UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
(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, 2014.
[ ] TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______.
Commission
File Number 000-26108
AMERICAN
CANNABIS COMPANY, INC.
(Exact
name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization) |
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94-2901715
(I.R.S. Employer Identification No.) |
| |
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3457
Ringsby Court, Unit 111
Denver, Colorado
(Address of principal executive offices) |
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80216
(Zip Code) |
(303) 974 - 4770
(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 [x] 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 [x] No [ ]
Indicate by check mark whether
the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company"
in Rule 12b-2 of the Exchange Act.
| Large accelerated filer [ ] |
|
Accelerated filer [ ] |
|
Non-accelerated filer [ ]
(Do not check if a smaller reporting company) |
|
Smaller reporting company [x] |
Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [x]
On November 3, 2014, 42,993,750
shares of common stock were outstanding.
TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION |
Page |
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| Item 1. |
FINANCIAL STATEMENTS (Unaudited): |
1 |
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CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2014 AND DECEMBER 31, 2013 |
1 |
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CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS
ENDED SEPTEMBER
30, 2014, THE THREE MONTHS ENDED SEPTEMBER 30, 2013
AND
THE PERIOD FROM INCEPTION (MARCH 5, 2013) THROUGH SEPTEMBER 30, 2013 |
2 |
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CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2014 AND THE PERIOD FROM INCEPTION (MARCH 5, 2013)
THROUGH SEPTEMBER 30, 2013 |
3 |
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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS |
4 |
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| Item 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
14 |
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| Item 3. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
20 |
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| Item 4. |
CONTROLS AND PROCEDURES |
20 |
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| PART II. OTHER INFORMATION |
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| Item 1. |
LEGAL PROCEEDINGS |
21 |
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| Item 1A. |
RISK FACTORS |
21 |
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| Item 2. |
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
21 |
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| Item 3. |
DEFAULTS UPON SENIOR SECURITIES |
21 |
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| Item 5. |
OTHER INFORMATION |
21 |
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| Item 6. |
EXHIBITS |
21 |
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| SIGNATURES |
22 |
PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN CANNABIS COMPANY, INC. AND ITS SUBSIDIARIES
FORMERLY KNOWN AS BRAZIL INTERACTIVE MEDIA,
INC.
CONSOLIDATED BALANCE SHEETS
(in dollars, except share data)
| | |
September 30, | |
December 31, |
| | |
2014 | |
2013 |
| | |
(Unaudited) | |
(Audited) |
| Assets | |
| | | |
| | |
| Current assets | |
| | | |
| | |
| Cash and cash equivalents | |
$ | 157,258 | | |
$ | 17,597 | |
| Accounts receivable, net | |
| 82,367 | | |
| 1,250 | |
| Deposits | |
| 168,000 | | |
| — | |
| Inventory | |
| 31,500 | | |
| — | |
| Prepaid expenses and other current assets | |
| 32,000 | | |
| 4,368 | |
| Total current assets | |
| 471,125 | | |
| 23,215 | |
| Property and equipment, net | |
| 3,868 | | |
| 1,765 | |
| Total assets | |
$ | 474,993 | | |
$ | 24,980 | |
| Liabilities and shareholders' equity | |
| | | |
| | |
| Current liabilities | |
| | | |
| | |
| Accounts payable | |
| 60,374 | | |
| 152 | |
| Deferred revenue | |
| 184,495 | | |
| 11,109 | |
| Convertible note, net of discount | |
| 85,917 | | |
| — | |
| Accrued and other current liabilities | |
| 103,634 | | |
| 5,340 | |
| Total current liabilities | |
| 434,420 | | |
| 16,601 | |
| Total liabilities | |
| 434,420 | | |
| 16,601 | |
| Commitments and contingencies (See Note 13) | |
| | | |
| | |
| Shareholders' equity | |
| | | |
| | |
| Preferred stock; $0.01 par value, 5,000,000 shares authorized; no
shares issued and outstanding | |
| — | | |
| — | |
| Common stock, $0.00001 par value, 100,000,000 shares authorized;
40,425,000 and 25,368,502 issued and outstanding at September 30, 2014 and December 31, 2013, respectively | |
| 404 | | |
| 254 | |
| Additional paid in capital | |
| 51,887 | | |
| 546 | |
| Retained earnings (deficit) | |
| (11,718 | ) | |
| 7,579 | |
| Total shareholders’ equity | |
| 40,573 | | |
| 8,379 | |
| Total liabilities and shareholders' equity | |
$ | 474,993 | | |
$ | 24,980 | |
The
accompanying notes are an integral part of these consolidated financial statements
AMERICAN
CANNABIS COMPANY, INC. AND ITS SUBSIDIARIES
FORMERLY KNOWN AS BRAZIL INTERACTIVE
MEDIA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in dollars, except share data)
(Unaudited)
| | |
Three Months Ended | |
Three Months Ended | |
Nine Months Ended | |
March 5, 2013 (Inception) Through |
| | |
September 30, 2014 | |
September 30, 2013 | |
September 30, 2014 | |
September 30, 2013 |
| | |
(unaudited) | |
(unaudited) | |
(unaudited) | |
(unaudited) |
| | |
| | | |
| | | |
| | | |
| | |
| Revenues | |
| | | |
| | | |
| | | |
| | |
| Consulting services | |
$ | 312,010 | | |
$ | 16,900 | | |
$ | 439,414 | | |
$ | 21,250 | |
| Products and equipment | |
| 169,588 | | |
| 3,705 | | |
| 179,226 | | |
| 3,705 | |
| Total revenues | |
| 481,598 | | |
| 20,605 | | |
| 618,640 | | |
| 24,955 | |
| Costs of revenues | |
| | | |
| | | |
| | | |
| | |
| Cost of consulting services | |
| 132,573 | | |
| 8,451 | | |
| 207,462 | | |
| 9,026 | |
| Cost of products and equipment | |
| 138,816 | | |
| 2,816 | | |
| 147,833 | | |
| 2,866 | |
| Total costs of revenues | |
| 271,389 | | |
| 11,267 | | |
| 355,295 | | |
| 11,892 | |
| Gross profit | |
| 210,209 | | |
| 9,338 | | |
| 263,345 | | |
| 13,063 | |
| Operating expenses | |
| | | |
| | | |
| | | |
| | |
| General and administrative expenses | |
| 82,260 | | |
| 4,427 | | |
| 178,153 | | |
| 5,026 | |
| Selling and marketing expenses | |
| 51,713 | | |
| 5,092 | | |
| 99,230 | | |
| 6,363 | |
| Total operating expense | |
| 133,973 | | |
| 9,519 | | |
| 277,383 | | |
| 11,389 | |
| Income (loss) from operations | |
| 76,236 | | |
| (181 | ) | |
| (14,038 | ) | |
| 1,674 | |
| Other income (expense) | |
| | | |
| | | |
| | | |
| | |
| Interest expense | |
| (998 | ) | |
| — | | |
| (1,259 | ) | |
| — | |
| Total other income (expenses) | |
| (998 | ) | |
| — | | |
| (1,259 | ) | |
| — | |
| Net income (loss) | |
$ | 75,238 | | |
$ | (181 | ) | |
$ | (15,297 | ) | |
$ | 1,674 | |
| | |
| | | |
| | | |
| | | |
| | |
| Basic net income per common share | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | |
| Diluted net income per common share | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | |
| | |
| | | |
| | | |
| | | |
| | |
| Basic weighted average common shares outstanding | |
| 31,910,071 | | |
| 25,368,502 | | |
| 28,966,879 | | |
| 25,368,502 | |
| Diluted weighted average common shares outstanding | |
| 36,900,161 | | |
| 25,368,502 | | |
| 28,966,879 | | |
| 25,368,502 | |
The accompanying notes are an integral
part of these consolidated financial statements
AMERICAN CANNABIS COMPANY, INC. AND
ITS SUBSIDIARIES
FORMERLY
KNOWN AS BRAZIL INTERACTIVE MEDIA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in dollars)
(Unaudited)
| | |
| |
March 5, 2013 |
| | |
Nine Months Ended | |
(Inception) Through |
| | |
September 30, 2014 | |
September 30, 2013 |
| | |
(unaudited) | |
(unaudited) |
| | |
| | | |
| | |
| Cash flows from operating activities | |
| | | |
| | |
| Net income (loss) | |
$ | (15,297 | ) | |
$ | 1,674 | |
| Adjustments to reconcile net income to operating cash | |
| | | |
| | |
| Depreciation | |
| 499 | | |
| 340 | |
