            |                                                                                                                             | 44







2











|MARIJUANA COMPANY OF AMERICA, INC. AND SUBSIDIARIES                                                                                                                                        
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|CONDENSED CONSOLIDATED BALANCE SHEETS                                                                                                                                                      
|                                                                                                                                                                                           
|                                                                                                                                                                                           
|                                                                                                                                                                                           
|                                                                                                                                                                                           
|ASSETS                                                                                                                                                                                     
|Current assets:                                                                                                                                                                            
|Cash                                                                                                                                                                                       
|Accounts receivable, net                                                                                                                                                                   
|Inventory                                                                                                                                                                                  
|Total current assets                                                                                                                                                                       
|                                                                                                                                                                                           
|Property and equipment, net                                                                                                                                                                
|                                                                                                                                                                                           
|Other assets:                                                                                                                                                                              
|Investments                                                                                                                                                                                
|                                                                                                                                                                                           
|Total assets                                                                                                                                                                               
|                                                                                                                                                                                           
|LIABILITIES AND STOCKHOLDERS' DEFICIT                                                                                                                                                      
|Current liabilities:                                                                                                                                                                       
|Accounts payable                                                                                                                                                                           
|Accrued compensation                                                                                                                                                                       
|Accrued interest                                                                                                                                                                           
|Notes payable, related party, net of debt discount of $22,681 and $0                                                                                                                       
|Convertible notes payable, net of debt discount of $107,597                                                                                                                                
|Warrant liability                                                                                                                                                                          
|Derivative liability                                                                                                                                                                       
|Total current liabilities                                                                                                                                                                  
|                                                                                                                                                                                           
|Long term debt:                                                                                                                                                                            
|Convertible notes payable, net of debt discount of $400,395                                                                                                                                
|Derivative liability                                                                                                                                                                       
|Total long term debt                                                                                                                                                                       
|                                                                                                                                                                                           
|Total liabilities                                                                                                                                                                          
|                                                                                                                                                                                           
|Stockholders' deficit:                                                                                                                                                                     
|Preferred stock, $0.001 par value, 50,000,000 shares authorized                                                                                                                            
|Class A preferred stock, $0.001 par value, 10,000,000 shares designated, 10,000,000 shares issued and outstanding as of September 30, 2017 and December 31, 2016                           
|Common stock, $0.001 par value; 5,000,000,000 shares authorized; 2,035,847,197 and 1,620,996,998 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively
|Additional paid in capital                                                                                                                                                                 
|Accumulated deficit                                                                                                                                                                        
|Total stockholders' deficit                                                                                                                                                                
|                                                                                                                                                                                           
|Total liabilities and stockholders' deficit                                                                                                                                                
|                                                                                                                                                                                           
|See the accompanying notes to these unaudited condensed financial statements                                                                                                               







3









|MARIJUANA COMPANY OF AMERICA, INC. AND SUBSIDIARIES                                      
|-----------------------------------------------------------------------------------------
|CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                                          
|(unaudited)                                                                              
|                                                                                         
|                                                                                         
|                                                                                         
|REVENUES:                                                                                
|Sales                                                                                    
|Cost of sales                                                                            
|                                                                                         
|Gross Profit                                                                             
|                                                                                         
|OPERATING EXPENSES:                                                                      
|Selling, general and administrative expenses                                             
|Depreciation                                                                             
|Total operating expenses                                                                 
|                                                                                         
|Net loss from operations                                                                 
|                                                                                         
|OTHER INCOME (EXPENSES):                                                                 
|Interest expense, net                                                                    
|Loss on equity investment                                                                
|Loss on change in fair value of derivative liabilities                                   
|Loss on settlement of debt                                                               
|Total other income (expense)                                                             
|                                                                                         
|Net loss before income taxes                                                             
|                                                                                         
|Income taxes (benefit)                                                                   
|                                                                                         
|NET LOSS                                                                                 
|                                                                                         
|Loss per common share, basic and diluted                                                 
|                                                                                         
|Weighted average number of common shares outstanding, basic and diluted                  
|                                                                                         
|See the accompanying notes to these unaudited condensed consolidated financial statements







4









|MARIJUANA COMPANY OF AMERICA, INC. AND SUBSIDIARIES                                      
|-----------------------------------------------------------------------------------------
|CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT                                
|NINE MONTHS ENDED SEPTEMBER 30, 2017                                                     
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Balance, December 31,2016                                                                
|Common stock issued for services rendered                                                
|Common stock issued in settlement of related party notes payable                         
|Replacement of previously canceled common shares                                         
|Sale of common stock                                                                     
|Common stock issued for accrued officer compensation                                     
|Stock based compensation                                                                 
|Net loss                                                                                 
|Balance, September 30, 2017 (unaudited)                                                  
|                                                                                         
|See the accompanying notes to these unaudited condensed consolidated financial statements







5









|MARIJUANA COMPANY OF AMERICA, INC. AND SUBSIDIARIES                                      
|-----------------------------------------------------------------------------------------
|CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                                          
|(unaudited)                                                                              
|                                                                                         
|                                                                                         
|                                                                                         
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                    
|Net loss                                                                                 
|Adjustments to reconcile net loss to net cash used in operating activities:              
|Depreciation                                                                             
|Amortization of debt discount                                                            
|Non cash interest                                                                        
|Loss on change in fair value of derivative liabilities                                   
|Fair value of liability warrants issued as inducement fee                                
|Stock based compensation                                                                 
|Notes payable issued in settlement of accrued compensation and expenses incurred         
|Loss on equity investment                                                                
|Changes in operating assets and liabilities:                                             
|Accounts receivable                                                                      
|Inventory                                                                                
|Accounts payable                                                                         
|Accrued compensation                                                                     
|Net cash used in operating activities                                                    
|                                                                                         
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                    
|Purchase of investments                                                                  
|Purchase of property and equipment                                                       
|Net cash used in investing activities                                                    
|                                                                                         
|                                                                                         
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                    
|Proceeds from issuance of notes payable                                                  
|Proceeds from issuance of notes payable, related party                                   
|Proceeds from sale of common stock                                                       
|Net cash provided by financing activities                                                
|                                                                                         
|Net (decrease) increase in cash                                                          
|                                                                                         
|Cash-beginning of period                                                                 
|Cash-end of period                                                                       
|                                                                                         
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION                                        
|Interest paid                                                                            
|Taxes paid                                                                               
|                                                                                         
|Non cash financing activities:                                                           
|Common stock issued in settlement of related party notes payable                         
|                                                                                         
|See the accompanying notes to these unaudited condensed consolidated financial statements







6







MARIJUANA
COMPANY OF AMERICA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER
30, 2017

(unaudited)



NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION



Marijuana Company of America, Inc. (The “Company”)
was incorporated under the laws of the State of Utah in October 1985 under the name Converge Global, Inc. In October 2009, in a
30 for 1 exchange, the Company merged with Sparrowtech, Inc. for the purpose of exploration and development of commercially viable
mining properties.



In 2015, the Company changed its business model
to a marketing and distribution company for medical marijuana. In conjunction with the change, the Company changed its name to
Marijuana Company of America, Inc. At the time of the transition in 2015, there were no remaining
assets, liabilities or operating activities of the mining business.



On September 21, 2015, the Company formed H
Smart, Inc, a Delaware corporation as a wholly owned subsidiary for the purpose of operating the hempSMART brand.



On February 1, 2016, the Company formed MCOA
CA, Inc., a California corporation as a wholly owned subsidiary to facilitate mergers, acquisitions and the offering of investments
or loans to the Company.



On May
3, 2017, the Company formed Hempsmart Limited, a United Kingdom corporation as a wholly owned subsidiary for the purpose of future
expansion into the European market.



The consolidated
financial statements include the accounts of the Company and its wholly owned subsidiaries: H Smart, Inc., Hempsmart Limited and
MCOA CA, Inc. All significant intercompany balances and transactions have been eliminated in consolidation.



The unaudited condensed interim financial statements
of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”)
for interim financial information and the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair presentation have been included.



The condensed balance sheet as of December
31, 2016 has been derived from audited financial statements.



Operating results for the three and nine months
ended September 30, 2017 are not necessarily indicative of results that may be expected for the year ending December 31, 2017.
These condensed financial statements should be read in conjunction with the audited financial statements for the year ended December
31, 2016.



NOTE 2 – GOING CONCERN AND MANAGEMENT’S
LIQUIDITY PLANS



The accompanying financial statements have
been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the
normal course of business. As shown in the accompanying financial statements during nine months ended September 30, 2017, the Company
incurred net losses of $23,085,618 and used cash in operations of $527,412. These factors among others may indicate that the Company
will be unable to continue as a going concern for a reasonable period of time.



The Company's primary source of operating funds
in 2017 and 2016 have been from revenue generated from proceeds from the sale of common stock and the issuance of convertible and
other debt. The Company has experienced net losses from operations since inception, but expects these conditions to improve in
the second half of 2017 and beyond as it develops its business model. The Company has stockholders' deficiencies at September 30,
2017 and requires additional financing to fund future operations.





7







The Company’s existence is
dependent upon management’s ability to develop profitable operations and to obtain additional funding sources. There
can be no assurance that the Company’s financing efforts will result in profitable operations or the resolution of the
Company’s liquidity problems. The accompanying statements do not include any adjustments that might result should the
Company be unable to continue as a going concern.



NOTE 3 –SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Revenue Recognition



The Company recognizes revenue in accordance
with Accounting Standards Codification subtopic 605-10, Revenue Recognition (“ASC 605-10”) 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 management’s judgments regarding the fixed nature of the selling prices of the products delivered
and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and
other adjustments are provided for in the same period the related sales are recorded.



Use of Estimates



The preparation of financial statements in
conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Significant estimates include the fair value of the Company’s stock, stock-based compensation,
fair values relating to derivative liabilities, debt discounts and the valuation allowance related to deferred tax assets. Actual
results may differ from these estimates.



Cash



The Company considers cash to consist of cash
on hand and temporary investments having an original maturity of 90 days or less that are readily convertible into cash.



Concentrations of credit risk



The Company’s financial instruments that
are exposed to a concentration of credit risk are cash and accounts receivable. Occasionally, the Company’s cash and cash
equivalents in interest-bearing accounts may exceed FDIC insurance limits. The financial stability of these institutions is periodically
reviewed by senior management.



Accounts Receivable



Trade receivables are carried at their estimated
collectible amounts. Trade credit is generally extended on a short-term basis; thus trade receivables do not bear interest. Trade
accounts receivable are periodically evaluated for collectability based on past credit history with customers and their current
financial condition.



Allowance for Doubtful Accounts



Any charges to the allowance for doubtful accounts
on accounts receivable are charged to operations in amounts sufficient to maintain the allowance for uncollectible accounts at
a level management believes is adequate to cover any probable losses. Management determines the adequacy of the allowance based
on historical write-off percentages and the current status of accounts receivable. Accounts receivable are charged off against
the allowance when collectability is determined to be permanently impaired. As of September 30, 2017 and December 31, 2016, allowance
for doubtful accounts was $-0-.



Inventories



Inventories are stated at the lower of
cost or market with cost being determined on a first-in, first-out (FIFO) basis. The Company writes down its inventory for
estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated
market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable
than those projected by management, additional inventory write-downs may be required. During the periods presented, there
were no inventory write-downs.





8







Cost of sales



Cost of sales is comprised of cost of product
sold, packaging, and shipping costs.



Stock Based Compensation



The Company measures the cost of services received
in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair value
of the award is measured on the grant date and for non-employees, the fair value of the award is generally re-measured on vesting
dates and interim financial reporting dates until the service period is complete. The fair value amount is then recognized over
the period during which services are required to be provided in exchange for the award, usually the vesting period. Stock-based
compensation expense is recorded by the Company in the same expense classifications in the statements of operations, as if such
amounts were paid in cash. As of September 30, 2017, there were outstanding stock options to purchase 1,000,000,000 shares of common
stock, 666,666,667 shares of which were vested. (See Note 9)



Net Loss per Common Share, basic and diluted



The Company computes earnings (loss) per share
under Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”). Net loss per common share
is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year.  Diluted
earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially
dilutive securities into common stock using the “treasury stock” and/or “if converted” methods as applicable.



The computation of basic and diluted income
(loss) per share as of September 30, 2017 and 2016 excludes potentially dilutive securities when their inclusion would be anti-dilutive,
or if their exercise prices were greater than the average market price of the common stock during the period.



Potentially dilutive securities excluded from
the computation of basic and diluted net loss per share are as follows:





|                                  |  | September 30, 2017 |               | September 30, 2016
|--------------------------------- |  | ------------------ | ------------- | ------------------
|Convertible notes payable         |  |                    | 33,826,242    |                   
|Options to purchase common stock  |  |                    | 1,000,000,000 |                   
|Warrants to purchase common stock |  |                    | 43,653,846    |                   
|Restricted stock units            |  |                    | 10,000,000    |                   
|Total                             |  |                    | 1,087,480,088 |                   





Fair Value of Financial Instruments



Fair value estimates discussed herein are based
upon certain market assumptions and pertinent information available to management as of September 30, 2017 and December 31, 2016.
The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial
instruments include cash and accounts payable. Fair values were assumed to approximate carrying values for cash, accounts payables
and short term notes because they are short term in nature.



Property and Equipment



Property and equipment are stated at cost.
When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts
and the net difference less any amount realized from disposition, is reflected in earnings. For financial statement purposes, property
and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives of 3to5 years.

9







Investments



The Company follows Accounting Standards Codification
subtopic 321-10, Investments-Equity Securities (“ASC 321-10) which requires the accounting for equity security to be measured
at fair value with changes in unrealized gains and losses are included in current period operations. Where an equity security is
without a readily determinable fair value, the Company may elect to estimate its fair value at cost minus impairment plus or minus
changes resulting from observable price changes (See Note 5).



Derivative Financial Instruments

The Company classifies as equity any
contracts that (i) require physical settlement or net-share settlement or (ii) provide the Company with a choice of net-cash settlement
or settlement in its own shares (physical settlement or net-share settlement) providing that such contracts are indexed to the
Company's own stock. The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including
a requirement to net cash settle the contract if an event occurs and if that event is outside the Company’s control) or (ii)
gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). The
Company assesses classification of its common stock purchase warrants and other free standing derivatives at each reporting date
to determine whether a change in classification between equity and liabilities is required.

