No director or executive officer of the Company
at any time since the beginning of the last fiscal year, nor any individual nominated to be a director of the Company, nor any
associate or affiliate of any of the foregoing, has any material interest, directly or indirectly, by way of beneficial ownership
of securities or otherwise, in any matter to be acted upon pursuant to the Written Consent (except as disclosed in this Information
Statement).
The Company is subject to the informational
requirements of the Exchange Act and files reports and other information with the SEC. Such reports and other information filed
by the Company may be inspected and copied at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the SEC’s public reference rooms.
The SEC also maintains an Internet site that contains reports, proxy statements and other information about issuers, like us, who
file electronically with the SEC. The address of the SEC’s web site is
http://www.sec.gov
.
The SEC allows us to “incorporate by
reference” into this Information Statement information that we file with the SEC. This means that we can disclose important
or required information to you without actually including the specific information in this Information Statement by referring you
to other documents filed separately with the SEC. The information incorporated by reference is an important part of this Information
Statement. Information that we later provide to the SEC, and which is deemed to be “filed” with the SEC, automatically
will update information previously filed with the SEC, and may replace information in this Information Statement.
We incorporate by reference into this Information
Statement the documents listed below:
Hollister & Blacksmith, Inc. (d/b/a American Cannabis Consulting,
Inc.)
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Shareholders
Hollister
& Blacksmith, Inc.
dba
American Cannabis Consulting:
We
have audited the accompanying balance sheet of Hollister & Blacksmith, Inc. dba American Cannabis Consulting (“the Company”)
as of December 31, 2013, and the related income statement, shareholders’ equity and cash flows for the period from inception
(March 5, 2013) through December 31, 2013. These financial statements are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these financial statements based on our audit.
We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. The Company is not required to have, nor were we engaged to perform, an audit of their internal control over financial
reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant
estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements
referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2013, and
the results of its operations, changes in shareholders’ equity and cash flows for the period from inception (March 5, 2013)
through December 31, 2013 in conformity with accounting principles generally accepted in the United States of America.
/s/ Bongiovanni & Associates,
PA
Bongiovanni & Associates, PA
Certified Public Accountants
Plantation, Florida
The United States of America
July 23, 2014
Note 1. Organization and Description of Business
Hollister & Blacksmith, Inc. d/b/a American
Cannabis Consulting (the “Company” or “ACC”) was incorporated on March 5, 2013 under the laws of the State
of Colorado. ACC is based out of Denver, CO, and operates a fully integrated business model that features end-to-end solutions
for businesses operating in the 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 its clients end-to-end solutions
based on its specialized knowledge of and experience with operating in regulated cannabis industries. ACC is both a consulting
and advisory service provider and a supplier of products and equipment to businesses operating in this unique industry. The Company’s
consultants and advisors providing services to clients consist of the Company’s two officers and directors and three independent
contractors.
The Company was incorporated on March 5,
2013 under the laws of the State of Colorado. Upon formation, each of the co-founders Ellis Smith and Corey Hollister were issued
4,000 shares of common stock in exchange for $400. This constituted 100% of the issued and outstanding shares of the Company’s
common stock and voting rights. Mr. Smith and Mr. Hollister are the sole directors and officers of the Corporation.
Note 2. Summary of Significant Accounting
Policies
Basis of Accounting
The financial statements are prepared in
accordance with the accounting principles generally accepted in the United States of America ("U.S. GAAP"). The Company
has elected a fiscal year ending on December 31.
Use of Estimates in Financial Reporting
The preparation of financial statements
in conformity with 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. Our cash balances at December 31, 2013 do not exceed the deposit insurance limits for
the financial institutions.
Accounts Receivable
Accounts receivable are recorded at face
amounts less an allowance for doubtful accounts. On a periodic basis, we evaluate our accounts receivable and, if necessary, establish
the allowance for doubtful accounts by calculating and recording a specified percentage of the individual open receivable balances.
Specific allowances are also recorded based on historical experience, analysis of past due accounts, client creditworthiness and
other current available information. However, our actual experience may vary from our estimates. If the financial condition of
our clients were to deteriorate, resulting in their inability or unwillingness to pay our fees, we may need to record additional
allowances or write-offs in future periods. This risk is mitigated to the extent that we typically receive retainers from some
of our clients prior to performing significant services.