| Amortization of discount on short-term notes payable | |
| 85,917 | | |
| — | |
| Stock-based compensation | |
| 10,947 | | |
| — | |
| Adjustment for recapitalization upon reverse merger (See Note 1) | |
| (296,361 | ) | |
| — | |
| Changes in operating assets and liabilities | |
| — | | |
| — | |
| Accounts receivable | |
| (81,117 | ) | |
| — | |
| Deposits | |
| (168,000 | ) | |
| — | |
| Inventory | |
| (31,500 | ) | |
| — | |
| Prepaid expenses and other current assets | |
| (27,632 | ) | |
| — | |
| Deferred revenue | |
| 173,386 | | |
| — | |
| Accrued liabilities and other current liabilities | |
| 98,466 | | |
| 5,272 | |
| Accounts payable | |
| 1,755 | | |
| — | |
| Net cash provided by (used in) operating activities | |
| (248,937 | ) | |
| 7,286 | |
| Cash flows from investing activities | |
| | | |
| | |
| Purchases of property and equipment | |
| (2,602 | ) | |
| (2,250 | ) |
| Net cash provided by (used in) investing activities | |
| (2,602 | ) | |
| (2,250 | ) |
| Cash flows from financing activities | |
| | | |
| | |
| Proceeds from issuance of common stock | |
| 200 | | |
| 800 | |
| Proceeds from short-term notes payable | |
| 35,000 | | |
| — | |
| Repayment of short-term notes payable | |
| (35,000 | ) | |
| — | |
| Proceeds from issuance of convertible notes payable | |
| 395,000 | | |
| — | |
| Due to directors | |
| — | | |
| 750 | |
| Investments from (distributions to) owners | |
| (4,000 | ) | |
| 1,043 | |
| Net cash provided by (used in) financing activities | |
| 391,200 | | |
| 2,593 | |
| Net increase (decrease) in cash and cash equivalents | |
| 139,661 | | |
| 7,629 | |
| Cash and cash equivalents at beginning of period | |
| 17,597 | | |
| — | |
| Cash and cash equivalents at end of period | |
$ | 157,258 | | |
$ | 7,629 | |
| Supplemental cash flow information: | |
| | | |
| | |
| Cash paid for interest during the period | |
$ | 261 | | |
$ | — | |
| Cash paid for taxes during the period | |
$ | — | | |
$ | — | |
The accompanying notes are an integral
part of these financial statements
AMERICAN CANNABIS COMPANY, INC. AND
ITS SUBSIDIARIES
FORMERLY
KNOWN AS BRAZIL INTERACTIVE MEDIA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1.
Description of the Business
American Cannabis Company, Inc. and
its subsidiaries (the “Company” or “ACC”) is a publicly listed company quoted on the OTCQB under the symbol
“AMMJ”. ACC is based in Denver, Colorado and operates a fully integrated business model that features end-to-end solutions
for businesses operating in the licensed cannabis industry in states and countries where cannabis is regulated and has been de-criminalized
for medical use and/or legalized for recreational use. ACC provides advisory and consulting services specific to this industry,
designs industry-specific products and facilities and manages a strategic group partnership that produces private label customer
products.
ACC is a Delaware corporation formed
on September 24, 2001 as Naturewell, Incorporated, which became Brazil Interactive Media, Inc. (“BIMI”) on March 13,
2013 pursuant to a merger transaction that resulted in the Company becoming the owner of a Brazilian interactive television technology
and television production company, BIMI, Inc. ACC became American Cannabis Company, Inc. on September 29, 2014, pursuant to an
Agreement and Plan of Merger (the “Merger Agreement”) dated May 15, 2014 between the Company, Cannamerica Corp. (“Merger
Sub”), a wholly-owned subsidiary of BIMI, and Hollister & Blacksmith, Inc. d/b/a American Cannabis Consulting (“American
Cannabis Consulting”). Upon execution of the Merger Agreement, the co-founder and president of American Cannabis Consulting,
Corey Hollister, was named Chief Executive Officer of ACC. Pursuant to the Merger Agreement, which was consummated and became effective
on September 29, 2014, (i) all of the outstanding shares of common stock of American Cannabis Consulting were exchanged for shares
of the Company based on a ratio of 3,171.0628 to one (the “Reverse Merger”), (ii) American Cannabis Consulting became
the surviving corporation following the Reverse Merger, (iii) each share of common stock of Merger Sub was converted into and exchanged
for one share of common stock of American Cannabis Consulting, (iv) the Company changed its name to “American Cannabis Company,
Inc.” and (v) the Company’s officers and directors in office prior to the Merger Agreement resigned and American Cannabis
Consulting appointed new officers and directors to serve ACC. In concert with the Merger Agreement, the Company consummated a complete
divestiture of BIMI, Inc. pursuant to a Separation and Exchange Agreement dated May 16, 2014 between the Company, BIMI, Inc., a
Delaware corporation and wholly-owned subsidiary of the Company, and Brazil Investment Holding, LLC (“Holdings”), a
Delaware limited liability company. On October 10, 2014, ACC changed its stock symbol from BIMI to AMMJ.
American Cannabis Consulting was deemed
to have been the accounting acquirer in the Reverse Merger. Accordingly, the Company’s consolidated statements of operations
and consolidated balance sheets reflect the historical results of American Cannabis Consulting prior to the Reverse Merger, and
of the combined entities following the Reverse Merger, and do not include the historical financial results of Brazil Interactive
Media, Inc. prior to the Reverse Merger.
Note 2.
Summary of Significant Accounting Policies
Basis of Accounting
The financial statements are prepared
in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The Company
has elected a fiscal year ending on December 31. Certain balance sheet reclassifications have been made to prior period balances
to reflect the current period’s presentation format; such reclassifications had no impact on the Company’s consolidated
statements of operations or consolidated statements of cash flows and had no material impact on the Company’s consolidated
balance sheets. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates in Financial Reporting
The preparation of financial statements in conformity with
GAAP requires management to make estimates and assumptions that affect amounts of assets and liabilities and disclosures of contingent
assets and liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the periods
presented. Actual results could differ from these estimates. Estimates and assumptions are reviewed periodically and the effects
of revisions are reflected in the financial statements in the period they are deemed to be necessary. Significant estimates made
in the accompanying financial statements include but are not limited to following: those related to revenue recognition, allowance
for doubtful accounts and unbilled services, lives and recoverability of equipment and other long-lived assets, contingencies
and litigation. The Company is subject to uncertainties, such as the impact of future events, economic, environmental and political
factors, and changes in the business climate; therefore, actual results may differ from those estimates. When no estimate in a
given range is deemed to be better than any other when estimating contingent liabilities, the low end of the range is accrued.
Accordingly, the accounting estimates used in the preparation of the Company's financial statements will change as new events
occur, as more experience is acquired, as additional information is obtained and as the Company's operating environment changes.
Changes in estimates are made when circumstances warrant. Such changes and refinements in estimation methodologies are reflected
in reported results of operations; if material, the effects of changes in estimates are disclosed in the notes to the financial
statements.
Cash and Cash Equivalents
The Company considers all highly liquid
investments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents are held in operating
accounts at a major financial institution.
Restricted Cash
Restricted cash is recorded at cost,
which approximates fair value. There was no restricted cash included in current assets on our consolidated balance sheets as of
September 30, 2014 and December 31, 2013. Restricted cash previously related to remaining proceeds from a short-term note entered
into on March 21, 2014 and fully satisfied on May 15, 2014 (see Note 9. Convertible Notes Payable).