The Company’s free-standing derivatives
consisted of conversion options embedded within its issued convertible debt and warrants with anti-dilutive (reset) provisions.
The Company evaluated these derivatives to assess their proper classification in the balance sheet using the applicable classification
criteria enumerated under GAAP.  The Company determined that certain conversion and exercise options do not contain fixed
settlement provisions.  The convertible notes contain a conversion feature and warrants have a reset provision such that the
Company could not ensure it would have adequate authorized shares to meet all possible conversion demands.



As such, the Company was required to record
the conversion feature and the reset provision which does not have fixed settlement provisions as liabilities and mark to market
all such derivatives to fair value at the end of each reporting period.



The Company has adopted a sequencing policy
that reclassifies contracts (from equity to assets or liabilities) with the most recent inception date first. Thus any available
shares are allocated first to contracts with the most recent inception dates.



Advertising



The Company follows the policy of charging
the costs of advertising to expense as incurred. The Company charged to operations $43,474 and $75,855 for the three and nine months
ended September 30, 2017 and $2,330 and $24,214 for the three and nine months ended September 30, 2016, respectively; as advertising
costs.



Income Taxes



Deferred income tax assets and liabilities
are determined based on the estimated future tax effects of net operating loss and credit carry forwards and temporary differences
between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted
tax rates. The Company records an estimated valuation allowance on its deferred income tax assets if it is not more likely than
not that these deferred income tax assets will be realized.



The Company recognizes a tax benefit from an
uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities,
based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a
position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.
As of September 30, 2017 and 2016, the Company has not recorded any unrecognized tax benefits.



10





Segment Information



Accounting Standards Codification subtopic
Segment Reporting 280-10 ("ASC 280-10") establishes standards for reporting information regarding operating segments
in annual financial statements and requires selected information for those segments to be presented in interim financial reports
issued to stockholders. ASC 280-10 also establishes standards for related disclosures about products and services and geographic
areas. Operating segments are identified as components of an enterprise about which separate discrete financial information is
available for evaluation by the chief operating decision maker, or decision-making group, in making decisions how to allocate resources
and assess performance. The information disclosed herein materially represents all of the financial information related to the
Company's only material principal operating segment.



Recent Accounting Pronouncements



In January 2017, the FASB issued Accounting
Standards Update (“ASU”) 2017-04, Intangibles – Goodwill and Other (Topic 350). The amendments in this update
simplify the test for goodwill impairment by eliminating Step 2 from the impairment test, which required the entity to perform
procedures to determine the fair value at the impairment testing date of its assets and liabilities following the procedure that
would be required in determining fair value of assets acquired and liabilities assumed in a business combination. The amendments
in this update are effective for public companies for annual or any interim goodwill impairment tests in fiscal years beginning
after December 15, 2019. We are evaluating the impact of adopting this guidance on our Consolidated Financial Statements.



In January 2017, the FASB issued ASU 2017-01,
Business Combinations (Topic 805); Clarifying the Definition of a Business. The amendments in this update clarify the definition
of a business to help companies evaluate whether transactions should be accounted for as acquisitions or disposals of assets or
businesses. The amendments in this update are effective for public companies for annual periods beginning after December 15, 2017,
including interim periods within those periods. We are evaluating the impact of adopting this guidance on our Consolidated Financial
Statements.



In July 2017, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-11, Earnings Per Share (Topic 260),
Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). The amendments in Part I of this Update
change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features.
When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round
feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock.
The amendments also clarify existing disclosure requirements for equity-classified instruments.



As a result, a freestanding equity-linked financial
instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result
of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities
that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is
triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible
instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent
beneficial conversion features (in Subtopic 470-20, Debt—Debt with Conversion and Other Options), including related EPS guidance
(in Topic 260). The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic
480 that now are presented as pending content in the Codification, to a scope exception.



Those amendments do not have an accounting
effect. For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2018. Early adoption is permitted for all entities, including adoption
in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of
the beginning of the fiscal year that includes that interim period. The Company is currently reviewing the impact of adoption of
ASU 2017-11on its financial statements.



11





In August 2014, the Financial Accounting Standards
Board (‘FASB”) issued Accounting Standards Update (ASU) No. 2014-15, Disclosure of Uncertainties about an Entities
Ability to Continue as a Going Concern, which is included in Accounting Standards Codification (“ASC”) 205, Presentation
of Financial Statements. This update provides an explicit requirement for management to assess an entity's ability to continue
as a going concern, and to provide related footnote disclosure in certain circumstances. The amendments are effective for annual
periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early application
is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. The adoption
of this standard did not have a material impact on the Company’s consolidated financial position and results of operations.



In January 2016, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (ASU) 2016-01, which amends the guidance in U.S. GAAP on the classification
and measurement of financial instruments. Changes to the current guidance primarily affect the accounting for equity investments,
financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments.
In addition, the ASU clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting
from unrealized losses on available-for-sale debt securities. The new standard is effective for fiscal years and interim periods
beginning after December 15, 2017, and upon adoption, an entity should apply the amendments by means of a cumulative-effect adjustment
to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted
except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific
credit risk in other comprehensive income. The adoption of this standard is not expected to have a material impact on the Company’s
consolidated financial position and results of operations.



The FASB issued ASU 2016-02, Leases (Topic
842). ASU 2016-02 requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should
recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset
representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is
permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities.
In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented
using a modified retrospective approach. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning
after December 15, 2018, including interim periods within those fiscal years (i.e., January 1, 2019, for a calendar year entity).
Early application is permitted for all public business entities and all nonpublic business entities upon issuance. The adoption
of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of
operations.



The
FASB issued ASU No. 2016-09, “Improvements to Employee Share-Based Payment Accounting.” The amendment is
part of the FASB’s simplification initiative and is intended to simplify the accounting around share-based payment award
transactions. The amendments include changing the recording of excess tax benefits from being recognized as a part of surplus capital
to being charged directly to the income statement, changing the classification of excess tax benefits within the statement of cash
flows, and allowing companies to account for forfeitures on an actual basis, as well as tax withholding changes. The amendments
in this update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal
years. The amendment requires different transition methods for various components of the standard. Early adoption is permitted.
The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position
and results of operations.



In November 2016, the FASB issued ASU No. 2016-18,
Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force). This ASU requires
that the reconciliation of the beginning-of-period and end-of-period amounts shown in the statement of cash flows include cash
and restricted cash equivalents. This ASU is effective for public business entities for fiscal years beginning after December 15,
2017, and interim periods within those fiscal years. The adoption of this standard is not expected to have a material impact on
the Company’s consolidated financial position and results of operations.





12







In April 2015, the FASB issued ASU
No. 2015-03(ASU 2015-03), Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of
Debt Issuance Costs. This standard amends the existing guidance to require that debt issuance costs be presented in the
balance sheet as a deduction from the carrying amount of the related debt liability instead of as a deferred charge. ASU
2015-03 is effective on a retrospective basis for annual and interim reporting periods beginning after December 15,
2015, but early adoption is permitted. The adoption of this standard did not have a material impact on the Company’s
consolidated financial position and results of operations.

There are other various updates recently issued,
most of which represented technical corrections to the accounting literature or application to specific industries and are not
expected to a have a material impact on the Company's financial position, results of operations or cash flows.



There are various other updates recently issued,
most of which represented technical corrections to the accounting literature or application to specific industries and are not
expected to a have a material impact on the Company's financial position, results of operations or cash flows.



NOTE 4 – PROPERTY AND EQUIPMENT



Property and equipment as of September 30, 2017 and December 31,
2016 is summarized as follows:



|                              |  | September 30, 2017 |        | December 31, 2016
|----------------------------- |  | ------------------ | ------ | -----------------
|Computer equipment            |  | $                  | 1,784  |                  
|Furniture and fixtures        |  |                    | 12,360 |                  
|Subtotal                      |  |                    | 14,144 |                  
|Less accumulated depreciation |  |                    | (1,402 | )                
|Property and equipment, net   |  | $                  | 12,742 |                  



Property and equipment are stated at cost and
depreciated using the straight-line method over their estimated useful lives of 3 years. When retired or otherwise disposed, the
related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount
realized from disposition, is reflected in earnings.



Depreciation expense was $755 and $1,402 for
the three and nine months ended September 30, 2017 and 2016, respectively; and $0 for the three and nine months ended September
30, 2016.



NOTE 5 – INVESTMENTS



MoneyTrac



On March 13, 2017, the Company
entered into a stock purchase agreement to acquire up to 15,000,000 common shares of MoneyTrac Technology, Inc., a
corporation organized and operating under the laws of the state of California, for a total purchase price of $250,000
representing approximately 15% ownership at the time of the agreement. As of September 30, 2017, the Company had acquired
15,000,000 common shares for $250,000 representing approximately 15% ownership. In connection with the investment, Donald
Steinberg, the Company’s President and Chief  Executive Officer and Director, was appointed as a board member
to MoneyTrac.



The Company accounts for its investment in
MoneyTrac Technology, Inc. at estimated market fair value. The Company has elected to estimate its fair value at cost minus impairment
plus or minus changes resulting from observable price changes since the equity security does not have a readily determinable fair
value.



BV-MCOA Management, LLC



On March 16, 2017, the Company entered into
a Joint Venture Agreement (“Agreement”) with Bougainville Ventures, Inc., a corporation organized under the laws of
Canada to engage in the development and promotion of products in the legalized marijuana industry in the state of Washington under
the name of BV-MCOA Management LLC. Ownership and voting control is divided on a 50/50 basis with neither party having effective
control.



13





The total investment of $375,000 is comprised
of a 50% ownership of BV-MCOA Management LLC and is accounted for using the equity method of accounting. The Company’s 50%
income earned by BV-MCOA Management LLC will recorded as other income/expense in the Company’s Statement of Operations in
the appropriate periods.  The Company’s 50% loss incurred by the Company’s interest was $375,000 for the three
and nine months ended September 30, 2017 and $0 for the three and nine months ended September 30, 2016 and was recorded as other
income/expense in the Company’s Statement of Operations in the appropriate periods.



Benihemp



On June 16, 2017, the Company entered into
a Loan Agreement (“Agreement”) with Conveniant Hemp Mart, LLC (“Benihemp”), a limited liability company
formed and operating under the laws of the State of Wyoming. Pursuant to the Agreement, Benilhemp executed a promissory note for
a principal loan amount of $50,000, accruing interest at the rate of 4% per annum and payable in one year, subject to one-time
six-month repayment extension. The Agreement also provided that the Company shall have the option to waive repayment of the note
and pay Benihemp an additional $50,000 payment in exchange for a 25% membership interest in Benihemp’s limited liability
company.



NOTE 6 – CONVERTIBLE NOTE PAYABLE



Convertible notes payable are comprised of
the following:



|                                                              |  | September 30, 2017 |          | December 31, 2016
|------------------------------------------------------------- |  | ------------------ | -------- | -----------------
|Convertible note payable-Ditto- due April 30, 2018            |  | $                  | 111,111  |                  
|Convertible note payable-Tangiers- due February 28, 2018      |  |                    | 85,000   |                  
|Convertible notes payable-St George-last due January 21, 2019 |  |                    | 477,500  |                  
|Total                                                         |  |                    | 673,611  |                  
|Less debt discounts                                           |  |                    | (507,991 | )                
|Net                                                           |  |                    | 165,620  |                  
|Less current portion                                          |  |                    | (88,515  | )                
|Long term portion                                             |  | $                  | (77,105  | )                



Convertible note payable-Ditto



Effective March 30, 2017, the Company issued
a 6.5% convertible promissory note for an aggregate of $2,777,778 due April 30, 2018 for consideration of $2,500,000, after original
interest discount (“OID) of $277,778; unsecured.



On June 30, 2017, the Company had received
net proceeds of $99,965 under the note. Gross face amount was $111,111, after additions for pro rate portion of OID and other related
costs.



The note is convertible, at any time, into
shares of the Company’s common stock at $0.03 per share unless on the day prior to the lender’s request to convert,
the closing price is less than $0.05 per share, then the conversion price shall be 60% of the average three lowest days closing
prices for 20 trading days prior to the request to convert.



At the funding date of the note, the Company
determined the aggregate fair value of $221,406 of embedded derivatives. The fair value of the embedded derivatives was determined
using the Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of
470.85%, (3) weighted average risk-free interest rate of 1.02%, (4) expected life of 1.08 years, and (5) estimated fair value of
the Company's common stock from $0.0604 per share.



The determined fair value of the debt derivatives
of $221,406 was charged as a debt discount up to the net proceeds of the note with the remainder of $121,441 charged to operations
as non-cash interest expense.



14





Convertible note payable-Tangiers Global LLC



On July 31, 2017, the Company issued a 10%
fixed convertible promissory note for an aggregate of $250,000 due February 28, 2018. The Company had received net proceeds of
$76,500 under the note. Gross face amount was $85,000, after additions for pro rate portion of OID and other related costs.



The note is convertible, at any time, into shares of the
Company’s common stock at $0.0125 per share. As an investment incentive, the Company issued 10,000,000 5 year cashless warrants,
exercisable at $.025.

At the funding date of the note, the Company
determined the aggregate fair value of $242,571 of embedded derivatives. The fair value of the embedded derivatives was determined
using the Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of
448.47%, (3) weighted average risk-free interest rate of 1.13%, (4) expected life of 0.58 years, and (5) estimated fair value of
the Company's common stock from $0.0375 per share.



The determined fair value of the debt derivatives
of $242,571 was charged as a debt discount up to the net proceeds of the note with the remainder of $166,071 charged to operations
as non-cash interest expense.



Additionally, date of issuance, the Company
determined the aggregate fair value of $375,000 of the issued warrant. The fair value of the warrant was determined using the Binomial
Option Pricing Model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 448.47%, (3) weighted
average risk-free interest rate of 1.84%, (4) expected life of 5.00 years, and (5) estimated fair value of the Company's common
stock from $0.0375 per share.



