Form 10-K American Cannabis Compan For: Dec 31

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UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM
10-K

     
(Mark One)    

 

[X]

 

 

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

For the Fiscal Year Ended
December 31, 2019

 

Or

 

[ ]  

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

For the Transition Period
From                            to                     

 

 

Commission
File Number 000-26108

https://www.streetinsider.com/

AMERICAN
CANNABIS COMPANY, INC.

(Exact name of registrant as specified in its charter)

     
Delaware
(State or other jurisdiction of
incorporation or organization)
  90-1116625
(I.R.S. Employer
Identification No.)

 

5690
Logan Street, Unit A

Denver, Colorado
(Address of principal executive offices)

 

 

80216
(Zip Code)

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

 

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

None

Title
of each class

 

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

 

Common
Stock, $0.00001 Par Value

(Title
of each class)

 

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

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

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

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

  

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

 

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

 

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

 

The
aggregate market value of common equity held by non-affiliates of the Registrant as of June 30, 2019 was approximately 
$7,932,641

As
at December 31, 2019, and March 25, 2020, 52,978,605 and 53,456,866 shares of common stock, par value $0.00001, were issued and
outstanding respectively.

  

 

 

  TABLE
OF CONTENTS

ITEM
1.
  BUSINESS     1
           
ITEM
1A.
  RISK
FACTORS
    8
           
ITEM
1B.
  UNRESOLVED
STAFF COMMENTS
    8
           
ITEM
2.
  PROPERTIES     8
           
ITEM
3.
  LEGAL
PROCEEDINGS
    8
           
ITEM
4.
  MINE
SAFETY DISCLOSURES
    8
           
    PART
II
     
ITEM
5.
  MARKET
FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES MARKET INFORMATION AND
HOLDERS
    9
           
ITEM
6.
  SELECTED
FINANCIAL DATA
    9
           
ITEM
7.
  MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    9
           
ITEM
7A.
  QUANTITATIVE
AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
    20
           
ITEM
8.
  FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
    23
           
ITEM
9.
  CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
    42
           
ITEM
9A.
  CONTROLS
AND PROCEDURES
    42
           
ITEM
9B.
  OTHER
INFORMATION
    44
           
    PART
III
     
           
ITEM
10.
  DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
    45
           
ITEM
11.
  EXECUTIVE
COMPENSATION
    48
           
ITEM
12.
  SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
    50
           
ITEM
13.
  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
    51
           
ITEM
14.
  PRINCIPAL
ACCOUNTING FEES AND SERVICES
    51
           
    PART
IV
     
           
ITEM
15.
  EXHIBITS,
FINANCIAL STATEMENT SCHEDULES
     

 

        PART
I.

 

ITEM
1. BUSINESS

 

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

 

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

 

Company
Background

 

American Cannabis
Company, Inc. and subsidiary is a publicly listed company quoted on the OTC Markets OTCQB TradingTier under the symbol “AMMJ”.
We are based in Denver, Colorado and operate a fully-integrated business model that features end-to-end solutions for businesses
operating in regulated cannabis industry in states and countries where cannabis is regulated and/or has been de-criminalized for
medical use and/or legalized for recreational use. We provide advisory and consulting services specific to this industry, design
industry-specific products and facilities, and manage a strategic group partnership that offers both exclusive and non-exclusive
customer products commonly used in the industry.

 

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

 

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

 

Industry
and Regulatory Overview

 

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

 

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

 

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

 

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

 

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

 

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

 

On December
20, 2018, President Donald J. Trump signed into law the Agriculture Improvement Act of 2018, otherwise known as the “Farm
Bill”. Prior to its passage, hemp, a member of the cannabis family, was classified as a Schedule 1 controlled substance,
and so illegal under the federal CSA.

 

With the passage
of the Farm Bill, hemp cultivation is now broadly permitted. The Farm Bill explicitly allows the transfer of hemp-derived products
across state lines for commercial or other purposes. It also puts no restrictions on the sale, transport, or possession of hemp-derived
products, so long as those items are produced in a manner consistent with the law.

 

Under Section
10113 of the Farm Bill, hemp cannot contain more than 0.3 percent THC. THC refers to the chemical compound found in cannabis that
produces the psychoactive “high” associated with cannabis. Any cannabis plant that contains more than 0.3 percent
THC would be considered non-hemp cannabis—or marijuana—under the CSA and would not be legally protected under this
new legislation and would be treated as an illegal Schedule 1 drug.