Inventory
Inventory is comprised of products
and equipment owned by the Company to be sold to end-customers. Inventory is valued at cost, unless and until the market value
for the inventory is lower than cost, in which case an allowance is established to reduce the valuation to market value. As of
September 30, 2014, market values of all of the Company’s inventory were greater than cost, and accordingly, no such valuation
allowances was recognized. The Company did not hold any inventory as of December 31, 2013.
Deposits
Deposits is comprised of advance payments
made to third parties, primarily for inventory for which the Company has not yet taken title. When the Company takes title to
inventory for which deposits are made, the related amount is classified as inventory, then recognized as a cost of revenues upon
sale (see “Costs of Revenues” below).
Prepaid Expenses and Other Current
Assets
Prepaid expenses and other current
assets is primarily comprised of advance payments made to third parties for independent contractors’ services or other general
expenses. Prepaid services and general expenses are amortized over the applicable periods which approximate the life of the contract
or service period.
Accounts Receivable
Accounts receivable are recorded at the net value of face
amount less an allowance for doubtful accounts. On a periodic basis, the Company evaluates its accounts receivable and, based
on a method of specific identification of any accounts receivable for which it deems the net realizable value to be less than
the gross amount of accounts receivable recorded, establishes an allowance for doubtful accounts for those balances. In determining
its need for an allowance for doubtful accounts, the Company considers historical experience, analysis of past due amounts, client
creditworthiness and any other relevant available information. However, the Company’s actual experience may vary from its
estimates. If the financial condition of its clients were to deteriorate, resulting in their inability or unwillingness to pay
the Company’s fees, it may need to record additional allowances or write-offs in future periods. This risk is mitigated
to the extent that the Company receives retainers from its clients prior to performing significant services.
The allowance for doubtful accounts, if any,
is recorded as a reduction in revenue to the extent the provision relates to fee adjustments and other discretionary pricing adjustments.
To the extent the provision relates to a client's inability to make required payments on accounts receivables, the provision is
recorded in operating expenses. As of September 30, 2014 and December 31, 2013, the Company did not have any allowances for doubtful
accounts.
Significant Clients and Customers
For the three months ended September 30, 2014, three customers
individually accounted for 10% or more of the Company’s revenues; these customers accounted for approximately 72% of the
Company’s total revenues for the period. For the nine months ended September 30, 2014, three clients individually accounted
for 10% or more of the Company’s revenues, and in aggregate, they comprised approximately 65% of the Company’s total
revenues for the period. For the three months ended September 30, 2013, the Company had three customers, each of which accounted
for 10% or more of its total revenues for the period. For the period from inception (March 5, 2013) to September 30, 2013, the
Company had four customers, each of which accounted for 10% or more of its total revenues for the period.
As of September 30, 2014, four customers accounted for
10% or more of the Company’s accounts receivable balance; these customers accounted for approximately 86% of the Company’s
accounts receivable balance at that date. As of December 31, 2013, one client represented 100% of its gross accounts receivable
balance of $1,250.
Property and Equipment, net
Property and Equipment is stated at net book value, cost
less depreciation. Maintenance and repairs are expensed as incurred. Depreciation of owned equipment is provided using the straight-line
method over the estimated useful lives of the assets, ranging from two to seven years. Property and equipment is reviewed for
impairment as discussed below under “Accounting for the Impairment of Long-Lived Assets.” The Company did not capitalize
any interest as of September 30, 2014 or December 31, 2013.
Accounting for the Impairment
of Long-Lived Assets
The Company evaluates long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Upon such an
occurrence, recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to forecasted
undiscounted net cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future
cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value
of the asset. For long-lived assets held for sale, assets are written down to fair value, less cost to sell. Fair value is determined
based on discounted cash flows, appraised values or management's estimates, depending upon the nature of the assets. The Company
had not recorded any impairment charges related to long-lived assets as of September 30, 2014 or December 31, 2013.
Beneficial Conversion Feature
If the conversion features of conventional
convertible debt provides for a rate of conversion that is below market value at issuance, this feature is characterized as a
beneficial conversion feature (“BCF”). A BCF is recorded by the Company as a debt discount pursuant to Financial
Accounting Standards Board (“FASB”) Accounting Standards Codification (“ACF”) Topic 470-20 Debt with
Conversion and Other Options. In those circumstances, the convertible debt is recorded net of the discount related to the
BCF, and the Company amortizes the discount to interest expense, over the life of the debt using the effective interest method.
Revenue Recognition
Revenue is recognized in accordance
with FASB ASC Topic 605, Revenue Recognition. The Company recognizes revenue when persuasive evidence of an arrangement
exists, the related services are rendered or delivery has occurred, the price is fixed or determinable and collectability is reasonably
assured.
The Company primarily generates revenues
from professional services consulting agreements. These arrangements are generally entered into on a time basis, for a fixed-fee
or on a contingent fee basis. Generally, a prepayment or retainer is required prior to performing services.
Revenues from time-based engagements
are recognized as the hours are incurred by the Company.
Revenues from fixed-fee engagements are recognized
under the completed or proportional performance methods. Management reviews arrangement to determine whether or not the fixed-fee
is for a final deliverable or act which is significant to the arrangement as a whole. If it is, revenue is recognized under the
completed performance method, in which revenue is recognized once the final act or deliverable is performed or delivered. Revenue
recognized under the proportional performance method is recognized as services are performed. Under this method, the Company estimates
the amount of completed work in comparison to the total services to be provided under the arrangement or deliverable in order
to determine the amount of revenue to be recognized. Revenue recognition is affected by a number of factors that change the estimated
amount of work required to complete the deliverable, such as changes in scope, timing, awaiting notification of license award
from local government, and the level of client involvement. Losses, if any, on fixed-fee engagements are recognized in the period
in which the loss first becomes probable and reasonably estimable. During the three and nine month periods ended September 30,
2014, and during the period from inception (March 5, 2013) through December 31, 2013, no such losses have occurred. The Company
believes if an engagement terminates prior to completion it can recover the costs incurred related to the services provided.
The Company has some arrangements
for which revenues are contingent upon achieving a pre-determined deliverable or future outcome. Any contingent revenue for these
arrangements is not recognized until the contingency is resolved and collectability is reasonably assured.
The Company’s arrangements with
clients may include terms to deliver multiple services or deliverables. These contracts specifically identify the services to
be provided with the corresponding deliverable. The value for each deliverable is determined based on the prices charged when
each element is sold separately or by other vendor-specific objective evidence (“VSOE”). Revenues are recognized in
accordance with our accounting policies for the elements as described above. The elements qualify for separation when the deliverables
have value on a stand-alone basis and the value of the separate elements can be established by VSOE or an estimated selling price.
While assigning values and identifying
separate elements requires judgment, generally selling prices of the separate elements are readily identifiable as the Company
also sells those elements individually outside of a multiple services engagement. Contracts with multiple elements are typically
fixed-fee or on time basis. Arrangements are typically terminable by either party upon sufficient notice and do not include provisions
for refunds relating to services provided.
Differences between the timing of
billings and the recognition of revenue are recognized as either unbilled services or deferred revenue in the accompanying balance
sheet. Revenues recognized for services performed, but not yet billed to clients are recorded as unbilled services.
Reimbursable expenses, including those
relating to travel, other out-of-pocket expenses and any third-party costs, are included as a component of revenues. Typically,
an equivalent amount of reimbursable expenses are included in total direct client service costs. Reimbursable expenses related
to time and materials and fixed-fee engagements are recognized as revenue in the period in which the expense is incurred and collectability
is reasonably assured. Taxes collected from customers and remitted to governmental authorities are presented in the statement
of operations on a net basis.
Revenue from product and equipment
sales, including delivery fees, is recognized when an order has been obtained, the price is fixed and determinable, the product
is shipped, title has transferred and collectability is reasonably assured. Generally, our suppliers’ drop-ship orders to
our clients with origin terms. For any shipments with destination terms, the Company defers revenue until delivery to the customer.