The determined fair value of the issued warrant
of $375,000 was charged as an inducement cost and charged to operations as non-cash interest expense.



Convertible notes payable-St George
Investments

Effective July 3, 2017, the Company
issued a secured convertible promissory note in aggregate of $752,500 to St George Investments LLC (“St George”). The
promissory note is bears interest at 10% per annum, is due upon maturity sixteen months after purchase price date and includes
an original issue discount (“OID”) of $67,500. In addition, the Company agreed to pay $10,000 for legal, accounting
and other transaction costs of the lender. The promissory note will be funded in four tranches of $422,500, $27,500, $27,500 and
$275,000; net of OID and transaction costs. As an investment incentive, the Company issued 33,653,846, 5 year cashless warrants,
exercisable at $.04.

Forbearance agreement



On August 4, 2017, the Company entered into
a forbearance agreement with St George Investments LLC, due to the Company’s alleged breached of certain default provisions
of the secured promissory note entered into with St George on July 3, 2017. The alleged breach occurred due to the Company entering
into an investment agreement with Tangiers on July 15, 2017 and issued a fixed convertible promissory note to Tangiers. Due to
the alleged breach, St George has the right, among other things, to accelerate the maturity date of the note, increase interest
from 10% to 22% and cause the balance of the outstanding promissory note to increase due to the application of the default provisions.



St George agreed to refrain and forbear from
bringing any action to collect under the promissory note, including the interest rate increase and balance increase, with respect
to the alleged default. As consideration of the forbearance, the Company agreed to accelerate the installment conversions from
1 year to 6 months and to add an additional OID of $112,875, which will be considered fully earned as of August 4, 2017, nonrefundable
and to be included in the first tranche. The Company and St George ratified the outstanding balance, after the added OID and accrued
interest, of $868,936 as of August 4, 2017.



As of September 30, 2017, the Company had received
aggregate net proceeds of $425,000 under the note. Gross face amount was $477,500, after additions for pro rate portion of OID
and other related costs.

15







The promissory note is convertible, at any
time at the lender’s option, at $0.04. However, in the event the Company’s market capitalization (as defined) falls
below $35,000,000, the conversion rate is 60% of the 3 lowest closing trade prices due the 20 trading days immediately preceding
date of conversion, subject to additional adjustments, as defined. In addition, the promissory note includes certain anti-dilution
provisions should the Company subsequently issue any common stock or equivalents at an effective price less than the lender conversion
price.



The Company has a right to prepayment of the
note, subject to a 20% prepayment premium and is secured by a trust deed of certain assets of the Company.



At the funding dates
of the note, the Company determined the aggregate fair value of $414,997 of embedded derivatives. The fair value of the embedded
derivatives was determined using the Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%;
(2) expected volatility of 447.62% to 448.40%, (3) weighted average risk-free interest rate of 1.19% to 1.13%, (4) expected life
of 1.33 years, and (5) estimated fair value of the Company's common stock from $0.0231 to $0.0355 per share.



The determined fair value of the debt derivatives
of $414,997 was charged as a debt discount up to the net proceeds of the note with the remainder of $809 charged to operations
as non-cash interest expense.



Additionally, date of issuance, the Company
determined the aggregate fair value of $689,903 of the issued warrant. The fair value of the warrant was determined using the Binomial
Option Pricing Model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 448.94%, (3) weighted
average risk-free interest rate of 1.93%, (4) expected life of 5.00 years, and (5) estimated fair value of the Company's common
stock from $0.0205 per share.



The determined fair value of the issued warrant
of $689,903 was charged as an inducement cost and charged to operations as non-cash interest expense.



Summary:



The Company has identified the embedded derivatives
related to the above described notes and warrants. These embedded derivatives included certain conversion and reset features. The
accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the
inception date of the note and to fair value as of each subsequent reporting date.



At September 30, 2017, the Company determined
the aggregate fair values of $1,083,617 and $1,462,401 of embedded derivatives and warrant liabilities, respectively. The fair
values were determined using the Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%; (2)
expected volatility of 446.34%, (3) weighted average risk-free interest rate of 1.20% to 1.92%, (4) expected life of 0.58 to 4.84
years, and (5) estimated fair value of the Company's common stock from $0.0335 per share.



For the three and nine months ended September
30, 2017, the Company recorded a loss on change in fair value of derivative liabilities of $1,255,213 and $1,225,245 and recorded
amortization of debt discounts of $128,993 and $154,807, respectively as a charge to interest expense, respectively.



NOTE 7 – NOTES PAYABLE, RELATED PARTY



16







Notes payable, related party is comprised of
the following:



|                               |  | September 30, 2017 |          | December 31, 2016
|------------------------------ |  | ------------------ | -------- | -----------------
|Notes payable                  |  | $                  | 246,267  |                  
|Convertible promissory notes   |  |                    | 54,277   |                  
|Subtotal                       |  |                    | 300,544  |                  
|Less unamortized debt discount |  |                    | (22,681  | )                
|Notes payable, net             |  |                    | 277,863  |                  
|Less current maturities        |  |                    | (277,863 | )                
|Long term portion              |  | $                  | —        |                  



Notes payable



As of September 30, 2017 and December 31, 2016,
the Company’s officers and directors have provided advances and incurred expenses on behalf of the Company. The issued notes
are unsecured, due on demand and non-interest bearing.



Convertible promissory notes



On June 30, 2017, the Company issued 5% convertible
promissory notes for an aggregate of $614,347 due June 30, 2018 for consideration of $585,092, after original interest discount
(“OID) of $29,255; unsecured.



The notes are convertible, at any time, into
shares of the Company’s common stock at 50% of the lowest reported sales price of the Company’s common stock for 15
trading days prior to the request to convert. In addition, the notes contain certain reset provisions should the Company issue
subsequent equity linked instruments.



The Company has identified the embedded derivatives
related to the above described notes. These embedded derivatives included certain conversion features and reset provisions. The
accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the
inception date of the note and to fair value as of each subsequent reporting date.



At June 30, 2017, the Company determined the
aggregate fair value of $1,317,555 of embedded derivatives. The fair value of the embedded derivatives was determined using the
Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 449.09%,
(3) weighted average risk-free interest rate of 1.24%, (4) expected life of 1.00 years, and (5) estimated fair value of the Company's
common stock from $0.0205 per share.



The determined fair value of the debt derivatives
of $1,317,555 was charged as a debt discount up to the net proceeds of the notes with the remainder of $732,463 charged to current
period operations as non-cash interest expense



During the nine month ended September 30, 2017,
the Company issued an aggregate of 55,604,744 shares of its common stock in settlement of $560,070 notes payable.



At September 30, 2017, the Company determined
the aggregate fair value of $160,378 of embedded derivatives. The fair value of the embedded derivatives was determined using the
Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 446.34%,
(3) weighted average risk-free interest rate of 1.31%, (4) expected life of 0.75 years, and (5) estimated fair value of the Company's
common stock from $0.0335 per share.



For the three and nine months ended September
30, 2017, the Company recorded a gain on change in fair value of derivative liabilities of $391,741 and recorded amortization of
debt discounts of $572,836 and $574,519, respectively as a charge to interest expense, respectively.



17





NOTE 8 – DERIVATIVE LIABILITIES



As described in Notes 6 and 7, the Company
issued convertible notes that contained conversion features and a reset provisions. The accounting treatment of derivative financial
instruments requires that the Company record fair value of the derivatives as of the inception date and to fair value as of each
subsequent reporting date.



NOTE 9 – STOCKHOLDERS’ DEFICIT



Preferred stock



The Company is authorized to issue 50,000,000
shares of $0.001 par value preferred stock as of September 30, 2017 and December 31, 2016. As of September 30, 2017, and December
31, 2016, the Company has designated and issued 10,000,000 shares of Class A Preferred Stock.



Each share of Class A Preferred Stock is entitled
to 100 votes on all matters submitted to a vote to the stockholders of the Company, does not have conversion, dividend or distribution
upon liquidation rights.



Common stock



The Company is authorized to issue 5,000,000,000
shares of $0.001 par value common stock as of September 30, 2017 and December 31, 2016. As of September 30, 2017 and December 31,
2016, the Company had 2,035,847,197 and 1,620,996,998 common shares issued and outstanding.



During the nine months ended September 30,
2017, the Company issued an aggregate of 301,533,333 shares of its common stock for services rendered with an estimated fair value
of $17,716,083.



During the nine months ended September 30,
2017, the Company issued an aggregate of 29,545,455 shares of its common stock for prior year officer stock-based compensation
accrual.



During the nine months ended September 30,
2017, the Company issued an aggregate of 20,000,000 shares of its common stock as replacement shares previously canceled in 2016
as part of settlement agreement.



During the nine months ended September 30,
2017, the Company sold an aggregate of 8,166,667 shares of its common stock for net proceeds of $85,000.



During the nine month ended September 30, 2017,
the Company issued an aggregate of 55,604,744 shares of its common stock in settlement of $560,070 related party notes payable.



Options



The following table summarizes the stock option
activity for the nine months ended September 30, 2017:



|                                  |  | Shares |               |  | Weighted-Average
        Exercise Price |   |       | Weighted Average
        Remaining
        Contractual Term |  |  | Aggregate
        Intrinsic Value | 
|--------------------------------- |  | ------ | ------------- |  | --------------------------------------- | - | ----- | ----------------------------------------------------------- |  |  | --------------------------------- | 
|Outstanding at December 31, 2016  |  |        | 1,000,000,000 |  |                                         | $ | 0.005 |                                                             |  |  | 8.76                              | 
|Granted                           |  |        | -             |  |                                         |   |       |                                                             |  |  |                                   | 
|Forfeitures or expirations        |  |        | -             |  |                                         |   |       |                                                             |  |  |                                   | 
|Outstanding at September 30, 2017 |  |        | 1,000,000,000 |  |                                         | $ | 0.005 |                                                             |  |  | 8.26                              | 
|                                  |  |        |               |  |                                         |   |       |                                                             |  |  |                                   | 
|Exercisable at September 30, 2017 |  |        | 666,666,667   |  |                                         | $ | 0.005 |                                                             |  |  | 8.26                              | 



18





The aggregate intrinsic value in the preceding
tables represents the total pretax intrinsic value, based on options with an exercise price less than the Company’s stock
price of $0.0335 as of September 30, 2017, which would have been received by the option holders had those option holders exercised
their options as of that date.



The following table presents information related to stock options
at September 30, 2017:



|Options Outstanding    |       |  | Options Exercisable       | 
|---------------------- | ----- |  | ------------------------- | 
|Exercise
        Price |       |  | Number of
        Options | 
|$                      | 0.005 |  |                           | 



As of September 30,
2017, stock-based compensation of $600,000 remains unamortized and is expected to be amortized over the weighted average remaining
period of 1.00 years.



The stock-based compensation
expense related to option grants was $150,000 and $450,000 during the three and nine months ended September 30, 2017 and $150,000
and $450,000 during the three and nine months ended September 30, 2016, respectively.



Warrants



The following table summarizes the stock warrant
activity for the nine months ended September 30, 2017:



|                                  |  | Shares |            |  | Weighted-Average
        Exercise Price |   |       | Weighted Average
        Remaining
        Contractual Term |  |  | Aggregate
        Intrinsic Value | 
|--------------------------------- |  | ------ | ---------- |  | --------------------------------------- | - | ----- | ----------------------------------------------------------- |  |  | --------------------------------- | 
|Outstanding at December 31, 2016  |  |        | -          |  |                                         | $ | -     |                                                             |  |  |                                   | 
|Granted                           |  |        | 43,653,846 |  |                                         |   | 0.037 |                                                             |  |  | 5.00                              | 
|Forfeitures or expirations        |  |        | -          |  |                                         |   |       |                                                             |  |  |                                   | 
|Outstanding at September 30, 2017 |  |        | 43,653,846 |  |                                         | $ | 0.037 |                                                             |  |  | 4.78                              | 
|                                  |  |        |            |  |                                         |   |       |                                                             |  |  |                                   | 
|Exercisable at September 30, 2017 |  |        | 43,653,846 |  |                                         | $ | 0.037 |                                                             |  |  | 4.78                              | 



The aggregate intrinsic value in the preceding
tables represents the total pretax intrinsic value, based on options with an exercise price less than the Company’s stock
price of $0.0335 as of September 30, 2017, which would have been received by the option holders had those option holders exercised
their options as of that date.



The following table presents information related to warrants at
September 30, 2017:



|Options Outstanding    |       |  | Options Exercisable       | 
|---------------------- | ----- |  | ------------------------- | 
|Exercise
        Price |       |  | Number of
        Options | 
|$                      | 0.025 |  |                           | 
|                       | .04   |  |                           | 
|                       | 0.037 |  |                           | 



In connection with the issuance of convertible
notes payable, the Company issued an aggregate of 43,653,846 warrants to purchase the Company’s common stock from $0.025
to $0.04, vesting immediately and expiring 5 years from the date of issuance. (See Note 6)





19







Restricted Stock
Units (“RSU”)



The following table summarizes the restricted
stock activity for the nine months ended September 30, 2017:





|Restricted shares units issued as of December 31, 2016 |  |  | 10,000,000 | 
|------------------------------------------------------ |  |  | ---------- | 
|Granted                                                |  |  | —          | 
|Forfeited                                              |  |  | —          | 
|Total Restricted Shares Issued at September 30, 2017   |  |  | 10,000,000 | 
|Vested at September 30, 2017                           |  |  | —          | 
|Unvested restricted shares as of September 30, 2017    |  |  | 10,000,000 | 



As of September 30, 2017, stock-based compensation
related to restricted stock awards of $83,750 remains unamortized and is expected to be amortized over the weighted average remaining
period of 0.50 years.



NOTE 10 — FAIR VALUE MEASUREMENT



The Company adopted the provisions of Accounting
Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”) on January 1, 2008. ASC 825-10 defines
fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required
or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact
and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer
restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the
use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels
of inputs that may be used to measure fair value:



Level 1 – Quoted prices in active markets
for identical assets or liabilities.



Level 2 – Observable inputs other than
Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent
transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived
principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.



Level 3 – Unobservable inputs to the
valuation methodology that are significant to the measurement of fair value of assets or liabilities.