 

Additionally,
there will be significant, shared state-federal regulatory power over hemp cultivation and production. Under Section 10113 of
the Farm Bill, state departments of agriculture must consult with the state’s governor and chief law enforcement officer
to devise a plan that must be submitted to the Secretary of the United States Department of Agriculture (hereafter referred to
as the “USDA”). A state’s plan to license and regulate hemp can only commence once the Secretary of USDA approves
that state’s plan. In states opting not to devise a hemp regulatory program, USDA will construct a regulatory program under
which hemp cultivators in those states must apply for licenses and comply with a federally run program. This system of shared
regulatory programming is similar to options states had in other policy areas such as health insurance marketplaces under Affordable
Care Act, or workplace safety plans under Occupational Health and Safety Act—both of which had federally-run systems for
states opting not to set up their own systems.

The Farm Bill
outlines actions that are considered violations of federal hemp law (including such activities as cultivating without a license
or producing cannabis with more than 0.3 percent THC). The Farm Bill details possible punishments for such violations, pathways
for violators to become compliant, and even which activities qualify as felonies under the law, such as repeated offenses.

 

One of the
goals of the previous 2014 Farm Bill was to generate and protect research into hemp. The 2018 Farm Bill continues this effort.
Section 7605 re-extends the protections for hemp research and the conditions under which such research can and should be conducted.
Further, section 7501 of the Farm Bill extends hemp research by including hemp under the Critical Agricultural Materials Act.
This provision recognizes the importance, diversity, and opportunity of the plant and the products that can be derived from it,
but also recognizes that there is a still a lot to learn about hemp and its products from commercial and market perspectives.

 

On November
1, 2019, Colorado Bill HB-19-1090, was passed and made effective. This law allows publicly traded corporations to apply for and
qualify for the ownership of Colorado cannabis licenses. Other states that have legalized cannabis for recreational and/or medicinal
use restrict public companies from owning interests in state cannabis licenses altogether, or have enacted regulations which make
it difficult for corporations to comply with application requirements, including all shareholders submitting to and passing background
checks.

 

Business
Overview

 

We
primarily operate as one segment within the regulated cannabis industry with three operation divisions: i) consulting and professional
services; (ii) the sale of products and equipment commonly utilized in the cultivation, processing, transportation or retail sale
of cannabis; and, (iii) a new business consulting division called “American Hemp Services,” which offers hemp producers
with consulting and professional services including business plan creation, greenhouse and farm design, license acquisition, seed
sales, hemp processing, operational deployment, and crop improvement. Furthermore, the Company seeks to partner with accredited
universities nationwide to further the advancement of hemp related research. We are not licensed to produce and/or sell cannabis.

 

We
at times that seem prudent seek to acquire minority equity ownership in development stage businesses that our cannabis licensee
applicants intend to operate, where not precluded by state laws. In exchange for a reduced fee for consulting services, we negotiate
for minority equity positions in applicant corporations, or minority interests in applicant limited liability companies, with
the contingent expectations that if a license is awarded, and the licensee obtains funding and commences operations, the Company
may share in those profits and losses.

 

Consulting
Services

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Equipment
and Supplies

 

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

 

· The
Satchel™.
The Satchel was invented in response to regulatory changes in Colorado
and elsewhere that require child-proof exit containers. The Satchel is a pouch-like case
designed as a high-quality, child-proof exit package solution for the regulated cannabis
industry. The Satchel meets child-safety requirements of the Consumer Products Safety
Commission (“CPSC”), making it compliant in all states, and the Satchel’s
drawstring and toggle lock fulfills the requirements of the Poison Prevention Packaging
Act of 1970 (16 CFR part 1700). There are few products meeting regulatory standards,
and even fewer that offer distinctive quality. The Satchel will meet all current exit
packaging regulations, featuring a child-proof closure that completely conceals the contents
inside. On March 29, 2016, the U.S. Patent and Trademark Office issued us Patent No.
9,296,524 B2 for the Satchel.

 

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

 

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

 

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

 

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

 

 

Equity
Interest Projects

 

We
negotiated for the following direct equity interests (as part of our reduced consulting fee compensation) in corporate and limited
liability company state applicants for cannabis licenses, with corresponding results from the applicant’s license applications
noted:

 

· Verde
of Florida, LLC
; (“Verde”) we obtained a 5% equity interest. To date,
the State of Florida has issued no cannabis licenses. There is no expected date that
the State of Florida will issue any cannabis licenses. Verde is not operating. We do
not exert any control
over Verde or provide Verde with any subordinated financial support. To date, we received no revenue, losses, expenses or penalties
as a result of our equity interest in Verde.

 

· California
City Cannabis Company, Inc
.; (“California City”) we obtained a 10% equity
interest. California City’s business terminated for failure to raise operating
capital. The Company and California City agreed to terminate our equity interest as of
December 31, 2019. California City is not operating. We exerted no control over California
City and provided no subordinated financial support to California City. To date, we received
no revenue, losses, expenses or penalties as a result of our equity interest and termination
thereof in California City.