During the three and nine month periods ended September 30, 2014 and the period from inception (March 5, 2013) through December
31, 2013, sales returns were not significant and as such, no sales return allowance had been recorded as of September 30, 2014
and December 31, 2013.
Costs of Revenues
The Company’s policy is to recognize
costs of revenue in the same manner in conjunction with revenue recognition. Cost of revenue includes the costs directly attributable
to revenue recognition and includes compensation and fees for services, travel and other expenses for services and costs of products
and equipment. Selling, general and administrative expenses are charged to expense as incurred.
Advertising and Promotion Costs
Advertising and promotion costs are
included as a component of selling and marketing expense and are expensed as incurred. During the three and nine month periods
ended September 30, 2014, these costs were $13,884 and $22,207, respectively. There were no such costs during fiscal 2013.
Shipping and Handling Costs
For product and equipment sales, shipping
and handling costs are included as a component of cost of revenues.
Stock-Based
Compensation
Restricted
shares are awarded to employees and entitle the grantee to receive shares of common stock at the end of the established vesting
period. The fair value of the grant is based on the stock price on the date of grant. The Company recognizes related compensation
costs on a straight-line basis over the requisite vesting period of the award, which to date has been one year. During the three
and nine months ended September 30, 2014, stock-based compensation expense was $10,947. There were no such costs during fiscal
2013.
Income Taxes
On September 29, 2014, the effective
date of the Reverse Merger, the Company’s corporate status changed from an S-Corporation, which it had been since inception,
to a C-Corporation. As provided in Section 1361 of the Internal Revenue Code, for income tax purposes, S-Corporations are not
subject to corporate income taxes; instead, the owners are taxed on their proportionate share of the S-Corporation’s taxable
income. Accordingly, the Company is only subject to income taxes for the final two days of the three and nine month periods ended
September 30, 2014 and was not subject to income taxes during 2013. As the Company’s operating activities subject to corporate
income taxes were minimal during the final two days of the three and nine month periods ended September 30, 2014, and the Company
was not subject to corporate income taxes through 2013, no provision for federal or state income taxes was included in the Company’s
consolidated statements of operations for the three and nine month periods ended September 30, 2014, the three month period ended
September 30, 2013 or the period from inception (March 5, 2013) through September 30, 2013. Additionally, no liability for federal
and state income taxes was included on the Company’s consolidated balance sheets as of September 30, 2014 and December 31,
2013. Corporate income taxes will be recorded beginning in the fourth quarter of 2014.
Net Income (Loss) Per Common Share
The Company reports net income (loss) per common share
in accordance with FASB ASC 260, Earnings per Share. This statement requires dual presentation of basic and diluted earnings
with a reconciliation of the numerator and denominator of the earnings per share computations. Basic net income (loss) per share
is computed by dividing net income attributable to common stockholders by the weighted average number of shares of common stock
outstanding during the period and excludes the effects of any potentially dilutive securities. Diluted net income (loss) per share
gives effect to any dilutive potential common stock outstanding during the period. The computation does not assume conversion,
exercise or contingent exercise of securities that would have an anti-dilutive effect on earnings.
Related Party Transactions
The Company follows FASB ASC subtopic
850-10, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions.
Pursuant to ASC 850-10-20, related
parties include: a) affiliates of the Company; b) entities for which investments in their equity securities would be required,
absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted
for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and profit-sharing trusts
that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company;
f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating
policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate
interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties
or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that
one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The financial statements shall include disclosures
of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the
ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined
financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s)
involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for
each of the periods for which statements of operation are presented, and such other information deemed necessary to an understanding
of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods
for which statements of operations are presented and the effects of any change in the method of establishing the terms from that
used in the preceding period; and d) amounts due from or to related parties as of the date of each balance sheet presented and,
if not otherwise apparent, the terms and manner of settlement.
See Note 12. Related Party Transactions
for associated disclosures.
Note 3. Recent Accounting Pronouncements
In July 2013, the FASB issued Accounting Standards Update
No. 2013-11 “Income Taxes” (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss
Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists,” to resolve the diversity in practice in the presentation
of unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists.
Although permitted by the ASU, the Company did not elect early adoption or retrospective application. As such, the ASU became
effective prospectively for the Company as of its first quarter of 2014. As of September 30, 2014, the Company did not have
any unrecognized tax benefits that meet the conditions described by the ASU; accordingly, the ASU did not have any impact on the
Company’s results of operations or financial position.
In May 2014, the FASB issued ASU
2014-09, “Revenue from Contracts with Customers (Topic 606)”, which supersedes the revenue recognition requirements in
ASC 605, “Revenue Recognition”. This ASU requires revenue to be recognized to reflect the consideration an entity
expects to be entitled to in exchange for the transfer of goods or services to customers in the appropriate period. This ASU
also requires disclosures enabling users of financial statements to understand the nature, amount, timing, and uncertainty of
revenue and cash flows arising from contracts with customers. Additionally, qualitative and quantitative disclosures about
customer contracts, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill
a contract are required. The Company will be required to implement this guidance in the first quarter of fiscal year 2017,
using one of two prescribed retrospective methods. Early adoption is not permitted. The Company has not yet determined the
effect of adoption on its consolidated financial statements.
There have been no other recent accounting pronouncements
or changes in accounting pronouncements during the quarter ended September 30, 2014 that are of significance, or potential
significance, to the Company.
Note 4. Accounts Receivable, net
Accounts receivable, net, was
comprised of the following as of September 30, 2014 and December 31, 2013:
| | |
September 30, | |
December 31, |
| | |
2014 | |
2013 |
| | |
(Unaudited) | |
(Audited) |
| | |
| | | |
| | |
| Gross accounts receivable | |
$ | 82,367 | | |
$ | 1,250 | |
| Less: allowance for doubtful accounts | |
| — | | |
| — | |
| Accounts receivable, net | |
$ | 82,367 | | |
$ | 1,250 | |
The Company had no bad debt expense during
the three and nine month periods ended September 30, 2014 or during the period from inception (March 5, 2013) to September 30,
2013.
Note 5. Deposits
Deposits was comprised of the following as
of September 30, 2014 and December 31, 2013:
| | |
September 30, | |
December 31, |
| | |
2014 | |
2013 |
| | |
(Unaudited) | |
(Audited) |
| | |
| | | |
| | |
| Inventory deposits | |
$ | 166,000 | | |
$ | — | |
| Operating lease deposits | |
| 2,000 | | |
| — | |
| Deposits | |
$ | 168,000 | | |
$ | — | |
Inventory deposits reflect down payments
made to suppliers or manufacturers under inventory purchase agreements.
Note 6.
Inventory
Inventory
as of September 30, 2014 of $31,500 was fully comprised of finished goods. There was no inventory as of December 31, 2013.
Note 7.
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets
was comprised of the following as of September 30, 2014 and December 31, 2013:
| | |
September 30, | |
December 31, |
| | |
2014 | |
2013 |
| | |
(Unaudited) | |
(Audited) |
| | |
| | | |
| | |
| Demo inventory | |
$ | 29,235 | | |
$ | — | |
| Prepaid expenses | |
| 2,615 | | |
| 4,368 | |
| Other current assets | |
| 150 | | |
| — | |
| Prepaid expenses and other current assets | |
$ | 32,000 | | |
$ | 4,368 | |
Note 8. Property and Equipment, net
Property and equipment, net, was
comprised of the following as of September 30, 2014 and December 31, 2013:
| | |
September 30, | |
December 31, |
| | |
2014 | |
2013 |
| | |
(Unaudited) | |
(Audited) |
| | |
| | | |
| | |
| Office equipment | |
$ | 3,602 | | |
$ | 2,250 | |
| Machinery and equipment | |
| 1,250 | | |
| — | |
| Property and equipment, gross | |
| 4,852 | | |
| 2,250 | |
| Less: accumulated depreciation | |
| (984 | ) | |
| (485 | ) |
| Property and equipment, net | |
$ | 3,868 | | |
$ | 1,765 | |
The Company recorded depreciation
expense of $212 and $147 during the three months ended September 30, 2014 and September 30, 2013, respectively. The Company recorded
depreciation expense of $499 during the nine months ended September 30, 2014 and $340 from the period from inception (March 5,
2013) to September 30, 2013.