All items required to be recorded or measured
on a recurring basis are based upon level 3 inputs.



To the extent that valuation is based on models
or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain
cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure
purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on
the lowest level input that is significant to the fair value measurement.



Upon adoption of ASC 825-10, there was no cumulative
effect adjustment to beginning retained earnings and no impact on the financial statements.



The carrying value of the Company’s cash
and cash equivalents, accounts receivable, accounts payable, short-term borrowings (including convertible notes payable), and other
current assets and liabilities approximate fair value because of their short-term maturity.



As of September 30, 2017 and December 31, 2016,
the Company did not have any items that would be classified as level 1 or 2 disclosures.

20





The Company recognizes its derivative
liabilities as level 3 and values its derivatives using the methods discussed in note 6. While the Company believes that its valuation
methods are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or
assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at
the reporting date. The primary assumptions that would significantly affect the fair values using the methods discussed in Notes
4 and 5 are that of volatility and market price of the underlying common stock of the Company.



As of September 30, 2017 and December 31, 2016,
the Company did not have any derivative instruments that were designated as hedges.



The derivative and warrant liability as of
September 30, 2017, in the amount of $1,083,617 and $1,462,401, respectively, have a level 3 classification.



The following table provides a summary of changes
in fair value of the Company’s Level 3 financial liabilities for the six months ended September 30, 2017:



|                                                                                                                         |  | Warrant Liability |           | Debt Derivative
|------------------------------------------------------------------------------------------------------------------------ |  | ----------------- | --------- | ---------------
|Balance, December 31, 2016                                                                                               |  | $                 | —         |                
|Total (gains) losses                                                                                                     |  |                   |           |                
|Initial fair value of debt derivative at note issuance                                                                   |  |                   |           |                
|Initial fair value of warrant liability at issuance                                                                      |  |                   | 1,064,903 |                
|Mark-to-market at September 30, 2017:                                                                                    |  |                   | 397,498   |                
|Transfers out of Level 3 upon conversion or payoff of notes payable                                                      |  |                   |           |                
|Balance, September 30, 2017                                                                                              |  | $                 | 1,462,401 |                
|Net gain for the period included in earnings relating to the liabilities held during the period ended September 30, 2017 |  | $                 | (397,498  | )              



Fluctuations in the Company’s stock
price are a primary driver for the changes in the derivative valuations during each reporting period. During the period ended September
30, 2017, the Company’s stock price decreased 44.5% from initial valuation. As the stock price decreases for each of the
related derivative instruments, the value to the holder of the instrument generally decreases. Stock price is one of the significant
unobservable inputs used in the fair value measurement of each of the Company’s derivative instruments.



NOTE 11 — RELATED PARTY TRANSACTIONS



The Company’s current officers and stockholders
advanced funds to the Company for travel related and working capital purposes. As of September 30, 2017 and December 31, 2016,
there were no related party advances outstanding.



As of September 30, 2017 and December 31, 2016,
accrued compensation due officers and executives included as accrued compensation was $97,500 and $32,710, respectively.



At September 30, 2017 and December 31, 2016,
there were an aggregate of $54,277 and $0 notes payable due to officers, respectively. See Note 7.



NOTE 12 – SUBSEQUENT EVENTS



On August 31, 2017,
the Company entered into a Joint Venture Agreement (“Agreement”) with Global Hemp Group, Inc., a Canadian corporation
(“Global Hemp Group”). The Company will assist Global Hemp Group in developing commercial hemp production in New Brunswick,
Canada. In the first year of the Agreement, the Company will share the costs of the ongoing hemp trial in New Brunswick; provide
its expertise in developing hemp cultivation going forward; and, be granted a right of first refusal as Global Hemp Group’s
primary off-taker of any raw materials produced from the project. The Company’s joint venture partner, Global Hemp Group, also partnered with Collège Communautaire
du Nouveau Brunswick (CCNB) in Bathurst, New Brunswick, to assist in conducting research with the hemp trials. The trials are
taking place on the Acadian peninsula of New Brunswick, and the initial trials to establish commercial cultivation pursuant to
the Agreement are expected to be completed in 2018.

21





On October 10, 2017, the Company entered into a “Settlement
and Mutual Release of All Claims Agreement” (“Agreement”) with Tangiers Global, LLC (“Tangiers”)
terminating the Company’s previously announced material definitive agreement with Tangiers reported on Form 8-K on July
31, 2017. The Agreement terminated an Investment Agreement between the Company and Tangiers, wherein Tangiers previously agreed
to invest up to five million dollars ($5,000,000) to purchase the Company’s Common Stock, par value $0.001 per share, based
upon an exemption from registration provided under Section 4(a)(2) of the 1933 Securities Act, and Section 506 of Regulation D
promulgated thereunder. Further, the Agreement, terminated a Registration Rights Agreement entered into between the Company and
Tangiers, which was an inducement to Tangiers to execute and deliver the Investment Agreement, whereby the Company agreed to provide
certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, and applicable
state securities laws, with respect to the shares of Common Stock issuable for Tangiers’s investment pursuant to the Investment
Agreement.

Further, the Agreement
settled two outstanding fixed convertible promissory notes the Company executed in favor of Tangiers: one in the amount of two
hundred and fifty thousand dollars ($250,000.00), of which Tangiers had advanced eighty-five thousand dollars ($85,000.00) to the
Company, with total principal and interest due in the amount of ninety-three thousand, five hundred dollars ($93,500.00); and one
in the amount of fifty thousand dollars ($50,000.00), with total principal and interest due in the amount of fifty-five thousand
dollars ($55,000.00).

The Agreement further
provided that in order to affect a prepayment of the fixed convertible promissory note in the amount of two hundred and fifty thousand
dollars ($250,000.00), the Company agreed to pay a prepayment penalty of eighteen thousand, five hundred dollars ($18,500.00),
resulting in a total payable on this note in the amount of one hundred and twelve thousand, two hundred dollars ($112,200.00).

The Company agreed to
settle the notes by paying Tangiers one hundred and sixty-seven thousand, two hundred dollars ($167,200.00) and issuing Tangiers
three million shares of the Company’s restricted common stock. The Company and Tangiers agreed to mutual releases of all
claims.

On November 1, 2017,
the Company entered into a material definitive agreement not made in the ordinary course of its business. The parties to the agreement
are the Company and St. George Investments, LLC (“St. George”), a Utah Limited Liability Company, (“St. George”).

Pursuant to a Securities
Purchase Agreement between the Company and St. George, St. George agreed to a Secured Convertible Promissory Note in the original
principal amount of $601,420.00 (the “Note”). The principal amount is convertible into shares of the Company’s
common stock, $0.001 par value per share, based upon the terms and subject to the limitations and conditions set forth in the Note.
The Company’s issuance of common stock upon conversion by St. George is based upon an exemption from registration provided
the 1933 Securities Act. As additional consideration for the Securities Purchase Agreement, the Company entered into a Warrant
Agreement with St. George, which provides St. George with the right to purchase at any time on or after November 1, 2017, until
November 1, 2022, twenty-two million (22,000,000) shares of Company’s common stock, par value $0.001 per share (the “Common
Stock”), as such number may be adjusted from time to time pursuant to the terms and conditions of the Warrant Agreement.
The Company’s issuance of common stock upon St. George’s election to exercise the warrants is based upon an exemption
from registration provided the 1933 Securities Act.

On November 6,
2017, the Company amended a material definitive agreement not made in the ordinary course of its business. The parties to the
agreement are the Company and Bougainville Ventures, Inc. (“Bougainville”). On March 16, 2017, the Company and
Bougainville previously entered into a Joint Venture Agreement (“Agreement”). The Agreement required the Company
to raise funds for the Joint Venture Project in the amount of not less than one million dollars ($1,000,000). Pursuant to
Section 12.9 of the Agreement, the Company and Bougainville entered into a written amendment of the Agreement which changed
the Company’s funding obligation from one million dollars ($1,000,000) to eight hundred thousand dollars ($800,000),
and separately required the Company to issue to Bougainville or its designee fifteen million (15,000,000) shares of its
restricted common stock pursuant to the Reg. D exemption from registration pursuant to the 1933 Securities and Exchange
Act.

22







ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS



This Management’s Discussion and Analysis
of Financial Condition and Results of Operations includes a number of forward-looking statements that reflect Management’s
current views with respect to future events and financial performance. You can identify these statements by forward-looking words
such as “may,” “will,” “expect,” “anticipate,” “believe,” “estimate”
and “continue,” or similar words. Those statements include statements regarding the intent, belief or current expectations
of us and members of our management team as well as the assumptions on which such statements are based. Prospective investors are
cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties,
and that actual results may differ materially from those contemplated by such forward-looking statements.



Readers are urged to carefully review and
consider the various disclosures made by us in this report and in our other reports filed with the Securities and Exchange Commission.
Important factors currently known to Management could cause actual results to differ materially from those in forward-looking statements.
We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated
events or changes in the future operating results over time. We believe that our assumptions are based upon reasonable data derived
from and known about our business and operations. No assurances are made that actual results of operations or the results of our
future activities will not differ materially from our assumptions. Factors that could cause differences include, but are not limited
to, expected market demand for our products, fluctuations in pricing for materials, and competition.



Business Overview



Plan of Operations – The Company
intends to participate in the research and development of (1) varieties of various species of cannabis, including hemp; (2) the
pharmacological benefits of cannabis species, including hemp; (3) the methodology of both indoor and outdoor cultivation methods;
(4) the variety of technology used for cultivation and harvesting of different species of cannabis, including but not limited to
lighting, venting, irrigation, hydroponics, nutrients and soil; (5) new hydroponical techniques for use in cultivating produce
such as fruits, berries and vegetables; (6) different cannabinoids within the cannabis species and the possible health benefits
thereof; and, (7) new and improved methods of hemp cannabinoid extraction omitting or eliminating the delta-9 tetrahydrocannabinol
“THC” molecule. Our business plan intends on only engaging within states and/or countries that have lawfully allowed
and permitted the legal use of medical and/or recreational cannabis and/or hemp and its molecular compounds and resulting products.
The Company operates two distinct and separate business divisions related to its two wholly owned subsidiaries, H Smart, Inc. and
MCOA CA, Inc.



In 2016, the Company launched its hempSMART
division by forming H Smart, Inc., as a wholly owned subsidiary. H Smart, Inc. was formed on September 21, 2015, as a Delaware
corporation, and its sole asset and operation was the ownership of the hempSMART brand and related research and development into
legal industrial hemp cannabidiol (CBD) derived products. These products are non-psychoactive. The Company’s product manufacturer,
CBD Global, Inc., a Colorado corporation, only provides certified THC free, CBD Full Spectrum Oil to the Company for its product
manufacturing. The focus of the hempSMART division is the development of products utilizing non-psychoactive Full Spectrum Hemp
Oil, enriched with CBD or with CBD isolate containing no THC.



The Company’s first product under
its hempSMARTTM division is hempSMARTTM Brain, a formulated product encapsulated with CBD derived from industrial
hemp as the core ingredient, combined with other high-quality ingredients. On July 18, 2016, the Company filed a patent
application for its proprietary formulation for hempSMARTTM Brain. The Company has also filed for a trademark for the
hempSMARTTM brand name. The Company has a number of other hempSMARTTM products in research and development, and
intends to broaden hempSMART’sTM product offerings to include products targeting body care, cosmetics, and a line
of branded merchandise using the hempSMARTTM name. The Company’s second formulated product, “hempSMART
Pain” is a personal care product focused on supporting joint health and flexibility taken orally in a gel capsule or by
rubbing cream and is currently in production with an expected release in the third quarter of 2017. The Company has a number
of other hempSMART products in research and development, and intends to broaden hempSMART’s product offerings to
include other formulated personal care products.





23







The Company’s hempSMART
product manufacturing is conducted by Equinox Nutraceutical (“Equinox”) in Lindon, Utah. As a manufacturer, Equinox
generally implements and follows good manufacturing practices (GMP) and processes that ensure the quality of our manufactured products.
Equinox also provides verified product testing of formulated components and finished products through a third-party lab to ensure
quality control.

Customers can order hempSMART
products directly through the hempSMART web site (https://www.hempSMART.com) or through any hempSMART “Affiliate.”
The Company actively encourages individuals to become hempSMART Affiliates by signing up on its web site. Once qualified, Affiliates
earn discounts on hempSMART products, and can earn commissions and discounts on future hempSMART products and orders, providing
entrepreneur Affiliates a means of maximizing business opportunities in the rapidly emerging cannabis industry through the Company’s
affiliate sales program.

In anticipation of establishing
and expanding its hempSMART sales affiliate program, the Company acquired a license from MultiSoft Corporation, a Florida corporation
(“MultiSoft”), to use its MarketPowerPro system software (“MarketPowerPro”). MarketPowerPro is a secure
multi-level-marketing sales software program that facilitates order placement over the internet via a web site, and accounts for
affiliate orders and sales; calculates referral benefits apportionable to specific sales associates, and calculates and accounts
for loyalty and rewards benefits for returning customers. MarketPowerPro is compliant with Payment Card Industry financial standards
for maintaining security regarding payment transactions conducted over the internet using credit cards. MultiSoft also independently
monitors licensee websites hosting MarketPowerPro to ensure that licensee websites are compliant and are invulnerable to being
compromised.

On November 1, 2016,
the Company contracted with Big Monkey 3PL Logistics to provide for warehousing, packaging, and order fulfillment of its hempSMART
products.

On March 17, 2017, the Company signed
a binding joint venture agreement with GateC Research Inc. (“GCR”), a California corporation. GCR has obtained a City/Municipal
permit to cultivate cannabis within an approved zone in Adelanto County, California. The Company will not be part of the cultivation
or harvest. The joint venture is currently in its development stages and is not yet operational. The Company and GCR intend to
optimize collaborative business opportunities in the development and sales of the resulting cannabis products, but only after California
finalizes and implements its regulations concerning cannabis in 2018.

The Company’s commitment
to the joint venture project is to provide $1,500,000 USD over a six-month period, with a minimum commitment of $500,000 USD within
a three (3) month period. The Company has yet to provide this financing, and has received an extension on this commitment until
California state regulations concerning cannabis are finalized and implemented in 2018, and the Company is able to obtain the $1,500,000
in the form of equity or debt financing.