 

· Atlantis
Management Group, Inc
.; (“Atlantis”) we negotiated for a 25% equity interest
if licenses were obtained in Massachusetts. No licenses were obtained, and no equity
was issued and the project terminated as of the date hereof. To date Atlantis is not
operating. We exerted no control over Atlantis and provided no subordinated financial
support to Atlantis. To date, we received no revenue, losses, expenses or penalties as
a result of our equity interest in Atlantis.

 

· Natural
State Hemp, LLC
; (“Natural State Hemp”) we negotiated for a 10% equity
interest. A license was awarded but no operating capital was raised. The project terminated
by mutual agreement of the Company and Natural State Hemp. We agreed in principal to
settle our equity interest and claims related thereto for a cash payment of $22,670 which
as of the date of this filing is pending. We exerted no control over Natural State Hemp
and provided no subordinated financial support to Natural State Hemp.

 

Aside
from the above, we collaborated with a related party, Tabular Investments, LLC (“Tabular”), by assigning to Tabular
all of our rights, title and interests in equity we negotiated for in our Missouri and Oklahoma applicant clients, in exchange
for offering each client ongoing consulting services and product sales, subject to our entering into a re-engagement agreement
with operating licensees and our agreement to engage Tabular for management services concerning our ongoing services and product
offerings. Tabular is managed by its sole member, Tad Mailander, our internal legal counsel and director. During fiscal 2019 we
assigned to Tabular the following equity interests, with noted corresponding results:

 

· Magna
Carta MO, LLC
; (“Magna Carta”) we assigned Tabular a 49% interest. No
license was obtained. The project terminated January 23, 2020. We exerted no control
over Magna Carta or Tabular and provided no subordinated financial support to Magna Carta
or Tabular. To date, we received no revenue, losses, expenses or penalties as a result
of our equity interest and termination thereof in Magna Carta.

 

· Willmann
& Luther, Inc., dba CannCare, Inc
.; (“Willman & Luther”) we assigned
Tabular a 10% equity interest. No license was obtained. The project terminated January
23, 2020. We exerted no control over Willmann & Luther or Tabular, and provided no
subordinated financial support to Willmann & Luther or Tabular. To date, we received
no revenue, losses, expenses or penalties as a result of our equity interest and termination
thereof in Willmann & Luther.

 

· Pharm
+ House, LLC
; (“Pharm + House”) we assigned Tabular a 25% interest. A
license was obtained. However, Pharm + House has not re-engaged us to provide ongoing
consulting services and product sales. We have also not entered into a management services
contract with Tabular. We exerted no control over Pharm + House or Tabular, and provided
no subordinated financial support to Pharm + House or Tabular. To date, we received no
revenue, losses, expenses or penalties as a result of our equity interest in Pharm +
House.

 

· RedBud
Growers, Inc
.; (“Red Bud”) we assigned Tabular a 15% equity. A license
was obtained. RedBud has not re-engaged us to provide ongoing consulting services and
product sales. We have also not entered into a management services contract with Tabular.
We exert no control over RedBud or Tabular and provided no subordinated financial support
to RedBud or Tabular. To date, we received no revenue, losses, expenses or penalties
as a result of our equity interest in RedBud.

 

· Beyond
Honey Oil Farms, LLC
; (“Beyond Honey”) we assigned Tabular a 10% interest.
A license was obtained. No operations have commenced. Beyond Honey has not re-engaged
us to provide ongoing consulting services and product sales. We have also not entered
into a management services contract with Tabular. We exert no control over Beyond Honey
or Tabular and provided no subordinated financial support to Beyond Honey or Tabular.
To date, we received no revenue, losses, expenses or penalties as a result of our equity
interest in Beyond Honey.

 

Sales
and Marketing

 

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

 

Research
and Development

 

As
a component of our equipment and supplies offerings, from time-to-time we design and develop our own proprietary products to meet
demand in markets where current offerings are insufficient. These products include, but are not limited to: The Satchel™,
Cultivation Cube™,
So-Hum Living Soils™ and the HDCS™. Costs associated
with the development of new products are expensed as occurred as research and development operating expenses. During the year
ended December 31, 2019, our research and development costs were $348, as compared to $590 for the fiscal year ended December
31, 2018.

 

Significant
Customers

 

As of December
31, 2019, there was one customer who equated to 10% of all revenues. For the year ended December 31, 2018, three customers accounted
for 47.5% of the Company’s total product sales revenues, and four customers accounted for 70.65% of the Company’s
total service-based revenue.