The provision for doubtful accounts 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.
Significant Clients and Customers
During 2013, there were three clients that
individually accounted for 10% or more of the Company’s total revenues, and 63% in aggregate of the Company’s total
revenues. At December 31, 2013, one client represented 100% of our gross accounts receivable balance.
Fixed Assets
Equipment is stated at cost. 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. Fixed assets are reviewed for impairment as discussed below under
“Accounting for the Impairment of Long-Lived Assets.” We did not capitalize any interest during 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 did not record any impairment charges related to long-lived assets during 2013.
Revenue Recognition
Revenue is recognized in accordance with
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 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 recognize 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 versus 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. To date, such losses have not been significant. 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
the 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 income statement on a net
basis.
Revenue from cultivation supply sales, including
the delivery fee, 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. To date, sales
returns have not been significant, and as such, a sales return allowance has not been recorded.
Cost of Revenues
The Company’s policy is to recognize
cost of revenue in the same manner in conjunction with revenue recognition, when the costs are incurred. 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 cost of supplies. Selling, general and administrative expenses are charged to expense as incurred.
Advertising
Advertising costs, which are included
as a component of selling and marketing expense, are expensed as incurred and have been insignificant.
Shipping and Handling Costs
For cultivation supply sales, shipping and
handling costs are included as a component of cost of revenues.
Income Taxes
The Company has elected to be treated as
an S corporation for income tax purposes as provided in Section 1361 of the Internal Revenue Code. In lieu of corporate income
taxes, the owners are taxed on their proportionate share of the respective Company’s taxable income. As of December 31, 2013,
the Company had elected and maintained its status as an S Corporation. The Company believes it does not have any uncertain tax
positions. No provision or liability for federal or state income taxes has been included in the financial statements.
Earnings per Share
The Company reports earnings per 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 earnings per share amounts
are based on the weighted average shares of common outstanding. If applicable, diluted earnings per share assume the conversion,
exercise or issuance of all common stock instruments such as options, warrants and convertible securities, unless the effect is
to reduce a loss or increase earnings per share. There were no adjustments to diluted earnings per share calculation as the Company
does not have any dilutive instruments.
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 income statements 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 income
statements 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.
Note 3. Recent Accounting Pronouncements
In July 2013, the FASB issued Accounting Standards Update (“ASU”)
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. The ASU is effective
prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013 for all unrecognized
tax benefits that exist at the effective date. Early adoption is permitted and retrospective application is permitted. The Company
has not elected early adoption or retrospective application of this ASU as it is not applicable to the Company.
In February 2013, the FASB issued ASU No. 2013-02,
Comprehensive
Income (Topic 220)
. The amendments do not change the current requirements for reporting net income or other comprehensive income
in financial statements. However, the amendments require an entity to provide information about the amounts reclassified out of
accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required
under US GAPP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required
under U.S. GAAP to be reclassified in their entirety to net income, and entity is required to cross-reference to other disclosures
required under U.S. GAAP that provide additional detail about those amounts. The amendments in this update are effective prospectively
for reporting periods beginning after December 15, 2013. Early adoption is permitted. Adoption of this update is not expected to
have a material effect on the Company’s results of operations or financial condition.
Note 4. Accounts receivable
Accounts receivable was comprised of the
following amounts as of December 31, 2013:
|
|
|
12/31/2013
|
|
|
|
|
|
|
Gross accounts receivable from customers
|
|
$
|
1,250
|
|
Allowance for doubtful accounts
|
|
|
-0-
|
|
Accounts receivable, net
|
|
$
|
1,250
|
|
The Company did not recognize any bad debt
expense for the period ended December 31, 2013.
Note 5. Fixed Assets
Fixed assets for the year-ended December
31, 2013, consisted of office equipment and were $1,765, net of accumulated depreciation of $486.
Note 6. Related Party Transactions
From time to time, the Company’s two
founder shareholders paid for the Company’s operating expenses which were recorded in due to director. As of December 31,
2013, the balance due from the Company to the two founding shareholders was $3,006.
Note 7. Commitments and Contingent Liabilities
As of December 31, 2013, the Company has
no outstanding commitments of contingent liabilities.
Note 8. Capital Stock
The Company is authorized to issue 12,000
common shares at $0.001 par value per share.