Note 9. Convertible Notes Payable
As of September 30, 2014, the
Company had convertible debentures in the total amount of $395,000. The debentures were originally issued on April 24, 2014,
mature on April 24, 2016, pay zero interest, and are convertible until maturity at the holders’ discretion into shares
of the Company’s common stock at $0.08 per share. The debentures have been discounted in the amount of $395,000 due to
the intrinsic value of the beneficial conversion option. As of September 30, 2014, the aggregate carrying value of the
debentures was $85,917, net of debt discounts of $309,083, and is reflected on the Company’s consolidated balance sheet
as Convertible notes payable, net. Amortization of debt discount was $49,713 and $85,917 for the three and nine month periods
ended September 30, 2014, respectively; of these amounts, the Company recorded $1,081 on its consolidated statement of operations for
these periods, the amount attributable to the period from the Reverse Merger’s effective date of September 29, 2014
through September 30, 2014 (see Note 1. Description of the Business).
On May 15, 2014, as a result of the
issuance of the convertible notes payable, a secured promissory note that the Company had originally entered into on March 21,
2014 was fully satisfied. This secured promissory note had a principal amount of $35,000 and an interest rate of 5% per annum.
The Company recorded interest expense related to this note of $260 during the three and nine month periods ended September 30,
2014.
Note 10. Accrued and Other
Current Liabilities
Accrued and other current liabilities
was comprised of the following at September 30, 2014 and December 31, 2013:
| | |
September 30, | |
December 31, |
| | |
2014 | |
2013 |
| | |
(Unaudited) | |
(Audited) |
| | |
| | | |
| | |
| Accrued payroll liabilities | |
$ | 23,223 | | |
$ | 636 | |
| Accrued legal fees | |
| 22,802 | | |
| 1,654 | |
| Unbilled inventory | |
| 22,500 | | |
| — | |
| Accrued accounting fees | |
| 17,200 | | |
| — | |
| Due to directors | |
| 2,776 | | |
| 3,006 | |
| Other | |
| 15,153 | | |
| 44 | |
| Accrued and other current liabilities | |
$ | 103,654 | | |
$ | 5,340 | |
Note 11. Net Income (Loss) Per Common
Share
The following is a reconciliation of weighted common shares
outstanding used in the calculation of basic and diluted net income (loss) per common share:
| | |
Three Months Ended | |
Three Months Ended | |
Nine Months Ended | |
March 5, 2013 (Inception) Through |
| | |
September 30, 2014 | |
September 30, 2013 | |
September 30, 2014 | |
September 30, 2013 |
| | |
(unaudited) | |
(unaudited) | |
(unaudited) | |
(unaudited) |
| | |
| | | |
| | | |
| | | |
| | |
| Net income (loss) per common share | |
$ | 75,238 | | |
$ | (181 | ) | |
$ | (15,297 | ) | |
$ | 1,674 | |
| Weighted average shares used for basic net income (loss) per common share | |
| 31,910,071 | | |
| 25,368,502 | | |
| 28,966,879 | | |
| 25,368,502 | |
| Incremental diluted shares | |
| 4,990,090 | | |
| — | | |
| — | | |
| — | |
| Weighted average shares used for diluted net income (loss) per common share | |
| 36,900,161 | | |
| 25,368,502 | | |
| 28,966,879 | | |
| 25,368,502 | |
| Net income (loss) per common share: | |
| | | |
| | | |
| | | |
| | |
| Net income (loss) per common share - basic | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | |
| Net income (loss) per common share - diluted | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | — | |
There were no antidilutive common shares
issued or outstanding for the three months ended September 30, 2014. For the nine months ended September 30, 2014, as a result
of the net loss for the period, the Company excluded 1,681,642 shares from its calculation of diluted net income (loss) per common
share because their effect would have been antidilutive. No potentially dilutive shares were issued or outstanding during 2013.
Note 12. Related Party Transactions
From time to time, the Company purchases
inventory and equipment from Baroud Development Group, in which Anthony Baroud, the Company’s Chief Technology Officer,
is an owner. During the three and nine month periods ended September 30, 2014, total such purchases were $10,415 and $40,715,
respectively. No such transactions occurred during 2013.
During the first quarter of 2014,
prior to the Reverse Merger, the Company distributed a total of $4,000 to its co-founders and owners, Corey Hollister and
Ellis Smith.
Note 13. Commitments and Contingent Liabilities
As of September 30, 2014 and December
31, 2013, the Company had no outstanding commitments or contingent liabilities meeting the criteria for recognition under its
accounting policies in accordance with U.S. GAAP.
Note 14. Stock-based Compensation
In August 2014, the Company granted
a new employee restricted shares of its common stock to provide further compensation in-lieu of wages and to align the employee’s
interests with the interests of its stockholders. Because vesting is based on continued employment, these equity-based incentives
are also intended to attract, retain and motivate personnel upon whose judgment, initiative and effort the Company’s success
is largely dependent. There were 50,000 shares granted as of September 30, 2014. The fair value of restricted stock units is determined
based on the quoted closing price of the Company’s common stock on the date of grant.
The following table summarizes the Company’s
share-based compensation awards activity during the nine months ended September 30, 2014:
| | |
| |
Weighted Average |
| | |
Restricted Shares | |
Grant Date |
| |
Common Stock | |
Fair Value |
| | | | |
| | | |
| | |
| | Outstanding unvested at December 31, 2013 | | |
| — | | |
$ | — | |
| | Granted | | |
| 50,000 | | |
| 1.31 | |
| | Vested restricted shares | | |
| — | | |
| — | |
| | Forfeited | | |
| — | | |
| — | |
| | Outstanding unvested at September 30, 2014 | | |
| 50,000 | | |
$ | 1.31 | |
During the
three and nine months ended September 30, 2014, the Company granted 50,000 restricted shares and recognized $10,947 in associated
stock-based compensation expense. The Company had no stock-based compensation activity during 2013 and no awards outstanding as
of December 31, 2013.
Unrecognized
stock-based compensation expense related to outstanding unvested restricted shares as of September 30, 2014 is expected to be
recognized over a weighted average period of 0.8 years, as follows:
| | |
Unamortized |
| | |
Compensation |
| | |
Expense |
| | | | |
| | |
| | 2014 | | |
$ | 16,330 | |
| | 2015 | | |
| 38,223 | |
| | Thereafter | | |
| — | |
| | Total | | |
$ | 54,553 | |
Note 15. Capital Stock
The Reverse Merger resulted in a recapitalization
for the Company, including retrospective recapitalization as of December 31, 2013. The Company is authorized to issue 100,000,000
common shares at $0.00001 par value per share and 5,000,000 shares of preferred stock at $0.01 par value. As of September
30, 2014 and December 31, 2013, the Company had 40,425,000 and 25,368,502 common shares issued and outstanding, respectively.
The Company had not issued any shares of its preferred stock as of September 30, 2014 and December 31, 2013.
Note 16. Reportable Segments
The Company operates in one segment,
in the licensed cannabis industry, as a provider of professional consulting services, products and equipment.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The statements
contained in this report that are not statements of historical fact, including without limitation, statements containing the words
“believes,” “expects,” “anticipates” and similar words, constitute forward-looking statements
that are subject to a number of risks and uncertainties. From time to time we may make other forward-looking statements. Investors
are cautioned that such forward-looking statements are subject to an inherent risk that actual results may materially differ as
a result of many factors, including the risks discussed from time to time in this report, including the risks described under “Risk
Factors” in any filings we have made with the SEC.
Our discussion
and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On
an on-going basis, we evaluate these estimates, including those related to useful lives of real estate assets, cost reimbursement
income, bad debts, impairment, net lease intangibles, contingencies and litigation. We base our estimates on historical experience
and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. There
can be no assurance that actual results will not differ from those estimates.