 

Int Intellectual
Property

 

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

 

Competition

 

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

 

 

Employees

 

As
of December 31, 2019, we have 9 full-time employees, all of whom are U.S based, primarily in Colorado at our Denver headquarters. None
of our U.S employees are represented by a labor union.

 

ITEM
1A. RISK FACTORS

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

 

ITEM
1B. UNRESOLVED STAFF COMMENTS

 

None.

 

ITEM 2. PROPERTIES

 

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

 

ITEM 3. LEGAL PROCEEDINGS

 

On November
15, 2019, Erin Turoff filed suit against the Company and Mr. Terry Buffalo, our principal executive officer and director, and
Mr. Ellis Smith, our chief development officer and director, in Denver County District Court. The complaint seeks a declaratory
judgment and damages relating to Ms. Turoff’s allegations that while working with the Company, she was misclassified as
an independent contractor when she was allegedly an employee of the Company. Ms. Turoff alleges she is owed unpaid overtime, liquidated
damages, wages, and other compensatory damages for her misclassification and alleged wrongful termination. Ms. Turoff’s
suit against Mr. Buffalo and Mr. Smith alleges that each are the alter ego of the Company and are therefore jointly and severally
liable. The case is currently in litigation.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not Applicable.

 

PART
II.

 

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

 

Our common stock trades on the
OTC Markets OTCQB Trading Tier under the ticker symbol “AMMJ”. As of December
31, 2019, there were 482 holders of record of our common stock. 
The following table sets forth, for the periods indicated,
the high and low closing sales prices of our common stock:

 

 

2019   High   Low
  Quarter ended December 31     $ 0.26     $ 0.08  
  Quarter ended September 30     $ 0.36     $ 0.24  
  Quarter ended June 30     $ 0.45     $ 0.26  
  Quarter ended March 31     $ 0.59     $ 0.33  

 

 

2018   High   Low
  Quarter ended December 31     $ 0.65     $ 0.22  
  Quarter ended September 30     $ 0.78     $ 0.39  
  Quarter ended June 30     $ 1.28     $ 0.60  
  Quarter ended March 31     $ 1.05     $ 0.81  

 

DIVIDEND
POLICY

 

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

 

ITEM
6. SELECTED FINANCIAL DATA

 

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

 

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

 

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

 

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

 

Background

 

American Cannabis
Company, Inc. and subsidiary is a publicly listed company quoted on the OTC Markets OTCQB TradingTier under the symbol “AMMJ”.
We are based in Denver, Colorado and operate a fully-integrated business model that features end-to-end solutions for businesses
operating in the regulated cannabis and hemp industries in states and countries where cannabis and hemp is regulated and/or has
been otherwise de-criminalized for medical use and/or legalized for recreational use. We provide advisory and consulting services
specific to this industry, design industry-specific products and facilities, and sell both exclusive and non-exclusive customer
products commonly used in these industries.

 

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

 

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

 

Results of Operations

 

Year ended December 31, 2019
compared to year ended December 31, 2018

 

The following table presents our
operating results for the year ended December 31, 2019 compared to December 31, 2018:

 

AMERICAN
CANNABIS COMPANY, INC.

CONSOLIDATED
STATEMENTS OF OPERATIONS        

 

    For The Year Ended   For The Year Ended
    December 31,   December 31,
    2019   2018
Revenues                
Consulting Services   $ 1,470,245     $ 395,840  
Product & Equipment     660,490       586,508  
Total Revenues     2,130,735       982,348  
Cost of Revenues                
Cost of Consulting Services     292,375       121,641  
Cost of Products and Equipment     499,408       402,206  
Total Cost of Revenues     791,783       523,847  
Gross Profit     1,338,952       458,501  
Operating Expenses                
General and Administrative     981,424       868,295  
Investor Relations     67,644       20,983  
Selling and Marketing     309,232       293,241  
Research and Development     347       590  
Stock Based Compensation expense     73,514       73,742  
Warrant expense     151,906       204,955  
Bad Debt expense     88,749       2,815  
Total Operating Expenses     1,672,816       1,464,621  
Loss from Operations     (333,864 )     (1,006,120 )
Other income     32,122       55,429  
NET LOSS     (301,742 )     (950,691 )
                 
Basic and diluted net loss per common share   $ (0.01 )   $ (0.02 )
                 
Basic and diluted weighted average common shares outstanding     52,468,502       51,465,188  
                 

 

Revenues  

Total revenues
for the year ended December 31, 2019 and December 31, 2018, were $2,130,735 and $982,348 respectively, an increase of $1,148,387.
This increase was primarily due to an increase in the demand for consulting services in 2019. For the year ended December 31,
2019 and December 31, 2018, consulting services revenue was $1,470,245 and $395,840, respectively. For the year ended December
31, 2019 and December 31, 2018, products and equipment revenues were $627,157 and $545,511 respectively. The increase attributable
to our product and services revenues was due to our clients ordering more products and equipment to support their businesses.
We also realized revenue of $33,333 and $40,997 from shipping services that are charged to customers for our product and equipment
sales for the years ended December 31, 2019 and 2018 respectively.