On March 16, 2017, the Company entered into
a joint venture agreement with Bougainville Ventures, Inc., a Canadian corporation operating under the name BV-MCOA Management,
LLC (“BV”), a Washington State Limited Liability Company. Bougainville Ventures, Inc. holds an assignable cannabis
cultivation license and a lease for real property located in the State of Washington. The joint venture agreement, as amended on
November 6, 2017, commits the Company to raise eight hundred thousand dollars ($800,000) and separately issue to Bougainville Ventures,
Inc. or its designee fifteen million (15,000,000) shares of restricted common stock in order to purchase the property that BV would
cultivate and harvest upon (See Note 12, Subsequent Events). The Company will lease the property to the venture, thus acting solely
as a landlord.





24





Results of Operations

We anticipate that our results of operations
will fluctuate for the foreseeable future due to several factors, such as the progress of our research and development efforts
and the timing and outcome of regulatory submissions. Due to these uncertainties, accurate predictions of future operations are
difficult or impossible to make.



Three Months Ended September 30, 2017
Compared to Three Months Ended September 30, 2016



Results of Operations - The Company
generated revenue of $2,927 for the three months ended September 30, 2017. This increase is due to the Company’s initial
deployment of its hempSMART marketing and sales efforts. Since the Company’s sales efforts were launched approximately one
year ago, no currently known or previous matters are expected to have a material impact on current or future operations, with the
exception of the Company’s need for additional funding (See Note 2 to the Financial Statements). For the three months ended
September 30, 2017, the Company had a loss from continuing operations of $3,884,748 compared to a loss from continuing operations
of $506,018 for the three months ended September 30, 2016. This change is due primarily to the Company’s cannabis operations
and non-cash interest costs associated with our convertible debt.



Revenues/Cost of sales



Total Revenues - Total revenues were $2,927
for the three months ended September 30, 2017 as compared to $0 for the three ended September 30, 2016. The reported revenues for
each period reflect the Company’s initial steps towards marketing and selling its hempSMARTTM products. Management plans
to expand its marketing and selling efforts in 2017 and expects revenues to increase in the coming months.





Costs and Expenses - Costs of sales, include
the costs of product development, manufacturing, testing, packaging, storage and sale. For the three months ended September 30,
2017, costs of sales were $1,941 as compared to $0 for the three months ended September 30, 2016. The reported costs of sales for
each period reflect the Company’s initial steps towards marketing and selling its hempSMARTTM products.



General and administrative expenses



Other general and administrative expenses increased
to $700,112 for the three months ended September 30, 2017 compared to $499,018 the three months ended September 30, 2016. General
and administrative expenses include selling and marketing, research and development, building rent, utilities, legal fees, office
supplies, subscriptions, and office equipment. The increase can be attributed primarily to increased operating costs for our hempSMART
business as the Company implemented its operations and launched its sales and marketing efforts this year.



(Loss) gain on change in fair value of
derivative liabilities



During 2017, we issued convertible promissory
notes and warrants with an embedded derivative, all requiring us to fair value the derivatives each reporting period, and mark
to market as a non-cash adjustment to our current period operations. This resulted in a loss of $863,472 and $0 on change in fair
value of derivative liabilities for the three months ended September 30, 2017 and 2016, respectively.



Loss on equity investment



During the three months ended September 30,
2017, we adjusted the carry value of our investment for our pro rata share of loss with BV-MCOA Management LLC to $0 incurring
a $375,000 loss.



Interest Expense



Interest expense during the three months ended
September 30, 2017 was $1,946,394 compared to $7,000 for the three months ended September 30, 2016. Interest expense primarily
consists of interest incurred on our convertible and other debt. The debt discounts amortization and non-cash interest incurred
during the three months ended September 30, 2017 and 2016 was $868,709 and $0, respectively. In addition, we incurred a non-cash
interest of $1,064,903 for the fair value of warrants issued in connection with convertible notes in 2017.



Nine Months Ended September 30, 2017
Compared to Nine Months Ended September 30, 2016

25







Results of Operations - For the nine
months ended September 30, 2017, the Company had a loss from continuing operations of $23,085,618 compared to a loss from continuing
operations of $1,935,529 for the nine months ended September 30, 2016. This change is due primarily to the Company’s cannabis
operations and restricted stock compensation granted to directors, employees and third party service providers recorded at an estimated
fair value of $18,113,583 for the nine months ended September 30, 2017, compared to $1,488,290 during the corresponding period
in 2016.



Revenues/Cost of sales



Total Revenues - Total revenues were $19,950
for the nine months ended September 30, 2017 as compared to $0 for the nine ended September 30, 2016. The reported revenues for
each period reflect the Company’s initial steps towards marketing and selling its hempSMARTTM products. Management plans
to expand its marketing and selling efforts in 2017 and expects revenues to increase in the coming months.



Costs and Expenses - Costs of sales, include
the costs of product development, manufacturing, testing, packaging, storage and sale. For the nine months ended September 30,
2017, costs of sales were $14,099 as compared to $0 for the three months ended September 30, 2016. The reported costs of sales for
each period reflect the Company’s initial steps towards marketing and selling its hempSMARTTM products.



General and administrative expenses



Other general and administrative expenses increased
to $19,051,948 for the nine months ended September 30, 2017 compared to $1,928,529 the nine months ended September 30, 2016. The
increase can be attributed primarily to is due primarily to restricted stock compensation granted to directors, employees and third-party
service providers.



(Loss) gain on change in fair value of
derivative liabilities



During 2017, we issued convertible promissory
notes and warrants with an embedded derivative, all requiring us to fair value the derivatives each reporting period and mark to
market as a non-cash adjustment to our current period operations. This resulted in a loss of $833,504 and $0 on change in fair
value of derivative liabilities for the nine months ended September 30, 2016 and 2015, respectively.



Loss on equity investment



During the nine months ended September 30,
2017, we adjusted the carry value of our investment for our pro rata share of loss with BV-MCOA Management LLC to $0 incurring
a $375,000 loss.



Interest Expense



Interest expense during the nine months ended
September 30, 2017 was $2,829,615 compared to $7,000 for the nine months ended September 30, 2016. Interest expense primarily consists
of interest incurred on our convertible and other debt. The debt discounts amortization and non-cash interest incurred during the
nine months ended September 30, 2017 and 2016 was $1,750,110 and $0, respectively. In addition, we incurred a non-cash interest
of $1,064,903 for the fair value of warrants issued in connection with convertible notes in 2017.



Liquidity and Capital Resources –The Company has generated a net loss from continuing operations for the three months ended September 30, 2017 of ($3,884,747)
and $(23,085,618) for the nine months ended September 30, 2017. As of September 30, 2017, the Company had total assets of $487,336,
which included inventory of $149,419 and accounts receivable of $11,900.



During the nine months ended September
30, 2017 and 2016, the Company has met its capital requirements through a combination of loans and convertible debt
instruments. The Company will need to secure additional external funding in order to continue its operations. On July 25,
2017, the Company entered into an Investment Agreement Tangiers Global, LLC (“Tangiers”), wherein Tangiers agreed
to invest up to five million dollars ($5,000,000) to purchase the Company’s Common Stock, par value $0.001 per share,
based upon an exemption from registration provided under Section 4(a)(2) of the 1933 Securities Act, and Section 506 of
Regulation D promulgated thereunder. Coincidentally, the Company and Tangiers entered into a Registration Rights Agreement,
as an inducement to Tangiers to execute and deliver the Investment Agreement, whereby the Company agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, and applicable
state securities laws, with respect to the shares of Common Stock issuable for Tangiers’s investment pursuant to the
Investment Agreement.





26







The Company and Tangiers also executed two
fixed convertible promissory notes: one in the amount of two hundred and fifty thousand dollars ($250,000) and one in the amount
of fifty thousand dollars ($50,000), each bearing interest at the rate of ten percent (10%). The $250,000 Note is due and payable
within seven months of the Effective Date of each payment, and is convertible at a price equal to $0.0125. The $50,000 Note is
due and payable on February 25, 2018, and is convertible at a price equal to $0.0175. Tangiers may convert any amount of principal
or interest due into the Company’s Common Stock, par value $0.001 per share. (See Note 12 Subsequent Events).



Operating Activities - For the nine months
ended September 30, 2017, the Company used cash in operating activities of $527,412. For the nine months ended September 30, 2016,
the Company used cash in operating activities of $106,885. This increase is due primarily to the implementation of our new business
plan, operations, management, personnel and professional services, and the resulting increases in operating expenses.



Investing Activities - During the nine months
ended September 30, 2017, the Company spent cash of $688,275 in investing activities related to its purchase of 15 million restricted
common shares in MoneyTrac Technology, Inc. in exchange for $250,000, and its investment of $375,000 in the Bougainville Ventures
joint venture along with smaller investments and $14,144 on office equipment. During the nine months ended September 30, 2016 the
Company had no investing activity.



Financing Activities - During the nine months
ended September 30, 2017 the Company, primarily through its receipt of funds from the issuance of notes payable, notes payable
to related parties, and sale of common stock, resulted in financing activity of $1,082,345. For the nine months ended September
30, 2016 the Company received proceeds of $77,000 from sale of common stock and $30,000 from issuance of related party note.



The Company’s business plans have not
generated significant revenues and as of the date of this filing are not sufficient to generate adequate amounts of cash to meet
its needs for cash. The Company's primary source of operating funds in 2017 and 2016 have been from revenue generated from proceeds
from the sale of common stock and the issuance of convertible and other debt. The Company has experienced net losses from operations
since inception, but expects these conditions to improve materially in the second half of 2017 and beyond as it implements its
affiliate marketing and sales program and concurrently expands its sales of its hempSMARTTM products. The Company has stockholders'
deficiencies at September 30, 2017 and requires additional financing to fund future operations. As of the date of this filing,
and due to the early stages of operations, the Company has insufficient sales data to evaluate the amounts and certainties of cash
flows, as well as whether there has been material variability in historical cash flows.



The Company’s two joint venture projects
require the Company to provide material commitments of cash in order to fund the acquisition of land and operations to initiate
the two grow operations. The Company does not have the ability to fund these joint ventures based upon its current cash position.
The Company has arranged for partial external third party financing in the amount of $752,500 for the Company’s one-million-dollar
financing commitment for the Bougainville Ventures joint venture project. The Company has a material capital commitment to provide
up to $1.5 million dollars in funding for the GateC joint venture project, but as of the date of this filing has not provided or
arranged financing for this project, pending the implementation of California’s regulations concerning Cannabis due to be
finalized in January, 2018. As the Company does not currently have the funding capability to complete both projects, it entered
into a $5 million fixed funding commitment with Tangiers Global, LLC on August 1, 2017 requiring the Company to register shares
of its common stock for sale to Tangiers to provide the Company with the necessary funding to complete both the Bougainville Ventures
project and the GateC project. Aside from the completion of the Company’s financing commitments mentioned above, the Company
expects that cash provided by the Tangiers fixed funding commitment will allow it to augment its cash used in future operating
activities.



27





Government Regulations of Cannabis



Federal Law



Our business includes research and development
of cannabis and industrial hemp, and the sale of products containing CBD derived from industrial hemp. Cannabis, marijuana and
CBD are illegal under federal law, and are “Schedule 1” drugs under the Controlled Substances Act (21 U.S.C. §
811). As Schedule 1 drugs, cannabis, marijuana and CBD are viewed as being highly addictive and having no medical value. The United
States Drug Enforcement Agency enforces the Controlled Substances Act, and persons violating it are subject to federal criminal
prosecution. The criminal penalty structure in the Controlled Substances Act is determined based on the specific predicate violations,
including but not limited to: simple possession, drug trafficking, attempt and conspiracy, distribution to minors, trafficking
in drug paraphernalia, money laundering, racketeering, environmental damage from illegal manufacturing, continuing criminal enterprise,
and smuggling. A first conviction under the Controlled Substances Act can generally result in possible fines from $250,000 to $50
million dollars, and incarceration for periods generally from five and up to forty years. For a second conviction, fines increase
generally from $500,000 to $75 million dollars, and incarceration for periods generally from ten years to twenty years to life.



The United States Food
& Drug Administration (“FDA”) is generally responsible for protecting the public health by ensuring the safety,
efficacy, and security of (1) prescription and over the counter drugs; (2) biologics including vaccines, blood & blood products,
and cellular and gene therapies; (3) foodstuffs including dietary supplements, bottled water, and baby formula; and, (4) medical
devices including heart pacemakers, surgical implants, prosthetics, and dental devices.

Regarding its regulation
of drugs, the FDA process requires a review that begins with the filing of an investigational new drug (IND) application, with
follow on clinical studies and clinical trials that the FDA uses to determine whether a drug is safe and effective, and therefore
subject to approval for human use by the FDA.

Aside from the FDA’s
mandate to regulate drugs, the FDA also regulates dietary supplement products and dietary ingredients under the Dietary Supplement
Health and Education Act of 1994. This law prohibits manufacturers and distributors of dietary supplements and dietary ingredients
from marketing products that are adulterated or misbranded. This means that these firms are responsible for evaluating the safety
and labeling of their products before marketing to ensure that they meet all the requirements of the law and FDA regulations, including,
but not limited to the following labeling requirements: (1) identifying the supplement; (2) nutrition labeling; (3) ingredient
labeling; (4) claims; and, (5) daily use information.

The FDA has not approved
cannabis, marijuana or CBD as a safe and effective drug for any indication. As of the date of this filing, we have not, and do
not intend to file an IND with the FDA, concerning any of our products that contain CBD derived from industrial hemp. Further,
our products containing CBD derived from industrial hemp are not marketed or sold using claims that their use is safe and effective
treatment for any medical condition subject to the FDA’s jurisdiction.