Background
American Cannabis Company, Inc. and
its subsidiaries (the “Company” or “ACC”) is a publicly listed company quoted on the OTCQB under the symbol
“AMMJ”. We are based in Denver, Colorado and operate a fully integrated business model that features end-to-end solutions
for businesses operating in the licensed cannabis industry in states and countries where cannabis is regulated and has been de-criminalized
for medical use and/or legalized for recreational use. We provide advisory and consulting services specific to this industry, design
industry-specific products and facilities and manage a strategic group partnership that produces private label customer products.
We are a Delaware corporation formed
on September 24, 2001 with the name Naturewell, Inc., which became Brazil Interactive Media, Inc. (“BIMI”) on March
13, 2013 pursuant to a merger transaction that resulted in the Company becoming the owner of a Brazilian interactive television
technology and television production company, BIMI, Inc. We became American Cannabis Company, Inc. on September 29, 2014, pursuant
to an Agreement and Plan of Merger dated May 15, 2014 (the “Merger Agreement”) between the Company, Cannamerica Corp.
(“Merger Sub”), a wholly-owned subsidiary of BIMI, and Hollister & Blacksmith, Inc. d/b/a American Cannabis Consulting
(“American Cannabis Consulting”). Pursuant to the Merger Agreement, which was consummated and became effective on September
29, 2014, Merger Sub was merged with and into American Cannabis Consulting through a reverse triangular merger transaction (the
“Reverse Merger”), we changed our name to “American Cannabis Company, Inc.”, and our officers and directors
in office prior to the Merger Agreement resigned and American Cannabis Consulting appointed new officers and directors to serve
our Company. In concert with the Merger Agreement, we consummated a complete divestiture of BIMI, Inc. pursuant to a Separation
and Exchange Agreement dated May 16, 2014 (the “Separation Agreement”) between the Company, BIMI, Inc., a Delaware
corporation and wholly-owned subsidiary of the Company, and Brazil Investment Holding, LLC (“Holdings”), a Delaware
limited liability company. On October 10, 2014, we changed our stock symbol from BIMI to AMMJ.
The foregoing descriptions of the Merger
Agreement and Separation Agreement do not purport to be complete and are qualified in their entirety by the terms of such agreements,
which are filed as exhibits to the Current Report on Form 8-K filed by the Company with the U.S. Securities and Exchange Commission
(“SEC”) on October 3, 2014.
Results of Operations
Three months ended September 30, 2014
compared to three months ended September 30, 2013
The following table presents our consolidated
operating results for the three months ended September 30, 2014 compared to the three months ended September 30, 2013:
| |
Three Months Ended September 30, 2014 (unaudited) | |
% of Total Revenues | |
Three Months Ended September
30, 2013 (unaudited) | |
% of Total Revenues | |
$ Change |
| Revenues | |
| | | |
| | | |
| | | |
| | | |
| | |
| Consulting services | |
$ | 312,010 | | |
| 64.8 | | |
$ | 16,900 | | |
| 82.0 | | |
$ | 295,110 | |
| Products and equipment | |
| 169,588 | | |
| 35.2 | | |
| 3,705 | | |
| 18.0 | | |
| 165,883 | |
| Total revenues | |
| 481,598 | | |
| 100.0 | | |
| 20,605 | | |
| 100.0 | | |
| 460,993 | |
| Costs of revenues | |
| | | |
| | | |
| | | |
| | | |
| | |
| Cost of consulting services | |
| 132,573 | | |
| 27.5 | | |
| 8,451 | | |
| 41.0 | | |
| 124,122 | |
| Cost of products and equipment | |
| 138,816 | | |
| 28.8 | | |
| 2,816 | | |
| 13.7 | | |
| 136,000 | |
| Total costs of revenues | |
| 271,389 | | |
| 56.4 | | |
| 11,267 | | |
| 54.7 | | |
| 260,122 | |
| Gross profit | |
| 210,209 | | |
| 43.6 | | |
| 9,338 | | |
| 45.3 | | |
| 200,871 | |
| Operating expenses | |
| | | |
| | | |
| | | |
| | | |
| | |
| General and administrative expenses | |
| 82,260 | | |
| 17.1 | | |
| 4,427 | | |
| 21.5 | | |
| 77,833 | |
| Selling and marketing expenses | |
| 51,713 | | |
| 10.7 | | |
| 5,092 | | |
| 24.7 | | |
| 46,621 | |
| Total operating expense | |
| 133,973 | | |
| 27.8 | | |
| 9,519 | | |
| 46.2 | | |
| 124,454 | |
| Income (loss) from operations | |
| 76,236 | | |
| 15.8 | | |
| (181 | ) | |
| (0.9 | ) | |
| 76,417 | |
| Other income (expense) | |
| | | |
| | | |
| | | |
| | | |
| | |
| Interest expense | |
| (998 | ) | |
| (0.2 | ) | |
| — | | |
| 0.0 | | |
| (998 | ) |
| Total other income (expenses) | |
| (998 | ) | |
| (0.2 | ) | |
| — | | |
| 0.0 | | |
| (998 | ) |
| Net income (loss) | |
$ | 75,238 | | |
| 15.6 | | |
$ | (181 | ) | |
| (0.9 | ) | |
$ | 75,419 | |
Revenues
Total revenues were $481,598 for the
three months ended September 30, 2014, compared to $20,605 for the three months ended September 30, 2013, an increase of $460,993.
This increase was primarily due to growth in our client base and volume of operations as our business has matured following commencement
of business operations in April 2013. For the three months ended September 30, 2014, consulting services revenue was
$312,010, or 64.8% of total revenue, compared to $16,900, or 82.0% of total revenues for the three months ended September 30, 2013.
For the three months ended September 30, 2014, products and equipment revenue was $169,588, or 35.2% of total revenues, compared
to $3,705, or 18.0% of total revenues for the three months ended September 30, 2013.
Costs of Revenues
Costs of revenues primarily consist
of labor, travel, and other costs directly attributable to providing services or products. During the three months ended September
30, 2014, our total costs of revenues were $271,389, or 56.4% of total revenues. This compares to total costs of revenues for the
three months ended September 30, 2013 of $11,267, or 54.7% of total revenues. The increase in costs of revenues was primarily due
to the increase in sales volume discussed above. As a percentage of total revenues, the slight increase was due to changes in product
mix, as sales of products and equipment, which have a lower gross margin compared to consulting and advisory services, made up
a higher percentage of revenues and costs of revenues during the three months ended September 30, 2014 as compared to the three
months ended September 30, 2013. For the three months ended September 30, 2014, consulting related costs were $132,573,
or 27.5% of total revenue, and costs associated with products and equipment were $138,816, or 28.8% of total revenue. For the three
months ended September 30, 2013, consulting related costs were $8,451, or 41.0% of total revenue, and costs associated
with products and equipment were $2,816, or 13.7% of total revenue.
Gross Profit
Gross profit was $210,209 for the three
months ended September 30, 2014, as compared to $9,338 for the three months ended September 30, 2013. This increase was primarily
due to growth in our client base and volume of operations as our business has matured following commencement of business operations
in April 2013. As a percentage of total revenues, gross profit was 43.6% for the three months ended September 30, 2014 and 45.3%
for the three months ended September 30, 2013. This slight decrease was due to the three months ended September 30, 2014 having
a higher proportion of total revenues from product and equipment sales as compared to consulting services, as product
and equipment sales have a lower profit margin compared to revenues generated by consulting and advisory services.
Operating Expenses
Total operating expenses were $133,973,
or 27.8% of total revenues for the three months ended September 30, 2014, compared to $9,519, or 46.2% of total revenues for the
three months ended September 30, 2013. This increase was primarily due to the combined effect of the increase in business volume
following our April 2013 commencement of business operations and higher professional fees driven by the Reverse Merger that became
effective on September 29, 2014 as well as higher operating expenses associated with becoming an SEC registrant. Professional fees,
which include legal, auditing and accounting expenses, were $48,538 for the three months ended September 30, 2014, or 36.2% of
total operating expenses for the period.