 

We realized
no revenues from our direct equity investments in Verde of Florida, LLC, California City Cannabis Company, Inc. Atlantis Management
Group, Inc. or Natural State Hemp, LLC. Verde of Florida, LLC was never awarded a license and the project, including our 5% equity
interest, terminated. California City Cannabis Company, Inc. was awarded a license, but failed to obtain funding, resulting in
our agreement to terminate the project, including our 10% equity interest. Our equity interest in Atlantis Management Group, Inc.
was contingent upon it being awarded licenses which were never awarded, and the project terminated with no equity issued to us.
Natural State Hemp, LLC was awarded a license but failed to obtain funding, resulting in our agreement to terminate the project,
including our 10% equity interest.

 

We also realized
no revenues from our assignment of equity interests to Tabular Investments, LLC, in our Missouri clients: Magna Carta MO, LLC
and Willmann & Luther, Inc.; and our Oklahoma clients: Pharm + House, LLC, RedBud Growers, Inc. and Beyond Honey Oil Farms,
LLC. Both Magna Carta MO, LLC and Willmann & Luther, Inc. failed to obtain licenses and each project terminated. Pharm + House,
LLC, RedBud Growers, Inc. and Beyond Honey Oil Farms, LLC were each issued licenses, however, pursuant to the terms of the assignment
of our equity interests to Tabular, none have re-engaged us to provide ongoing consulting services or product sales, and we have
not entered into any management services contract with Tabular, resulting in no revenues.

 

The Company
no longer intends to enter into equity deals in exchange for service.

 

Costs of
Revenues 

Costs of revenues
primarily consist of labor, travel, marketing and other costs directly attributable to providing services or offering products.
For the year ended December 31, 2019 and December 31, 2018, our total costs of revenues were $791,783 and $523,847 respectively.
The increase was primarily due to more consulting services provided and higher margins for products sold in 2019. For the year
ended December 31, 2019, consulting related costs were $292,375 or 13.9% of total revenues, and costs associated with products
and equipment were $499,408 or 23.7% of total revenues. For the year ended December 31, 2018, consulting related costs were $121,641
or 12.3% of total revenues, and costs associated with products and equipment were $402,206 or 40.9% of total revenues.

 

We incurred
immaterial internal cost of revenues from our consulting clients, in which we discounted certain of our consulting services in
exchange for our receipt of a minority direct equity investment. All of our discounted services are disclosed and are reflected
in our normal fixed costs of doing business. Regarding our direct equity investments, we exerted no control over Verde of Florida,
LLC, California City Cannabis Company, Inc. Atlantis Management Group, Inc. or Natural State Hemp, LLC, and provided no subordinated
financial support and incurred no losses, expenses or penalties as a result of our equity interests and termination thereof.

 

We incurred
immaterial internal cost of revenues from our assignments of equity interests to Tabular Investments, LLC in our Missouri clients:
Magna Carta MO, LLC and Willmann & Luther, Inc.; and our Oklahoma clients: Pharm + House, LLC, RedBud Growers, Inc. and Beyond
Honey Oil Farms, LLC. All of our discounted consulting services, which were exchanged for a minority equity interests in each
entity prior to our assignment to Tabular, were disclosed and are reflected in our normal fixed costs of doing business. The Company
exerted no control over said entities and provides no subordinated financial support, reimbursement of losses, expenses or penalties
as a result of our equity interests and termination thereof.

 

Gross Profit

For the year
ended December 31, 2019 and December 31, 2018, gross profit was $1,338,952 and $458,501, respectively. This increase of $880,452
was primarily due to an increase in our client base and volume of operations for consulting services. As a percentage of total
revenues, gross profit was 62.8% and 46.7% for the years ended December 31, 2019 and December 31, 2018, respectively. This increase
was primarily due to the year ended December 31, 2019 having a higher proportion of total revenues from consulting services as
compared to product and equipment sales, as consulting services have a higher profit margin as compared to product and equipment
sales.

 

Operating
Expenses

Total operating
expenses for the years ended December 31, 2019 and December 31, 2018 was $1,672,816 and $1,464,621, respectively. This increase
of $208,195 was attributed to an increase in general consulting services, an increase in bad debt expense, and decrease in warrant
expenses.