The FDA has concluded
that products containing CBD are excluded from the dietary supplement definition under sections 201(ff)(3)(B)(i) and (ii) of the
U.S. Food, Drug & Cosmetic Act, respectively. The FDA’s position is that products containing CBD are Schedule 1 drugs
under the Controlled Substances Act, and so are illegal. Our products containing CBD derived from industrial hemp are not marketed
or sold as dietary supplements. However, at some indeterminate future time, the FDA may choose to change its position concerning
generally cannabis and marijuana, and specifically products containing CBD, and may choose to enact regulations that are applicable
to such products. In this event, our industrial hemp based products containing CBD may be subject to regulation (See Risk Factors,
Item IA).

Our business intends
to participate in the research and development of (1) varieties of various species of cannabis, including hemp; (2) the pharmacological
benefits of cannabis species, including hemp; (3) the methodology of both indoor and outdoor cultivation methods; (4) the variety
of technology used for cultivation and harvesting of different species of cannabis, including but not limited to lighting, venting,
irrigation, hydroponics, nutrients and soil; (5) new hydroponical techniques for use in cultivating produce such as fruits, berries
and vegetables; (6) different cannabinoids within the cannabis species and the possible health benefits thereof; and, (7) new
and improved methods of hemp cannabinoid extraction omitting or eliminating the delta-9 tetrahydrocannabinol “THC”
molecule.

28





Our business plan intends
on only engaging within states and/or countries that have lawfully allowed and permitted the legal use of medical and/or recreational
cannabis and/or hemp and its molecular compounds and resulting products.

In conjunction with the Company’s overall
research and development in the cannabis field and industry, in general, the Company may or may not become directly or indirectly
involved in any actual delta-9 tetrahydrocannabinol (“THC”) research. This will depend upon future legalities and proper
approvals. As of the date of this filing, the Company is not engaged in any direct or indirect delta-9 tetrahydrocannabinol (“THC”)
research, and has no immediate plans to initiate or participate in any such research. It is anticipated that should the Company
engage within the THC aspect of the industry, in the near future, it will solely be as a landlord, or as a possible developer,
distributor or lessor in the technology or software industry. In any event, the Company will only be engaged with licensed, lawful
and compliant operator(s) within a legalized state and pursuant to the Cole Memorandum (issued by James Cole, Deputy Attorney General,
Department of Justice, August 29, 2013).

In addition to the Cole
Memorandum, the Company’s research and development activities intend to comply with the parameters of a recent 9th
Cir. Federal Appellate Court decision, United States v. McIntosh, 2016 DJDAR 8484 (Aug. 16, 2016), which held:
“the U.S. Department of Justice cannot spend money to prosecute federal marijuana cases if the defendants comply with state
guidelines that permit the drug's sale for medical purposes”. This ruling is consistent with Congress’s passing of
its current budget rule, and The Omnibus Appropriations Act, also known as the “Rohrabacher–Farr Amendment,”
which prohibits the DOJ from using federal funds to interfere in the implementation of state marijuana regulations. The Court reasoned
that “if the DOJ punishes individuals for engaging in activities permitted under state law (such as the use, cultivation,
distribution and possession of medical marijuana), then the DOJ is preventing state law from being implemented as a practical matter.”
“By officially permitting certain conduct, state law provides for non-prosecution of individuals who engage in such conduct.
If the federal government prosecutes such individuals, it has prevented the state from giving practical effect to its law providing
for non-prosecution of individuals who engage in the permitted conduct."

Critical Accounting Policies
- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities of the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Note 1 to the Consolidated Financial Statements describes the significant accounting policies and
methods used in the preparation of the Consolidated Financial Statements. Estimates are used for, but not limited to, contingencies
and taxes. Actual results could differ materially from those estimates. The following critical accounting policies are impacted
significantly by judgments, assumptions, and estimates used in the preparation of the Consolidated Financial Statements.



Stock-Based Compensation - The
Company also issues restricted shares of its common stock for share-based compensation programs to employees and non-employees.
The Company measures the compensation cost with respect to restricted shares to employees based upon the estimated fair value at
the date of the grant, and is recognized as expense over the period which an employee is required to provide services in exchange
for the award. For non-employees, the Company measures the compensation cost with respect to restricted shares based upon the estimated
fair value at measurement date which is 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.



Recent Accounting Pronouncements
- See Note 1 of the condensed consolidated financial statements for discussion of recent accounting pronouncements.



| | ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
| | ------- | ----------------------------------------------------------



Not applicable to Smaller Reporting Companies.



29







|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------



Disclosure Controls and Procedures



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



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



As of September 30, 2017, an evaluation of the effectiveness of the Company’s disclosure controls and
procedures (as defined in Rules 13(a)-15(e) and 15(d)-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”)
was carried out under the supervision and with the participation of our Chief Executive Officer, Chief Financial Officer, and
other persons carrying out similar functions for the Company. Based on the evaluation of the Company’s disclosure controls
and procedures, the Company concluded that during the period covered by this report, such disclosure controls and procedures were
effective.



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



Changes in Internal Controls Over Financial
Reporting



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



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



PART II - OTHER INFORMATION



|ITEM 1. | LEGAL PROCEEDINGS
|------- | -----------------



None.





| | ITEM 1A. | RISK FACTORS
| | -------- | ------------



Our business involves a number of very significant
risks, including but not limited to various areas of the cannabis industry being illegal under Federal Law and susceptible to aggressive
prosecution from the U.S. Attorney General. Our business, operating results and financial condition could be seriously harmed as
a result of the occurrence of any of the following risks. You should invest in our common stock only if you can afford to lose
your entire investment. Your decision to invest in our common stock should only be made after you have knowingly accepted the possibilities
of such a loss and the associated risks, including our business being so close to the Federally illegal cannabis industry, including
various states where hemp and marijuana are still not legal for commercial purposes and sale.

30





Risks Related to Our
Business

Because we have only
recently begun our hempSMART operations, and our other ventures are in the development stage or not of yet capitalized, we anticipate
our operating expenses will increase prior to earning revenue, and we may never achieve profitability:

The Company launched
its first product, hempSMART Brain, in November, 2016. As we continue to conduct research and development of other hempSMART products,
we anticipate increases in our operating expenses, without realizing significant revenues from operations. Within the next 12 months,
these increases in expenses will be attributed to the cost of (i) administration and start-up costs, (ii) research and development,
(iii) advertising and website development, (iv) legal and accounting fees at various stages of operation, (v) joint venture activities,
(vi) creating and maintaining distribution and supply chain channels.

As a result of some or
all of these factors in combination, the Company will incur significant financial losses in the foreseeable future. There is no
history upon which to base any assumption as to the likelihood that the Company will prove successful. We cannot provide investors
with any assurance that our business will attract customers and investors. If we are unable to address these risks, there is a
high probability that our business will fail.

Failure to raise additional
capital to fund operations could harm our business and results of operations:

Our primary source of
operating funds from 2015 through the June 30, 2017 quarter end has been from revenue generated from proceeds from the sale of
our common stock and the issuance of convertible and other debt. The Company has experienced net losses from operations since inception,
but expects these conditions to improve in 2017 and beyond as it develops its business model. The Company has stockholders' deficiencies
at December 31, 2016 and requires additional financing to fund future operations. Currently, we do not have any arrangements for
financing and can provide no assurance to investors that we will be able to obtain financing when required. No assurance can be
given that the Company will obtain access to capital markets in the future or that financing, adequate to satisfy the cash requirements
of implementing our business strategies, will be available on acceptable terms. The inability of the Company to gain access to
capital markets or obtain acceptable financing could have an adverse effect upon the results of its operations and upon its financial
conditions.

Marijuana, Cannabis
and CBD are illegal under federal law:

Marijuana, cannabis and
CBD are Schedule 1 controlled substances and are illegal under federal law, specifically the Controlled Substances Act (21 U.S.C.
§ 811). Even in states that have legalized the use of marijuana, its sale and use remain violations of federal law. The illegality
of marijuana under federal law preempts state laws that legalize its use. Therefore, strict enforcement of federal law regarding
marijuana would likely result in our inability to proceed with our business plan.

Our business is dependent
on laws pertaining to the cannabis industry:

The federal government
has issued guidance to federal prosecutors concerning marijuana enforcement under the Controlled Substances Act (CSA). The Cole
Memorandum updates that guidance in light of state ballot initiatives that legalize under state law the possession of small amounts
of marijuana and provide for the regulation of marijuana production, processing, and sale. The guidance set forth herein applies
to all federal enforcement activity, including civil enforcement and criminal investigations and prosecutions, concerning marijuana
in all states.

Congress has
determined that marijuana is a dangerous drug and that the illegal distribution and sale of marijuana is a serious crime that
provides a significant source of revenue to large-scale criminal enterprises, gangs, and cartels. The Department of Justice
is committed to enforcement of the Controlled Substance Act (CSA) consistent with those determinations. The Department is
also committed to using its limited investigative and prosecutorial resources to address the most significant threats in the
most effective, consistent, and rational way. In furtherance of those objectives, as several states enacted laws relating to
the use of marijuana for medical purposes, the Department in recent years has focused its efforts on certain enforcement
priorities that are particularly important to the federal government:



31







•       Preventing
the distribution of marijuana to minors;

•       Preventing
revenue from the sale of marijuana from going to criminal enterprises, gangs, and cartels;

•       Preventing
the diversion of marijuana from states where it is legal under state law in some form to other states;

•       Preventing
state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal
activity;

•       Providing
the necessary resources and demonstrate the willingness to enforce their laws, and,

•       Enacting
regulations in a manner that ensures they do not undermine federal enforcement priorities.

In jurisdictions that
have enacted laws legalizing marijuana in some form, and that have also implemented strong and effective regulatory and enforcement
systems to control the cultivation, distribution, sale, and possession of marijuana, conduct in compliance with those laws and
regulations is less likely to threaten the federal priorities set forth above. Indeed, a robust system may affirmatively address
those priorities by, for example, implementing effective measures to prevent diversion of marijuana outside of the regulated system
and to other states, prohibiting access to marijuana by minors, and replacing an illicit marijuana trade that funds criminal enterprises
with a tightly regulated market in which revenues are tracked and accounted for. In those circumstances, consistent with the traditional
allocation of federal-state efforts in this area, enforcement of state law by state and local law enforcement and regulatory bodies
should remain the primary means of addressing marijuana-related activity. If state enforcement efforts are not sufficiently robust
to protect against the harms set forth above, the federal government may seek to challenge the regulatory structure itself in addition
to continuing to bring individual enforcement actions, including criminal prosecutions, focused on those harms.

As with the Department's
previous statements on this subject, this memorandum is intended solely as a guide to the exercise of investigative and prosecutorial
discretion. This memorandum does not alter in any way the Department's authority to enforce federal law, including federal laws
relating to marijuana, regardless of state law. Neither the guidance herein nor any state or local law provides a legal defense
to a violation of federal law, including any civil or criminal violation of the CSA. Even in jurisdictions with strong and effective
regulatory systems, evidence that particular conduct threatens federal priorities will subject that person or entity to federal
enforcement action, based on the circumstances. This memorandum is not intended to, does not, and may not be relied upon to create
any rights, substantive or procedural, enforceable at law by any party in any matter civil or criminal. It applies prospectively
to the exercise of prosecutorial discretion in future cases and does not provide defendants or subjects of enforcement action with
a basis for reconsideration of any pending civil action or criminal prosecution. Finally, nothing herein precludes investigation
or prosecution, even in the absence of any one of the factors listed above, in particular circumstances where investigation and
prosecution otherwise serves an important federal interest.

As to the Company engaging
in business outside of the jurisdiction of the U.S.A., the Company must first assume that the laws in other country(s), territories
or destinations are similar to that of the U.S. Federal Government, however, the Company must then retain competent legal counsel
in this outside jurisdiction and insisting that they understand and obtain a copy of these foreign laws and rules and should gain
the expertise and representation of a foreign specialist or attorney in the foreign destination being considered prior to engaging
in any cannabis, marijuana or hemp business.

Laws and regulations
affecting our industry are constantly changing:

32





The constant evolution
of laws and regulations affecting the marijuana industry could detrimentally affect our operations. Local, state and federal medical
marijuana laws and regulations are broad in scope and subject to changing interpretations. These changes may require us to incur
substantial costs associated with legal and compliance fees and ultimately require us to alter our business plan. Furthermore,
violations of these laws, or alleged violations, could disrupt our business and result in a material adverse effect on our operations.
In addition, we cannot predict the nature of any future laws, regulations, interpretations or applications, and it is possible
that regulations may be enacted in the future that will be directly applicable to our business.

Our business is subject
to risk of government action:

While we will use our
best efforts to comply with all laws, including federal, state and local laws and regulations, there is a possibility that governmental
action to enforce any alleged violations may result in legal fees and damage awards that would adversely affect us.

Because our business
is dependent upon continued market acceptance by consumers, any negative trends will adversely affect our business operations:

We are substantially
dependent on continued market acceptance and proliferation of consumers of cannabis, medical marijuana and recreational marijuana.
We believe that as marijuana becomes more accepted the stigma associated with marijuana use will diminish and as a result consumer
demand will continue to grow. While we believe that the market and opportunity in the marijuana space continues to grow, we cannot
predict the future growth rate and size of the market. Any negative outlook on the marijuana industry will adversely affect our
business operations.

In addition, it is believed
by many that large well-funded businesses may have a strong economic opposition to the cannabis industry. We believe that the pharmaceutical
industry clearly does not want to cede control of any product that could generate significant revenue. For example, medical marijuana
will likely adversely encroach, impact or displace the existing market for the current "marijuana pill" Marinol, sold
by the mainstream pharmaceutical industry. The pharmaceutical industry is well funded with a strong and experienced lobby that
eclipses the funding of the medical marijuana movement. Any inroads the pharmaceutical industry could make in halting the impending
cannabis industry could have a detrimental impact on our business.