Upon the Company’s formation on March
5, 2013, the Company issued 4,000 shares of common stock to each of the co-founders Ellis Smith and Corey Hollister in exchange
of $400, which was recorded as a reduction to due from director.
As of December 31, 2013, the Company has
8,000 common shares issued and outstanding.
Note 9. Segment Information
For the year ended December 31, 2013, the
Company does not operate in any material, separately reportable operating segments.
Note 10. Subsequent Events
On May 15, 2014, the Company entered into
an Agreement and Plan of Merger ("Merger Agreement") with Cannamerica Corp., a wholly-owned subsidiary of Brazil Interactive
Media, Inc. (“BIMI”), under which all of the outstanding shares of common stock of the Company will be acquired. The
effective time of the Merger shall be upon the filing of Certificates of Merger with the Secretaries of State of the States of
Delaware and Colorado, pursuant to applicable statutes. As of the date of this report, July 23, 2014, the documents making the
merger effective have not been filed.
EXHIBIT F
ACC’S UNAUDITED FINANCIAL STATEMENTS FOR
QUARTER ENDED MARCH 31, 2014
Note 1. Organization and Description of Business
Hollister & Blacksmith, Inc. dba American
Cannabis Consulting (the “Company” or “ACC”) was incorporated on March 5, 2013 under the laws of the State
of Colorado. ACC is based out of Denver, CO, and operates a fully integrated business model that features end-to-end solutions
for businesses operating in the 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 its clients end-to-end solutions
based on its specialized knowledge of and experience with operating in regulated cannabis industries. ACC is both a consulting
and advisory service provider and a supplier of products and equipment to businesses operating in this unique industry. The Company’s
consultants and advisors providing services to clients consist of the Company’s two officers and directors and three independent
contractors.
The Company was incorporated on March 5,
2013 under the laws of the State of Colorado. Upon formation, each of the co-founders Ellis Smith and Corey Hollister were issued
4,000 shares of common stock in exchange for $400. This constituted 100% of the issued and outstanding shares of the Company’s
common stock and voting rights. Mr. Smith and Mr. Hollister are the sole directors and officers of the Corporation.
Note 2. Summary of Significant Accounting
Policies
Basis of Accounting
The financial statements are prepared in
accordance with the accounting principles generally accepted in the United States of America ("U.S. GAAP"). The Company
has elected a fiscal year ending on December 31.
Use of Estimates in Financial Reporting
The preparation of financial statements
in conformity with 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. Our cash balances at March 31, 2014 and December 31, 2013 do not exceed the deposit
insurance limits for the financial institutions.
Restricted Cash
Restricted cash is recorded at cost, which
approximates fair value. Restricted cash included in current assets on our balance sheet was $8,000 and $0 at March 31, 2014 and
December 31, 2013, respectively. Restricted cash at March 31, 2014 relates to the remaining proceeds from a short-term note entered
into on March 21, 2014 (see Note 7. Notes Payable) which restricts the use of its proceeds. The note which in total was for $35,000
restricts the use of the funds to $30,000 for manufacturing a new piece of equipment designed and developed by the Company which
it will be selling to its client; and $5,000 to produce associated marketing materials for it. At March 31, 2014, the Company
had spent $27,000 of the total note on a deposit required by the equipment manufacturer to begin manufacturing (see Note 4. Prepaid
Expenses and Other Currents Assets). Violation of the cash restrictions triggers default of the note, the Company was in compliance
with the cash restrictions as of March 31, 2014.
Prepaid Expenses and Other Current Assets
This amount is comprised of advance payments
made to third parties for independent contractors’ services, general expenses and inventory deposits. Prepaid services and
general expenses are amortized over the applicable periods which approximate the life of the contract. When the Company has taken
title to inventory which deposits were for, the related amount is classified as inventory and recognized as a cost of revenues
(see “Cost of Revenues” below).
Accounts Receivable
Accounts receivable are recorded at face
amounts less an allowance for doubtful accounts. On a periodic basis, we evaluate our accounts receivable and, if necessary, establish
the allowance for doubtful accounts by calculating and recording a specified percentage of the individual open receivable balances.
Specific allowances are also recorded based on historical experience, analysis of past due accounts, client creditworthiness and
other current available information. However, our actual experience may vary from our estimates. If the financial condition of
our clients were to deteriorate, resulting in their inability or unwillingness to pay our fees, we may need to record additional
allowances or write-offs in future periods. This risk is mitigated to the extent that we typically receive retainers from some
of our clients prior to performing significant services.