 

Income
Tax Expense (Benefit)

We did not
have any income tax expense or benefit for the years ended December 31, 2019 and December 31, 2018, respectively. Although our
tax status changed from a non-taxable pass-through entity (S-Corporation) to a taxable entity (C-Corporation) during the year
ended
December 31, 2014, due to cumulative losses since we became a C-Corporation, we recorded
a valuation allowance against our related deferred tax asset which netted our deferred tax asset and benefit for income taxes
to zero. We were an S-Corporation throughout the period from Inception (March 5, 2013) through December 31, 2013, and accordingly,
no provision or benefit for income taxes was applicable. The years 2010 to 2018 remain subject to examination by the Company’s
major tax jurisdictions.

 

Net Loss

As a result
of the factors discussed above, net loss for the year ended December 31, 2019 and December 31, 2018 was ($301,742) and ($950,691),
respectively. For December 31, 2019 our net loss was 14.2% of total revenues. For December 31, 2018, our net loss represented
a 96.8% of total revenue.

 

Liquidity and Capital Resources

 

As of December
31, 2019, and December 31, 2018, our primary internal sources of liquidity were cash and cash equivalents of $945,181 and $1,086,565,
respectively. We also have the ability to raise additional capital as needed through an external equity financing transaction.
We believe our liquidity and capital resources to be adequate to fund our operational and general and administrative expenses
for the next 12 months.

 

Operating Activities

For the years
ended December 31, 2019 and December 31, 2018, the Company had a Net Cash Used in Operating Activities of ($102,848) and ($561,522),
respectively. The increase in Net Used In Operating Activities of $458,674 was attributed to managements aggressive means
in collecting it receivables and fulfilling its deliverables on a timely basis. Due to this factor and considering that our fixed
overhead costs are relatively low, we have the ability to issue stock and stock equivalents to compensate employees and management,
and the level of future revenue we expect to generate from executed client contracts, we believe our liquidity and capital
resources to be adequate to fund our operational and general and administrative expenses for the next 12 months.

 

Investing
Activities

 

For the years
ended December 31, 2019 and December 31, 2018, net cash used in investing activities was $38,536 and $0, respectively.

 

Financing
Activities

 

For the years
ended December 31, 2019 and December 31, 2018, financing activities were a source of cash of $0 and $0, respectively. 

 

Off Balance
Sheet Arrangements

 

As of December
31, 2019, and December 31, 2018, 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. Neither our direct equity ownership in, nor our assignments
of equity to Tabular Investments, LLC are, or are reasonably likely to allow for, substantive terms, transactions, and arrangements,
whether contractual or not contractual, that will have a current or future effect on our financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources. We have no direct or indirect majority influence
or control over any entity in which we have a direct equity interest. We do not have any direct or indirect interest in, and do
not control Tabular. We have not absorbed losses from either our direct equity interests or assignments to Tabular, and we have
provided no subordinated financial support to any project.

 

Non-GAAP
Financial Measures

 

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

 

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

 

 

Adjusted EBITA Reconciliation   For the Year Ended   For the Year Ended
  December 31, 2019   December 31, 2018
Net loss   $ (301,742 )   $ (950,691 )
Interest expenses   $ —       $ 52  
Tax Expense (benefit)   $ —       $ —    
Stock Based Compensation and Warrant expenses   $ 225,420     $ 278,697  
Adjusted EBITA   $ (76,322 )   $ (671,942 )

 

CRITICAL
ACCOUNTING POLICIES AND ESTIMATES

 

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

 

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

 

Cash
and Cash Equivalents

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

 

Inventory

Inventory
is primarily comprised of products and equipment to be sold to end-customers. Inventory is valued at cost, based on the specific
identification method, unless and until the market value for the inventory is lower than cost, in which case an allowance is established
to reduce the valuation to market value. As of December 31, 2019, and December 31, 2018, market values of all of our inventory
were greater than cost, and accordingly, no such valuation allowances was recognized.

 

Deposits

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

 

Prepaid
Expenses and Other Current Assets

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

 

Accounts
Receivable

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

The allowance
for doubtful accounts, if any, is recorded as a reduction in revenue to the extent the provision relates to fee adjustments and
other discretionary pricing adjustments. To the extent the provision relates to a client’s inability to make required payments
on accounts receivables, the provision is recorded in operating expenses. As of December 31, 2019, and December 31, 2018 our allowance
for doubtful accounts was $39,677 and $2,635, respectively. For December 31, 2019 and December 31, 2018, we recorded bad debt
expense of $88,749 and $2,815, respectively.