The possible FDA Regulation
of cannabis marijuana and CBD, and the possible registration of facilities where cannabis is grown and CBD products are produced,
if implemented, could negatively affect the cannabis industry generally, which could directly affect our financial condition:

The FDA has not approved
cannabis, marijuana, industrial hemp or CBD derived from cannabis or industrial hemp as a safe and effective drug for any indication.
The FDA considers these substances illegal Schedule 1 drugs. As of the date of this filing, we have not, and do not intend to file
an IND with the FDA, concerning any of our products that may contain cannabis, industrial hemp or CBD derived from industrial hemp.
Further, The FDA has concluded that products containing cannabis, marijuana industrial hemp or CBD derived from industrial hemp
are excluded from the dietary supplement definition under sections 201(ff)(3)(B)(i) and (ii) of the U.S. Food, Drug & Cosmetic
Act, respectively. Our products are not marketed or sold as dietary supplements. However, at some indeterminate future time, the
FDA may choose to change its position concerning products containing cannabis, marijuana, or CBD derived from industrial hemp,
and may choose to enact regulations that are applicable to such products, including, but not limited to: the growth, cultivation,
harvesting and processing of cannabis and marijuana; regulations covering the physical facilities where cannabis and marijuana
are grown; and possible testing to determine efficacy and safety of CBD. In this hypothetical event, our industrial hemp based
products containing CBD may be subject to regulation. In the hypothetical event that some or all of these regulations are imposed,
we do not know what the impact would be on the cannabis industry in general, and what costs, requirements and possible prohibitions
may be enforced. If we are unable to comply with the conditions and possible costs of possible regulations and/or registration
as may be prescribed by the FDA, we may be unable to continue to operate our business.

We may have difficulty
accessing the service of banks:

33





On February 14, 2014,
the U.S. government issued rules allowing banks to legally provide financial services to state-licensed marijuana businesses. A
memorandum issued by the Justice Department to federal prosecutors re-iterated guidance previously given, this time to the financial
industry that banks can do business with legal marijuana businesses and "may not" be prosecuted. The Treasury Department's
Financial Crimes Enforcement Network (FinCEN) issued guidelines to banks that "it is possible to provide financial services""
to state-licensed marijuana businesses and still be in compliance with federal anti-money laundering laws. The guidance falls short
of the explicit legal authorization that banking industry officials had pushed the government to provide and to date, it is not
clear if any banks have relied on the guidance and taken on legal marijuana companies as clients. The aforementioned policy may
be administration dependent and a change in presidential administrations may cause a policy reversal and retraction of current
policies, wherein legal marijuana businesses may not have access to the banking industry. Also, the inability of potential customers
in our target market to open accounts and otherwise use the service of banks may make it difficult for them to purchase our products.

Banking regulations
in our business are costly and time consuming:

In assessing the risk
of providing services to a marijuana-related business, a financial institutions may conduct customer due diligence that includes:
(i) verifying with the appropriate state authorities whether the business is duly licensed and registered; (ii) reviewing the license
application (and related documentation) submitted by the business for obtaining a state license to operate its marijuana-related
business; (iii) requesting from state licensing and enforcement authorities available information about the business and related
parties; (iv) developing an understanding of the normal and expected activity for the business, including the types of products
to be sold and the type of customers to be served (e.g., medical versus recreational customers); (v) ongoing monitoring of publicly
available sources for adverse information about the business and related parties; (vi) ongoing monitoring for suspicious activity,
including for any of the red flags described in this guidance; and (vii) refreshing information obtained as part of customer due
diligence on a periodic basis and commensurate with the risk. With respect to information regarding state licensure obtained in
connection with such customer due diligence, a financial institution may reasonably rely on the accuracy of information provided
by state licensing authorities, where states make such information available. These regulatory reviews may be time consuming and
costly.

Due to our involvement
in the cannabis industry, we may have a difficult time obtaining the various insurances that are desired to operate our business,
which may expose us to additional risk and financial liability:

Insurance that is otherwise
readily available, such as general liability, and directors and officer’s insurance, is more difficult for us to find, and
more expensive, because we are service providers to companies in the cannabis industry. There are no guarantees that we will be
able to find such insurances in the future, or that the cost will be affordable to us. If we are forced to go without such insurances,
it may prevent us from entering into certain business sectors, may inhibit our growth, and may expose us to additional risk and
financial liabilities.

The Company’s
industry is highly competitive and we have less capital and resources than many of our competitors which may give them an advantage
in developing and marketing products similar to ours or make our products obsolete:

We are involved in a
highly competitive industry where we may compete with numerous other companies who offer alternative methods or approaches, who
may have far greater resources, more experience, and personnel perhaps more qualified than we do. Such resources may give our competitors
an advantage in developing and marketing products similar to ours or products that make our products obsolete. There can be no
assurance that we will be able to successfully compete against these other entities.

We may be unable to
respond to the rapid technological change in the industry and such change may increase costs and competition that may adversely
affect our business:

Rapidly changing
technologies, frequent new product and service introductions and evolving industry standards characterize our market. The
continued growth of the Internet and intense competition in our industry exacerbates these market characteristics. Our future
success will depend on our ability to adapt to rapidly changing technologies by continually improving the performance
features and reliability of our products and services. We may experience difficulties that could delay or prevent the
successful development, introduction or marketing of our products and services. In addition, any new enhancements must meet
the requirements of our current and prospective customers and must achieve significant market acceptance. We could also incur
substantial costs if we need to modify our products and services or infrastructures to adapt to these changes.



34





We also expect that
new competitors may introduce products, systems or services that are directly or indirectly competitive with us. These competitors
may succeed in developing, products and services that have greater functionality or are less costly than our products and services,
and may be more successful in marketing such products and services. Technological changes have lowered the cost of operating communications
and computer systems and purchasing software. These changes reduce our cost of selling products and providing services, but also
facilitate increased competition by reducing competitors’ costs in providing similar services. This competition could increase
price competition and reduce anticipated profit margins.

Our products and services
are new and our industry is rapidly evolving:

Due consideration must
be given to our prospects in light of the risks, uncertainties and difficulties frequently encountered by companies in their early
stage of development, particularly companies in the rapidly evolving legal cannabis industry. To be successful in this industry,
we must, among other things:

•       develop
and introduce functional and attractive service offerings;

•       attract
and maintain a large base of consumers;

•       increase
awareness of our brands and develop consumer loyalty;

•       establish
and maintain strategic relationships with distribution partners and service providers;

•       respond
to competitive and technological developments;

•       attract,
retain and motivate qualified personnel.

We cannot guarantee
that we will succeed in achieving these goals, and our failure to do so would have a material adverse effect on our business, prospects,
financial condition and operating results:

Some of our products
and services are new and are only in early stages of commercialization. We are not certain that these products and services will
function as anticipated or be desirable to its intended market. Also, some of our products and services may have limited functionalities,
which may limit their appeal to consumers and put us at a competitive disadvantage. If our current or future products and services
fail to function properly or if we do not achieve or sustain market acceptance, we could lose customers or could be subject to
claims which could have a material adverse effect on our business, financial condition and operating results.

As is typical in a new
and rapidly evolving industry, demand and market acceptance for recently introduced products and services are subject to a high
level of uncertainty and risk. Because the market for the Company is new and evolving, it is difficult to predict with any certainty
the size of this market and its growth rate, if any. We cannot guarantee that a market for the Company will develop or that demand
for Company’s products and services will emerge or be sustainable. If the market fails to develop, develops more slowly than
expected or becomes saturated with competitors, our business, financial condition and operating results would be materially adversely
affected.

The Company’s
failure to continue to attract, train, or retain highly qualified personnel could harm the Company’s business:

35





The Company’s success
also depends on the Company’s ability to attract, train, and retain qualified personnel, specifically those with management
and product development skills. In particular, the Company must hire additional skilled personnel to further the Company’s
research and development efforts. Competition for such personnel is intense. If the Company does not succeed in attracting new
personnel or retaining and motivating the Company’s current personnel, the Company’s business could be harmed.

If we are unable to
attract and retain independent associates, our business may suffer.

Our future success depends
largely upon our ability to attract and retain a large active base of independent associates and members who purchase our products.
We cannot give any assurances that the number of our independent associates will be established or increase in the future. Several
factors affect our ability to attract and retain independent associates and members, including: on-going motivation of our independent
associates; general economic conditions; significant changes in the amount of commissions paid; public perception and acceptance
of our industry; public perception and acceptance of network marketing; public perception and acceptance of our business and our
products, including any negative publicity; the limited number of people interested in pursuing network marketing as a business;
our ability to provide proprietary quality-driven products that the market demands; and, competition in recruiting and retaining
independent associates.

The loss of key management
personnel could adversely affect our business.

We depend on the continued
services of our executive officers and senior management team as they work closely with independent associate leaders and are responsible
for our day-to-day operations. Our success depends in part on our ability to retain our executive officers, to compensate our executive
officers at attractive levels, and to continue to attract additional qualified individuals to our management team. Although we
have entered into employment agreements with certain members of our senior management team, and do not believe that any of them
are planning to leave or retire in the near term, we cannot assure that our senior managers will remain with us. The loss or limitation
of the services of any of our executive officers or members of our senior management team, or the inability to attract additional
qualified management personnel, could have a material adverse effect on our business, financial condition, results of operations,
or independent associate relations.

If government regulations
regarding network marketing change or are interpreted or enforced in a manner adverse to our business, we may be subject to new
enforcement actions and material limitations regarding our overall business model.

Network marketing is
subject to foreign, federal, and state regulations. Any change in legislation and regulations could affect our business. Furthermore,
significant penalties could be imposed on us for failure to comply with various statutes or regulations resulting from: ambiguity
in statutes; regulations and related court decisions; the discretion afforded to regulatory authorities and courts interpreting
and enforcing laws; and new regulations or interpretations of regulations affecting our business.

If our network marketing
activities do not comply with government regulations, our business could suffer.

Many governmental agencies
regulate our network marketing activities. A government agency’s determination that our business or our independent associates
have significantly violated a law or regulation could adversely affect our business. The laws and regulations for network marketing
intend to prevent fraudulent or deceptive schemes. Our business faces constant regulatory scrutiny due to the interpretive and
enforcement discretion given to regulators, periodic misconduct by our independent associates, adoption of new laws or regulations,
and changes in the interpretation of new or existing laws or regulations.

Independent associates
could fail to comply with our associate policies and procedures or make improper product, compensation, marketing or advertising
claims that violate laws or regulations, which could result in claims against us that could harm our financial condition and operating
results.

36





We sell our products
through a sales force of independent associates through our distributors. The independent associates are independent contractors
and, accordingly, we are not in a position to provide the same direction, motivation, and oversight as we would if associates were
our own employees. As a result, there can be no assurance that our associates will participate in our marketing strategies or plans,
accept our introduction of new products, or comply with our associate policies and procedures. All independent associates will
be required to sign a written contract and agree to adhere to our policies and procedures, which prohibit associates from making
false, misleading or other improper claims regarding products or income potential from the distribution of the products. However,
independent associates may from time to time, without our knowledge and in violation of our policies, create promotional materials
or otherwise provide information that does not accurately describe our marketing program. There is a possibility that some jurisdictions
could seek to hold us responsible for independent associate activities that violate applicable laws or regulations, which could
result in government or third-party actions or fines against us, which could harm our financial condition and operating results.

We may be held responsible
for certain taxes or assessments relating to the activities of our independent associates, which could harm our financial condition
and operating results.

Our independent associates
are subject to taxation and, in some instances, legislation or governmental agencies impose an obligation on us to collect taxes,
such as value added taxes, and to maintain appropriate tax records. In addition, we are subject to the risk in some jurisdictions
of being responsible for social security and similar taxes with respect to our distributors. In the event that local laws and regulations
require us to treat our independent distributors as employees, or if our distributors are deemed by local regulatory authorities
to be our employees, rather than independent contractors, we may be held responsible for social security and related taxes in those
jurisdictions, plus any related assessments and penalties, which could harm our financial condition and operating results.

Risks Related to the
Company

Uncertainty of profitability:

Our business strategy
may result in increased volatility of revenues and earnings. As we will only develop a limited number of products and services
at a time, our overall success will depend on a limited number of products and services, which may cause variability and unsteady
profits and losses depending on the products and services offered and their market acceptance.

Our revenues and our
profitability may be adversely affected by economic conditions and changes in the market for medical and recreational marijuana.
Our business is also subject to general economic risks that could adversely impact the results of operations and financial condition.

Because of the anticipated
nature of the products and services that we offer and attempt to develop, it is difficult to accurately forecast revenues and operating
results and these items could fluctuate in the future due to a number of factors. These factors may include, among other things,
the following:

•       Our
ability to raise sufficient capital to take advantage of opportunities and generate sufficient revenues to cover expenses.

•       Our
ability to source strong opportunities with sufficient risk adjusted returns.

•       Our
ability to manage our capital and liquidity requirements based on changing market conditions generally and changes in the developing
legal medical marijuana and recreational marijuana industries.

•       The
acceptance of the terms and conditions of our services.

•       The
amount and timing of operating and other costs and expenses.

37





•       The
nature and extent of competition from other companies that may reduce market share and create pressure on pricing and investment
return expectations.

•       Adverse
changes in the national and regional economies in which we will participate, including, but not limited to, changes in our performance,
capital availability, and market demand.

•       Adverse
changes in the projects in which we plan to invest which result from factors beyond our control, including, but not limited to,
a change in circumstances, capacity and economic impacts.

•       Adverse
developments in the efforts to legalize marijuana or increased federal enforcement.

•       Changes
in laws, regulations, accounting, taxation, and other requirements affecting our operations and business.

•       Our
operating results may fluctuate from year to year due to the factors listed above and others not listed. At times, these fluctuations
may be significant.

Management of growth
will be necessary for us to be competitive:

Successful expansion
of our business will depend on our ability to effectively attract and manage staff, strategic business relationships, and shareholders.
Specifically, we will need to hire skilled management and technical personnel as well as manage partnerships to navigate shifts
in the general economic environment. Expansion has the potential to place significant strains on financial, management, and operational
resources, yet failure to expand will inhibit our profitability goals.

We are entering a
potentially highly competitive market:

The markets for businesses
in the medical marijuana and recreational marijuana industries are competitive and evolving. In particular, we face strong competition
from larger companies that may be in the process of offering similar products and services to ours. Many of our current and potential
competitors have longer operating histories, significantly greater financial, marketing and other resources and larger client bases
than we have (or may be expected to have).