Other Income (Expense)
Other income (expense) for the three
months ended September 30, 2014 was expense of $998, comprised of interest expense that was primarily the result of $1,081 of convertible
notes payable discount amortization during the period. There was no other income (expense) during the three months ended September
30, 2013.
Net Income (Loss)
As a result of the factors discussed
above, net income (expense) for the three months ended September 30, 2014 was net income of $75,238, or 15.6% of total revenues
for the period, as compared to a net loss of $181, or 0.9% of total revenues for the three months ended September 30, 2013.
Nine months ended September 30, 2014 compared
to period of March 5, 2013 (date of inception) through September 30, 2013
The following table presents our consolidated
operating results for the nine months ended September 30, 2014 compared to the period from inception (March 5, 2013) through
September 30, 2013:
| |
Nine Months Ended September 30, 2013 (unaudited) | |
% of Total Revenues | |
March 5, 2013 (Inception) Through September 30,
2013 (unaudited) | |
% of Total
Revenues | |
$ Change |
| Revenues | |
| | | |
| | | |
| | | |
| | | |
| | |
| Consulting services | |
$ | 439,414 | | |
| 71.0 | | |
$ | 21,250 | | |
| 85.2 | | |
$ | 418,164 | |
| Products and equipment | |
| 179,226 | | |
| 29.0 | | |
| 3,705 | | |
| 14.8 | | |
| 175,521 | |
| Total revenues | |
| 618,640 | | |
| 100.0 | | |
| 24,955 | | |
| 100.0 | | |
| 593,685 | |
| Costs of revenues | |
| | | |
| | | |
| | | |
| | | |
| | |
| Cost of consulting services | |
| 207,462 | | |
| 33.5 | | |
| 9,026 | | |
| 36.2 | | |
| 198,436 | |
| Cost of products and equipment | |
| 147,833 | | |
| 23.9 | | |
| 2,866 | | |
| 11.5 | | |
| 144,967 | |
| Total costs of revenues | |
| 355,295 | | |
| 57.4 | | |
| 11,892 | | |
| 47.7 | | |
| 343,403 | |
| Gross profit | |
| 263,345 | | |
| 42.6 | | |
| 13,063 | | |
| 52.3 | | |
| 250,282 | |
| Operating expenses | |
| | | |
| | | |
| | | |
| | | |
| | |
| General and administrative expenses | |
| 178,153 | | |
| 28.8 | | |
| 5,026 | | |
| 20.1 | | |
| 173,127 | |
| Selling and marketing expenses | |
| 99,230 | | |
| 16.0 | | |
| 6,363 | | |
| 25.5 | | |
| 92,867 | |
| Total operating expense | |
| 277,383 | | |
| 44.8 | | |
| 11,389 | | |
| 45.6 | | |
| 265,994 | |
| Income (loss) from operations | |
| (14,038 | ) | |
| (2.3 | ) | |
| 1,674 | | |
| 6.7 | | |
| (15,712 | ) |
| Other income (expense) | |
| | | |
| | | |
| | | |
| | | |
| | |
| Interest expense | |
| (1,259 | ) | |
| (0.2 | ) | |
| — | | |
| 0.0 | | |
| (1,259 | ) |
| Total other income (expenses) | |
| (1,259 | ) | |
| (0.2 | ) | |
| — | | |
| 0.0 | | |
| (1,259 | ) |
| Net income (loss) | |
$ | (15,297 | ) | |
| (2.5 | ) | |
$ | 1,674 | | |
| 6.7 | | |
$ | (16,971 | ) |
Revenues
Total revenues were $618,640 for the
nine months ended September 30, 2014, compared to $24,955 for the period from inception (March 5, 2013) through September 30, 2013,
an increase of $593,685. This increase was primarily due to the combined effect of 63 additional days included in the 2014 period
and the ongoing growth and maturation of our business following the inception of business operations in April 2013. For the nine
months ended September 30, 2014, consulting services revenue accounted for 71.0% of total revenues for the period
and sales of products and equipment accounted for 29.0% of total revenue. For the period from inception (March 5, 2013) through
September 30, 2013, consulting services revenue accounted for 85.2% of total revenues and sales of products and equipment
accounted for 14.8% of total revenues for the period. The increase of product and equipment sales revenue as a percentage of total
revenues reflects the growth of this component of our business as our company has matured following its inception of operations
in April 2013.
Costs of Revenues
Cost of revenues consist primarily
of labor, travel, and costs directly attributable to the providing of services or product. During the nine months ended September
30, 2014, our total costs of revenues were $355,295, or 57.4% of total revenues, as compared to $11,892, or 47.7% of total revenues,
for the period from inception (March 5, 2013) through September 30, 2013. The $343,403 increase in total costs of revenues of was
primarily a result of the increase in revenues as described above. The increase in costs of revenues as a percentage of total revenues
was primarily due to the changes in the composition of our total revenue, as sales of products and equipment, which have a lower
gross margin compared to consulting services, made up a higher percentage of revenues and costs of revenues during
the nine months ended September 30, 2014 as compared to the period from inception (March 5, 2013) through September 30, 2013. For
the nine months ended September 30, 2014, of total costs of revenues of $355,295, consulting related costs were $207,462
and costs associated with products and equipment were $147,833. For the period from March 5, 2013 through September 30, 2013, of
total costs of revenues of $11,892, costs related to consulting and advisory services were $9,026 and the remaining $2,866 was
associated with products and equipment.
Gross Profit
Gross profit was $263,345 for the
nine months ended September 30, 2014, as compared to $13,063 for the period from inception (March 5, 2013) through September
30, 2013. This increase was primarily due to growth in our client base and volume of operations as our business has matured
following commencement of business operations in April 2013. As a percentage of total revenues, gross profit was 42.6% for
the nine months ended September 30, 2014 and 52.3% for the period from inception (March 5, 2013) through September
30, 2013. This decrease was due to the nine months ended September 30, 2014 having a higher proportion of total revenues from
product and equipment sales as compared to consulting services, as product and equipment sales have a lower
profit margin compared to revenues generated by consulting and advisory services.
Operating Expenses
Total operating expenses were
$277,383, or 44.8% of total revenues for the nine months ended September 30, 2014, as compared to $11,389, or 45.6% of total
revenues for the period from inception (March 5, 2013) through September 30, 2013. This $265,994 increase reflects the
combined effect of the 63 additional days in the 2014 period, the overall increase in business volume as our business has
grown following our April 2013 commencement of operations and higher professional fees associated with the Reverse Merger and
our resulting establishment as publicly traded company. For the nine months ended September 30, 2014, professional fees,
including legal, auditing and accounting expenses, were $104,451, or 37.7% of total operating expenses, compared to $455, or
4.0% of total operating expenses for the period from inception (March 5, 2013) through September 30, 2013.
Other Income (Expense)
Other income (expense) for the nine
months ended September 30, 2014 was expense of $1,259, comprised of interest expense primarily due to $1,081 of convertible notes
payable discount amortization during the period. There was no other income (expense) for the period from March 5, 2013 through
September 30, 2013.
Net Income (Loss)
As a result of the factors discussed
above, net income (expense) for the nine months ended September 30, 2014 was net loss of $15,297, or 2.5% of total revenues for
the period, as compared to net income of $1,674, or 6.7% of total revenues for the period from inception (March 5, 2013) through
September 30, 2013.
Liquidity and Capital Resources
As of September 30, 2014, our primary
sources of liquidity were cash and cash equivalents of $157,258 and accounts receivable of $82,367. Additionally, as part of the
Reverse Merger, we received net cash of $267,840 related to convertible notes payable that were issued for $395,000 prior to the
Reverse Merger.