 

Operating
Lease

In February
2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU requires lessees to recognize a lease liability, on a discounted
basis, and a right-of-use asset for substantially all leases, as well as additional disclosures regarding leasing arrangements.
In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842), which provides an optional transition method of applying the new
lease standard. Topic 842 can be applied using either a modified retrospective approach at the beginning of the earliest period
presented, or as permitted by ASU 2018-11, at the beginning of the period in which it is adopted.

 

We adopted
this standard using a modified retrospective approach in 2019. The modified retrospective approach includes a number of optional
practical expedients relating to the identification and classification of leases that commenced before the adoption date; initial
direct costs for leases that commenced before the adoption date; and, the ability to use hindsight in evaluating lessee options
to extend or terminate a lease or to purchase the underlying asset.

 

The Company
elected the package of practical expedients permitted under ASC 842 allowing it to account for its existing operating lease that
commenced before the adoption date as an operating lease under the new guidance without reassessing (i) whether the contract contains
a lease; (ii) the classification of the lease; or, (iii) the accounting for indirect costs as defined in ASC 842.

 

In considering
its qualitative disclosure obligations under ASC 842-20-50-3, the Company examined its one lease for office space that has a fixed
monthly rent with no variable lease payments and no options to extend. The lease is for an office space. The lease does not provide
for terms and conditions granting residual value guarantees by the Company, or any restrictions or covenants imposed by the lease
for dividends or incurring additional financial obligations by the Company. The Company also elected a short-term lease exception
policy and an accounting policy to not separate non-lease components from lease components for our facility lease, as we determined
our right of use asset to be zero.

 

Consistent
with ASC 842-20-50-4, the Company calculated its total lease cost based solely on its monthly rent obligation. The Company had
no cash flows arising from its lease, no finance lease cost, short term lease cost, or variable lease costs. Our office lease
does not produce any sublease income, or any net gain or loss recognized from sale and leaseback transactions. As a result, the
Company did not need to segregate amounts between finance and operating leases for cash paid for amounts included in the measurement
of lease liabilities, segregated between operating and financing cash flows; supplemental non-cash information on lease liabilities
arising from obtaining right-of-use assets; weighted-average calculations for the remaining lease term; or the weighted-average
discount rate.

 

The adoption
of this guidance resulted in no significant impact to our results of operations or cash flows.

 

Property
and Equipment, net

Property and
Equipment is stated at net book value, cost less depreciation. Maintenance and repairs are expensed as incurred. Depreciation
of owned equipment is provided using the straight-line method over the estimated useful lives of the assets, ranging from two
to seven years. Depreciation of capitalized construction in progress costs, a component of property and equipment, net, begins
once the underlying asset is placed into service and is recognized over the estimated useful life. Property and equipment are
reviewed for impairment as discussed below under “Accounting for the Impairment of Long-Lived Assets.” We did not
capitalize any interest as of December 31, 2019 and as of December 31, 2018.

 

Accounting
for the Impairment of Long-Lived Assets

We evaluate
long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Upon such an occurrence, recoverability of assets to be held and used is measured by comparing the carrying
amount of an asset to forecasted undiscounted net cash flows expected to be generated by the asset. If the carrying amount of
the asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount
of the asset exceeds the fair value of the asset. For long-lived assets held for sale, assets are written down to fair value,
less cost to sell. Fair value is determined based on discounted cash flows, appraised values or management’s estimates, depending
upon the nature of the assets. We have not recorded any impairment charges related to long-lived assets during the year ended
December 31, 2019, and December 31, 2018.

 

Revenue
Recognition

 

During the first quarter of 2019,
we adopted the following accounting principles related to revenue recognition: (a) FASB ASU 2016-12 “Revenue from Contracts
with Customers (Topic 606)
;” (b) FASB ASU 2016-11 “Revenue Recognition (Topic 605) and (c) FASB ASU 2016-10
Revenue from Contracts with Customers (Topic 606).”  Due to the nature of our contracts with customers,
adopting the new accounting principles did not have a significant impact on our prior period results of operations, cash flows
or financial position.

 

Our service and product revenues
arise from contracts with customers.  Service revenue includes Operations Divisions consulting revenue. Product revenue includes
(a) Operations Division product sales (So-Hum Living Soils) and (b) Equipment Sales
Division.  The majority of our revenue is derived from distinct performance obligations, such as time spent delivering a
service or the delivery of a specific product.

 

We may also enter into contracts
with customers that identify a single, or few, distinct performance obligations, but that also have non-distinct, underlying performance
obligations.  These contracts are typically fulfilled within one to three months.  Only an insignificant portion of
our revenue would be assessed for allocation between distinct (contractual) performance obligations and non-distinct deliverables
between reporting periods and, accordingly, we do not record a contract asset for completed, non-distinct performance obligations
prior to invoicing the customer.