Given the rapid changes
affecting the global, national, and regional economies generally and the medical marijuana and recreational marijuana industries,
in particular, we may not be able to create and maintain a competitive advantage in the marketplace. Our success will depend on
our ability to keep pace with any changes in its markets, especially with legal and regulatory changes. Our success will depend
on our ability to respond to, among other things, changes in the economy, market conditions, and competitive pressures. Any failure
by us to anticipate or respond adequately to such changes could have a material adverse effect on our financial condition, operating
results, liquidity, cash flow and our operational performance.

Although we believe
that our hempSMART products are exempt from regulation under the CSA, the U.S. Patent and Trademark Office may disagree and disallow
us from obtaining trademark and patent protection for our hempSMART brand and products:

We have applied for a
trademark for our hempSMARTTM brand and a patent for our hempSMART Brain product. Because our hempSMART Brain product contains
CBD, and may be considered an illegal Schedule 1 drug under federal law, the U.S. Patent and Trademark Office may not approve our
pending applications for patent or trademark protection for our products, and this could materially affect our ability to establish
and grow our brand, hempSMART products and develop our customer base and good will.

If we fail to protect
our intellectual property, our business could be adversely affected:

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Our viability will depend,
in part, on our ability to develop and maintain the proprietary aspects of our products and brands to distinguish our products
and services from our competitors' products and services. We rely on patents, copyrights, trademarks, trade secrets, and confidentiality
provisions to establish and protect our intellectual property.

Any infringement or misappropriation
of our intellectual property could damage its value and limit our ability to compete. We may have to engage in litigation to protect
the rights to our intellectual property, which could result in significant litigation costs and require a significant amount of
our time.

Competitors may also
harm our sales by designing products that mirror the capabilities of our products or technology without infringing on our intellectual
property rights. If we do not obtain sufficient protection for our intellectual property, or if we are unable to effectively enforce
our intellectual property rights, our competitiveness could be impaired, which would limit our growth and future revenue.

We may also find it necessary
to bring infringement or other actions against third parties to seek to protect our intellectual property rights. Litigation of
this nature, even if successful, is often expensive and time-consuming to prosecute, and there can be no assurance that we will
have the financial or other resources to enforce our rights or be able to enforce our rights, or prevent other parties from developing
similar technology or designing around our intellectual property.

Our trade secrets
may be difficult to protect:

Our success depends upon
the skills, knowledge and experience of our scientific and technical personnel, our consultants and advisors, as well as our contractors.
Because we operate in a highly competitive industry, we rely in part on trade secrets to protect our proprietary products and processes.
However, trade secrets are difficult to protect. We enter into confidentiality or non-disclosure agreements with our corporate
partners, employees, consultants, outside scientific collaborators, developers and other advisors. These agreements generally require
that the receiving party keep confidential and not disclose to third parties confidential information developed by the receiving
party or made known to the receiving party by us during the course of the receiving party's relationship with us. These agreements
also generally provide that inventions conceived by the receiving party in the course of rendering services to us will be our exclusive
property, and we enter into assignment agreements to perfect our rights.

These confidentiality,
inventions and assignment agreements may be breached and may not effectively assign intellectual property rights to us. Our trade
secrets also could be independently discovered by competitors, in which case we would not be able to prevent the use of such trade
secrets by our competitors. The enforcement of a claim alleging that a party illegally obtained and was using our trade secrets
could be difficult, expensive and time consuming and the outcome would be unpredictable. The failure to obtain or maintain meaningful
trade secret protection could adversely affect our competitive position.

Our lack of sufficient
patent and/or trademark or copyright protection and any unauthorized use of our proprietary information and technology may affect
our business:

We currently rely
on a combination of protections by patents, trademarks, contracts, including confidentiality and nondisclosure agreements,
and common law rights, such as trade secrets, to protect our intellectual property. However, we cannot assure you that we
will be able to adequately protect our technology or other intellectual property from misappropriation in the U.S. and
abroad. This risk may be increased due to the lack of certain patent and/or copyright protection. Any patent issued to us
could be challenged, invalidated or circumvented or rights granted thereunder may not provide a competitive advantage to us.
Furthermore, patent applications that we file may not result in issuance of a patent, or, if a patent is issued, the patent
may not be issued in a form that is advantageous to us. Despite our efforts to protect our intellectual property rights,
others may independently develop similar products, duplicate our products or design around our patents and other rights. In
addition, it is difficult to monitor compliance with, and enforce, our intellectual property rights on a worldwide basis in a
cost-effective manner. In jurisdictions where foreign laws provide less intellectual property protection than afforded in the
U.S., our technology or other intellectual property may be compromised, and our business could be materially adversely
affected. If any of our proprietary rights are misappropriated or we are forced to defend our intellectual property rights,
we will have to incur substantial costs. Such litigation could result in substantial costs and diversion of our resources,
including diverting the time and effort of our senior management, and could disrupt our business, as well as have a material
adverse effect on our business, prospects, financial condition and results of operations. We can provide no assurance that we
will have the financial resources to oppose any actual or threatened infringement by any third party. Furthermore, any patent
or copyrights that we may be granted may be held by a court to infringe on the intellectual property rights of others and
subject us to the payment of damage awards.



39





Our Business Can be Effected by Unusual Weather Patterns:

The production of some
of our products relies on the availability and use of live plant material, which will be grown in California and Washington State.
Growing periods can be impacted by weather patterns and these unpredictable weather patterns may impact our ability to harvest
cannabis and produce products. In addition, severe weather, including drought and hail, can destroy a crop, which could result
in our having no cannabis to process. If we are unable to harvest cannabis through our joint ventures, our ability to meet customer
demand, generate sales, and maintain operations will be impacted. Our joint ventures do not presently have insurance against any
loss of operations due to weather.

Ordinary and necessary
business deduction other than the cost of goods sold are disallowed by the Internal Revenue Services for Cannabis companies under
IRC Section 280E:

At this juncture, IRS
280E does not interfere with our businesses model from deducting ordinary and necessary business expenses. However, should Company
enter the cannabis industry more directly, this onerous tax burden might significantly impact the profitability of the Company
and may make the pricing of its products less competitive.

Risks Related to Our
Common Stock

Because we may issue
additional shares of our common stock, investment in our company could be subject to substantial dilution:

Investors’ interests
in our Company will be diluted and investors may suffer dilution in their net book value per share when we issue additional shares.
We are authorized to issue 5,000,000,000 shares of common stock, $0.001 par value per share. As of December 31, 2016, there were
1,620,996,998 shares of our common stock issued and outstanding. We anticipate that all or at least some of our future funding,
if any, will be in the form of equity financing from the sale of our common stock. If we do sell more common stock, investors’
investment in our company will likely be diluted. Dilution is the difference between what investors pay for their stock and the
net tangible book value per share immediately after the additional shares are sold by us. If dilution occurs, any investment in
our company’s common stock could seriously decline in value.

Trading in our common
stock on the OTC Pink Exchange has been subject to wide fluctuations:

Our common stock is currently
quoted for public trading on the OTC Pink Exchange. The trading price of our common stock has been subject to wide fluctuations.
Trading prices of our common stock may fluctuate in response to a number of factors, many of which will be beyond our control.
The stock market has generally experienced extreme price and volume fluctuations that have often been unrelated or disproportionate
to the operating performance of companies with limited business operation. There can be no assurance that trading prices and price
earnings ratios previously experienced by our common stock will be matched or maintained. These broad market and industry factors
may adversely affect the market price of our common stock, regardless of our operating performance. In the past, following periods
of volatility in the market price of a company’s securities, securities class-action litigation has often been instituted.
Such litigation, if instituted, could result in substantial costs for us and a diversion of management’s attention and resources.



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Utah law, our Certificate
of Incorporation and our by-laws provides for the indemnification of our officers and directors at our expense, and correspondingly
limits their liability, which may result in a major cost to us and hurt the interests of our shareholders because corporate resources
may be expended for the benefit of officers and/or directors:

Our Certificate of Incorporation
and By-Laws include provisions that eliminate the personal liability of our directors for monetary damages to the fullest extent
possible under the laws of the State of Utah or other applicable law. These provisions eliminate the liability of our directors
and our shareholders for monetary damages arising out of any violation of a director of his fiduciary duty of due care. Under Utah
law, however, such provisions do not eliminate the personal liability of a director for (i) breach of the director's duty of loyalty,
(ii) acts or omissions not in good faith or involving intentional misconduct or knowing violation of law, (iii) payment of dividends
or repurchases of stock other than from lawfully available funds, or (iv) any transaction from which the director derived an improper
benefit. These provisions do not affect a director's liabilities under the federal securities laws or the recovery of damages by
third parties.

We do not intend to
pay cash dividends on any investment in the shares of stock of our Company and any gain on an investment in our Company will need
to come through an increase in our stock’s price, which may never happen:

We have never paid any
cash dividends and currently do not intend to pay any cash dividends for the foreseeable future. To the extent that we require
additional funding currently not provided for, our funding sources may prohibit the payment of a dividend. Because we do not currently
intend to declare dividends, any gain on an investment in our company will need to come through an increase in the stock’s
price. This may never happen and investors may lose all of their investment in our company.

Because our securities
are subject to penny stock rules, you may have difficulty reselling your shares:

Our shares as penny stocks,
are covered by Section 15(g) of the Securities Exchange Act of 1934 which imposes additional sales practice requirements on broker/dealers
who sell our company’s securities including the delivery of a standardized disclosure document; disclosure and confirmation
of quotation prices; disclosure of compensation the broker/dealer receives; and, furnishing monthly account statements. These rules
apply to companies whose shares are not traded on a national stock exchange, trade at less than $5.00 per share, or who do not
meet certain other financial requirements specified by the Securities and Exchange Commission. These rules require brokers who
sell “penny stocks” to persons other than established customers and “accredited investors” to complete
certain documentation, make suitability inquiries of investors, and provide investors with certain information concerning the risks
of trading in such penny stocks. These rules may discourage or restrict the ability of brokers to sell our shares of common stock
and may affect the secondary market for our shares of common stock. These rules could also hamper our ability to raise funds in
the primary market for our shares of common stock.

FINRA sales practice
requirements may also limit a stockholder’s ability to buy and sell our stock:

In addition to the “penny
stock” rules described above, the Financial Industry Regulatory Authority (known as “FINRA”) has adopted rules
that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that
the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional
customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status,
investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability
that speculative low-priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult
for broker-dealers to recommend that their customers buy our common shares, which may limit your ability to buy and sell our stock
and have an adverse effect on the market for our shares.



|ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|------- | -----------------------------------------------------------



During the quarter ended September 30, 2017,
and to date, the Company made the following sales of unregistered equity securities:



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On August 30, 2017, the Company issued 1,666,667
shares of restricted common stock to Paras Bhakta in exchange for $10,000. The issuance was made pursuant to an exemption from
registration provided by Section 506 of Reg. D and Section 4.2 of the 1933 Securities and Exchange Act.



On August 30, 2017, the Company issued 2,500,000
shares of restricted common stock to Jay Gangwal in exchange for $15,000. The issuance was made pursuant to an exemption from registration
provided by Section 506 of Reg. D and Section 4.2 of the 1933 Securities and Exchange Act.



On October 2, 2017, the Company issued
Trevor Muehlfelder 1,000,000 shares of restricted common stock, as consideration for services rendered. The issuance was made
pursuant to an exemption from registration provided by Section 506 of Reg. D and Section 4.2 of the 1933 Securities and
Exchange Act.



On October 2, 2017, the Company issued Brenda
Andrews 1,000,000 shares of restricted common stock, as consideration for services rendered. The issuance was made pursuant to
an exemption from registration provided by Section 506 of Reg. D and Section 4.2 of the 1933 Securities and Exchange Act.



On October 2, 2017, the Company issued Sam
Rosenberg 3,000,000 shares of restricted common stock, as consideration for services rendered. The issuance was made pursuant to
an exemption from registration provided by Section 506 of Reg. D and Section 4.2 of the 1933 Securities and Exchange Act.



On October 2, 2017, the Company issued
William Louis Merlo 2,500,000 shares of restricted common stock, as consideration for services rendered. The issuance was
made pursuant to an exemption from registration provided by Section 506 of Reg. D and Section 4.2 of the 1933 Securities and
Exchange Act.



On October 2, 2017, the Company issued Mailander
Law Office, Inc. 5,000,000 shares of restricted common stock, as consideration for services rendered. The issuance was made pursuant
to an exemption from registration provided by Section 506 of Reg. D and Section 4.2 of the 1933 Securities and Exchange Act.



On October 10, 2017, the Company issued Tangiers
Global, LLC 3,000,000 shares of restricted common stock, as consideration for services rendered. The issuance was made pursuant
to an exemption from registration provided by Section 506 of Reg. D and Section 4.2 of the 1933 Securities and Exchange Act.



|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES
|------- | -------------------------------



None.



|ITEM 4. | MINE SAFETY DISCLOSURES
|------- | -----------------------



Not applicable



|ITEM 5. | OTHER INFORMATION
|------- | -----------------



None.



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|ITEM 6. | EXHIBITS
|------- | --------



The following exhibits are included as part
of this report:



|Exhibit
        Number | Exhibit Description                                                                
|---------------------- | -----------------------------------------------------------------------------------
|3.1                    | Articles of Incorporation (1)                                                      
|3.2                    | By-laws (1)                                                                        
|10.1                   | Tangiers Global, LLC Investment Agreement(1)                                       
|10.2                   | Tangiers
    Global, LLC Registration Rights Agreement(1)                          
|10.3                   | Tangiers
    Global, LLC Convertible Promissory Notes: $250,000 and $50,000 (1)    
|10.4                   | St.
    George Investments, LLC Convertible Promissory Note(1)                     
|10.5                   | St.
    George Investments, LLC Forbearance Agreement(1)                           
|10.6**                 | Settlement
    and Mutual Release of All Claims Agreement with Tangiers Global, LLC
|31**                   | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.           
|32***                  | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.           



**       Filed
herewith

***       Furnished
Herewith

(1)       Incorporated
by reference.





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SIGNATURES



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



Dated: December 11 , 2017



| | MARIJUANA COMPANY OF AMERICA, INC.
| | ----------------------------------
| |                                   
| | By:                               
| |                                   
| |                                   
| |                                   
| |                                   
| | By:                               
| |                                   
| |                                   
| |                                   
| |                                   
| |                                   
| |                                   
| |                                   

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