The provision for doubtful accounts 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.
Significant Clients and Customers
For the period ended March 31, 2014 three clients
individually accounted for 10% or more and 82% in aggregate of the Company’s total revenues. The Company did not have any
revenues for the period ended March 31, 2013.
The Company did not have any outstanding
gross accounts receivables at December 31, 2013. At December 31, 2013, one client represented 100% of our gross accounts receivable
balance.
Fixed Assets
Equipment is stated at cost. 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. Fixed assets are reviewed for impairment as discussed below under
“Accounting for the Impairment of Long-Lived Assets.” We did not capitalize any interest as of March 31, 2014 and 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 has not recorded any impairment charges related to long-lived assets as of March 31, 2014 and as of December
31, 2013.
Revenue Recognition
Revenue is recognized in accordance with
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 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 recognize 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 versus 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. As of March 31, 2014 and December 31, 2013, such losses have not
been significant. 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
the 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 income statement on a net
basis.
Revenue from supply and equipment sales,
including the delivery fee, 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.
As of March 31, 2014 and December 31, 2013, sales returns have not been significant and as such, a sales return allowance has not
been recorded.
Cost of Revenues
The Company’s policy is to recognize
cost of revenue in the same manner in conjunction with revenue recognition, when the costs are incurred. 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 cost of supplies. Selling, general and administrative expenses are charged to expense as incurred.
Advertising
Advertising costs, which are included
as a component of selling and marketing expense, are expensed as incurred and have been insignificant.
Shipping and Handling Costs
For supply and equipment sales, shipping
and handling costs are included as a component of cost of revenues.
Income Taxes
The Company has elected to be treated as
an S corporation for income tax purposes as provided in Section 1361 of the Internal Revenue Code. In lieu of corporate income
taxes, the owners are taxed on their proportionate share of the respective Company’s taxable income. As of March 31, 2014
and December 31, 2013, the Company had elected and maintained its status as an S Corporation. The Company believes it does not
have any uncertain tax positions. No provision or liability for federal or state income taxes has been included in the financial
statements.
Earnings per Share
The Company reports earnings per 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 earnings per share amounts
are based on the weighted average shares of common outstanding. If applicable, diluted earnings per share assume the conversion,
exercise or issuance of all common stock instruments such as options, warrants and convertible securities, unless the effect is
to reduce a loss or increase earnings per share. There were no adjustments to diluted earnings per share calculation as the Company
does not have any dilutive instruments.
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 income statements 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 income
statements 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.
Note 3. Recent Accounting Pronouncements
In July 2013, the FASB issued Accounting Standards Update (“ASU”)
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. The ASU is effective
prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013 for all unrecognized
tax benefits that exist at the effective date. Early adoption is permitted and retrospective application is permitted. The Company
has not elected early adoption or retrospective application of this ASU as it is not applicable to the Company.
In February 2013, the FASB issued ASU No. 2013-02,
Comprehensive
Income (Topic 220)
. The amendments do not change the current requirements for reporting net income or other comprehensive income
in financial statements. However, the amendments require an entity to provide information about the amounts reclassified out of
accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required
under US GAPP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required
under U.S. GAAP to be reclassified in their entirety to net income, and entity is required to cross-reference to other disclosures
required under U.S. GAAP that provide additional detail about those amounts. The amendments in this update are effective prospectively
for reporting periods beginning after December 15, 2013. Early adoption is permitted. Adoption of this update is not expected to
have a material effect on the Company’s results of operations or financial condition.
Note 4. Prepaid Expenses and Other Current
Assets
Prepaid expenses and other current assets
were comprised of the following amounts as of March 31, 2014 and December 31, 2013:
Note 5. Accounts receivable
Accounts receivable was comprised of the
following amounts as of March 31, 2014 and December 31, 2013:
The Company did not recognize any bad debt
expense for the periods ended March 31, 2014 and 2013.
Note 6. Fixed Assets
The Company recorded depreciation expense
of $146 and $49 for the periods ended March 31, 2014 and 2013, respectively.
Note 7. Notes Payable
On March 21, 2014, the Company entered into
a secured promissory note with Duchess Opportunity Fund, II, LP, in the amount of $35,000 which bears interest of 5% per annum.