Operating Activities
Net cash used in operating activities
for the nine months ended September 30, 2014 was $248,937, consisting of net loss of $15,297, non-cash adjustments reconciling
net income to net cash used in operating activities of $198,998 and a net use of cash of $34,642 from changes in operating assets
and liabilities. The net non-cash adjustments of $198,998 were primarily due to the adjustment for recapitalization upon the Reverse
Merger of $296,361, partially offset by cumulative amortization of the discount on convertible notes payable of $85,917, stock-based
compensation of $10,947 and depreciation of $499. Changes in operating assets and liabilities, a net use of cash of $34,642, were
the result of $168,000 used for deposits on inventory and an operating lease, an increase in accounts receivable of $81,117 due
to increased business volume for both consulting and advisory services and product and equipment sales, an increase in inventory
of $31,500 from purchases of product and equipment inventory to be sold, and an increase in prepaid expenses and other current
assets of $21,632 primarily due to the cost of demo inventory placed during the period, partially offset by decreases in accrued
and other current liabilities of $98,466 and accounts payable of $1,755.
For the period from inception (March 5,
2013) through September 30, 2013, net cash provided by operating activities was $7,286, which consisted of net income of
$1,674, non-cash adjustments reconciling net income to net cash provided by operating activities of $340 (depreciation
expense), and an increase in accrued and other current liabilities of $5,272, primarily reflecting payroll-related
liabilities.
Investing Activities
Investing activities were a use of
cash of $2,602 and $2,250 for the nine months ended September 30, 2014 and the period from March 5, 2013 through September 30,
2013, respectively. These uses of cash were due to purchases of property and equipment in support of our business operations.
Financing Activities
Net cash provided by financing activities
was $391,200 for the nine months ended September 30, 2014. This was the result of the issuance of convertible notes payable for
$395,000 and $200 of proceeds from the issuance of common stock, partially offset by $4,000 in distributions to owners. Short-term
notes payable were also issued during the period for $35,000, but were fully satisfied upon issuance of the convertible notes payable,
resulting in no net impact on cash flows for the period.
Financing activities provided $2,593
for the period from March 5, 2013 through September 30, 2013. This source of cash was due to investments from owners of $1,043,
$800 received from the issuance of common stock, and $750 from transactions with directors.
We had cash and cash equivalents of
$157,258 as of September 30, 2014. We believe our liquidity and capital resources to be adequate to fund our operational and general
and administrative expenses for at least the next 12 months.
Off Balance Sheet Arrangements
As of September 30, 2014 and December
31, 2013, we did not have any off balance sheet arrangements that have or are reasonably likely to have a current or future
effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources.
ITEM
3. QUANTITATIVE & QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM
4. CONTROLS AND PROCEDURES
Our Chief Executive Officer and Chief
Financial Officer (the “Certifying Officers”) are responsible for establishing and maintaining disclosure controls
and procedures for our Company. The Certifying Officers have designed such disclosure controls and procedures to ensure that material
information is made known to them, particularly during the period in which this report was prepared.
Evaluation of Controls and Procedures
We maintain disclosure controls and
procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act reports is recorded,
processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information
is accumulated and communicated to our management, including our chief executive and financial officer, to allow timely decisions
regarding required disclosure. In designing and evaluating the disclosure controls and procedures, our management recognized that
any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired
control objectives, as ours are designed to do, and our management necessarily was required to apply its judgment in evaluating
the cost-benefit relationship of possible controls and procedures.
As of September 30, 2014, an evaluation
was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that
evaluation, our Chief Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were
effective.
Changes in Internal Controls
There have been no changes in our internal
controls over financial reporting that occurred during the third quarter of 2014 to which this report relates that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness
of Controls
A control system, no matter how well conceived
and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because
of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control
issues and instances of fraud, if any, within a company have been detected. Our disclosure controls and procedures are designed
to provide reasonable assurance of achieving its objectives. Our Chief Executive Officer and Chief Financial Officer have concluded
that our disclosure controls and procedures are effective at that reasonable assurance level.
PART
II—OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS
The Company is not currently a party
to any pending legal proceedings.
ITEM
1A. RISK FACTORS
Not
required.
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Please
refer to the Form 8-K filed by the Company with the SEC on October 3, 2014.
ITEM
3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM
5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
This list is intended to constitute
the exhibit index.
| 101.INS | | XBRL Instance Document* |
| 101.SCH | | XBRL Taxonomy Extension Schema Document* |
| 101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document* |
| 101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document* |
| 101.LAB | | XBRL Taxonomy Extension Label Linkbase Document* |
| 101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document* |
*Pursuant to Rule 406T of Regulation
S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections
11 or 12 of the Securities Act of 1933 or Section 18 of the Securities and Exchange Act of 1934, and otherwise are not subject
to liability under those sections.
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.
| |
|
|
American Cannabis Company, Inc. |
| |
|
|
|
|
| Date: |
November 13, 2014 |
|
By: |
/s/ Corey Hollister |
| |
|
|
|
Corey Hollister |
| |
|
|
|
Chief Executive Officer |
| |
|
|
|
(Prinicpal Executive Officer) |
| |
|
|
|
|
| Date: |
November 13, 2014 |
|
By: |
/s/ Antonio Migliarese |
| |
|
|
|
Antonio Migliarese |
| |
|
|
|
Chief Financial Officer |
| |
|
|
|
(Principal Financial Officer) |
EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE
OFFICER
Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002, I, Corey Hollister, certify that:
| 1. | | I have reviewed this report on Form 10-Q of American Cannabis Company, Inc., for the
fiscal quarter ended September 30, 2014; |
| 2. | | Based on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report; |
| 3. | | Based on my knowledge, the financial statements, and other financial information included
in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report; |
| 4. | | The registrant’s other certifying officer and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | | Designed such disclosure controls and procedures, or caused such disclosure controls
and procedures to be designed under our supervision to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this
report is being prepared; |
| (b) | | Designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | | Evaluated the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and |
| (d) | | Disclosed in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal
quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and |
| 5. | | The registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee
of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | | All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonable likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and |
| (b) | | Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant’s internal controls over financial reporting. |
Date: November 13, 2014
/s/ Corey Hollister
Corey Hollister
Chief Executive Officer, Principle
Executive Officer
EXHIBIT 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL
OFFICER
Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002, I, Antonio Migliarese, certify that:
| 1. | | I have reviewed this report on Form 10-Q American Cannabis Company, Inc., for the
fiscal quarter ended September 30, 2014; |
| 2. | | Based on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report; |
| 3. | | Based on my knowledge, the financial statements, and other financial information included
in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report; |
| 4. | | The registrant’s other certifying officer and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | | Designed such disclosure controls and procedures, or caused such disclosure controls
and procedures to be designed under our supervision to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this
report is being prepared; |
| (b) | | Designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | | Evaluated the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and |
| (d) | | Disclosed in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal
quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and |
| 5. | | The registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee
of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | | All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonable likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and |
| (b) | | Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant’s internal controls over financial reporting. |
Date: November 13, 2014
/s/ Antonio Migliarese
Antonio Migliarese
Chief Financial Officer, Principal
Financial Officer
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY
ACT OF 2002
In connection with the quarterly report
of American Cannabis Company, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2014, as filed
with the Securities and Exchange Commission on the date hereof (the “Report”), I, Corey Hollister, Chief Executive
Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that, to the best of my knowledge and belief:
| 1. | | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and |
| 2. | | The information contained in the Report fairly presents, in all material respects,
the financial condition and result of operations of the Company. |
Date: November 13, 2014
/s/ Corey Hollister
Corey Hollister
Chief Executive Officer, Principle
Executive Officer
A signed original of this written statement
required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in
typed form within the electronic version of this written statement has been provided to the Company and will be retained by the
Company and furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY
ACT OF 2002
In connection with the quarterly report
of American Cannabis Company, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2014, as filed
with the Securities and Exchange Commission on the date hereof (the “Report”), I, Antonio Migliarese, principal financial
officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that, to the best of my knowledge and belief:
| 1. | | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and |
| 2. | | The information contained in the Report fairly presents, in all material respects,
the financial condition and result of operations of the Company. |
Date: November 13, 2014
/s/ Antonio Migliarese
Antonio Migliarese
Chief Financial Officer, Principal
Financial Officer
A signed original of this written statement
required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in
typed form within the electronic version of this written statement has been provided to the Company and will be retained by the
Company and furnished to the Securities and Exchange Commission or its staff upon request.
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