The agreement restricts the use of $30,000 of the funds toward manufacturing costs for the first model of a new piece of cultivation
equipment designed by the Company which it will be selling to its clients, and $5,000 for the production of marketing materials
of the equipment (see “Restricted Cash” under Note 2. Summary of Significant Accounting Policies and Note 4. Prepaid
Expenses and Other Current Assets). The note is secured by the piece of equipment which the funds are being used to manufacture.
The maturity date is stated as the earlier of: 1) May 15, 2014; 2) within 30 days of demand; 3) the Company receiving any funding;
or 4) the Company receiving payment from the sale of the equipment the borrowed funds are being used to purchase.
As of March 31, 2014, the Company is in
compliance with all covenants required by the note which consist of the following: 1) good standing of corporate existence and
authorization; 2) compliance with all material laws applicable to its business; and 3) no tax liens, encumbrances, past due debt,
or increase in debt while the loan is outstanding. The Company recorded interest expense related to this note of $43 and $0 for
the periods ended March 31, 2014 and 2013, respectively.
Note 8. Related Party Transactions
From time to time, the Company’s two
founder shareholders paid for the Company’s operating expenses which were recorded in due to director. As of March 31, 2014
and December 31, 2013, the balance due from the Company to the two founding shareholders was $3,006.
Note 9. Commitments and Contingent Liabilities
As of March 31, 2014 and December 31, 2013,
the Company has no outstanding commitments of contingent liabilities.
Note 10. Capital Stock
The Company is authorized to issue 12,000
common shares at $0.001 par value per share.
Upon the Company’s formation on March
5, 2013, the Company issued 4,000 shares of common stock to each of the co-founders Ellis Smith and Corey Hollister in exchange
of $400, which was recorded as a reduction to due from director.
As of March 31, 2014 and December 31, 2013,
the Company has 8,000 common shares issued and outstanding.
Note 11. Segment Information
For the periods ended March 31, 2014 and
2013, the Company does not operate in any material, separately reportable operating segments.
Note 12. Subsequent Events
On May 15, 2014, the Company entered into
an Agreement and Plan of Merger ("Merger Agreement") with Cannamerica Corp., a wholly-owned subsidiary of Brazil Interactive
Media, Inc. (“BIMI”), under which all of the outstanding shares of common stock of the Company will be acquired. The
effective time of the Merger shall be upon the filing of Certificates of Merger with the Secretaries of State of the States of
Delaware and Colorado, pursuant to applicable statutes. As of the date of this report, July 29, 2014, the documents making the
merger effective have not been filed.
EXHIBIT
G
CERTIFICATE OF AMENDMENT OF THE
RESTATED CERTIFICATE OF INCORPORATION
OF
BRAZIL INTERACTIVE MEDIA, INC.
Brazil Interactive Media, Inc. (the “Corporation”) hereby
certifies that:
1.
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FIRST: The original Certificate of Incorporation of the Corporation was filed with
the Secretary of State of the State of Delaware on September 24, 2001 under the name “NatureWell, Incorporated”, and
a Restated Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on April 20, 2006.
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2.
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SECOND: A Certificate of Amendment to the Restated Certificate of Incorporation of
the Corporation was filed with the Secretary of State of the State of Delaware on April 21, 2013 whereby the Corporation, among
other things, changed the name of the Corporation to “Brazil Interactive Media, Inc.”
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3.
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THIRD: Pursuant to Section 242 of the General Corporation Law of the State of Delaware,
this Certificate of Amendment to the Restated Certificate of Incorporation, as amended (this “Amendment”), further
amends the provisions of the Corporation’s Restated Certificate of Incorporation.
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4.
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FOURTH: The terms and provisions of this Amendment have been duly approved by written
consent of the required number of shares of outstanding stock of the Corporation pursuant to Subsection 228(a) of the General
Corporation Law of the State of Delaware.
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5.
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FIFTH: Article First of the Corporation’s Restated Certificate of Incorporation,
as amended, is deleted in its entirety and substituted by the following:
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“The name of the Corporation
is American Cannabis Company, Inc.”
IN WITNESS WHEREOF, the undersigned has executed this Certificate
of Amendment of the Corporation’s Restated Certificate of Incorporation, as amended, on ________, 2014.
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Corey Hollister
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Chief Executive Officer
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