 

We recognize revenue when the following
criteria are met:

 

The parties to the contract
have approved the contract and are committed to perform their respective obligations – 
our customary practice is
to obtain written evidence, typically in the form of a contract or purchase order.

 

Each party’s rights regarding
the goods or services have been identified – 
we have rights to payment when services are completed in accordance
with the underlying contract, or for the sale of goods when custody is transferred to our customers either upon shipment to or
receipt at our customers’ locations, with no right of return or further obligations.

 

The payment terms for the goods
or services have been identified – 
prices are typically fixed, and no price protections or variables are offered.

 

The contract has commercial
substance – 
our practice is to only enter into contracts that will positively affect our future cash flows.

 

Collectability is probable – we
typically require a retainer for all or a portion of the goods or services to be delivered, as well as continually monitoring
and evaluating customers’ ability to pay.  Payment terms are typically zero to fifteen days within delivery of the
good or service.

 

Advances from Clients deposits
are contract liabilities with customers that represent our obligation to either transfer goods or services in the future, or refund
the amount received.  Where possible, we obtain retainers to lessen our risk of non-payment by our customers.  Advances
from Clients deposits are recognized as revenue as we perform under the contract.

 

Product
Sales

 

Revenue from
product and equipment sales, including delivery fees, is recognized when an order has been delivered to the customer, the price
is fixed and determinable when the order is placed, the product is delivered, title has transferred and collectability is reasonably
assured. Generally, our suppliers’ drop-ship orders to our clients with destination terms. Given the facts that (1) our
customers exercise discretion in determining the timing of when they place their product order; and, (2) the price negotiated
in our product sales contracts is fixed and determinable at the time the customer places the order, we are not of the opinion
that our product sales indicate or involve any significant financing that would materially change the amount of revenue recognized
under the contract, or would otherwise contain a significant financing component for us or the customer under FASB ASC Topic 606.
During the year ended December 31, 2019, sales returns were $51,208 comprised of product returns and replacement.

 

Consulting
Services

 

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

 

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

 

Occasionally,
our fixed-fee hourly engagements are recognized under the completed performance method. Some fixed fee arrangements are for completion
of a final deliverable or act which is significant to the arrangement as a whole. These engagements do not generally exceed a
one-year term. If the performance is for a final deliverable or act, we recognize revenue under the completed performance method,
in which revenue is recognized once the final act or deliverable is performed or delivered for a fixed fee. Revenue recognition
is affected by a number of factors that change the estimated amount of work required to complete the deliverable, such as changes
in scope, timing, awaiting notification of license award from local government, and the level of client involvement. Losses, if
any, on fixed-fee engagements are recognized in the period in which the loss first becomes probable and reasonably estimable.
FASB ASC Topic 606 provides a practical expedient to disregard the effects of a financing component if the period between payment
and performance is one year or less. As, our fixed fee hourly engagements do not exceed one year, no significant customer-based
financing is implicated under FASB ASC Topic 606. During the year ended December 31, 2019, and December 31, 2018, we have incurred
no losses from fixed fee engagements that terminate prior to completion. We believe if an engagement terminates prior to completion,
we can recover the costs incurred related to the services provided.

 

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

 

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

 

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

 

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

 

Costs
of Revenues

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

 

Advertising
and Promotion Costs

Advertising
and promotion costs are included as a component of selling and marketing expense and are expensed as incurred. During the year
ended December 31, 2019 and December 31, 2018, these costs were $32,071 and $124,026, respectively.

 

Shipping
and Handling Costs

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

 

Stock-Based
Compensation

Restricted
shares are awarded to employees and entitle the grantee to receive shares of restricted common stock at the end of the established
vesting period. The fair value of the grant is based on the stock price on the date of grant. We recognize related compensation
costs on a straight-line basis over the requisite vesting period of the award, which to date has been one year from the grant
date. During the years ended December 31, 2019 and December 31, 2018, stock-based compensation expense for restricted shares was
$73,514 and $73,742, respectively. Compensation expense for warrants are based on the fair value of the instruments on the grant
date, which is determined using the Black-Scholes valuation model and are expensed over the expected term of the awards. During
the year ended December 31, 2019 and December 31, 2018, compensation expense for warrants was $151,906 and $204,955 respectively.
The decrease was attributed to the Company issuing less warrants to its consultants and employees.

 

Income Taxes

Our corporate
status changed from an S-Corporation, which it had been since inception, to a C-Corporation during the year ended December 31,
2014. As provided in Section 1361 of the Internal Revenue Code, for income tax purposes, S-Corporations are not subject to corporate
income taxes; instead, the owners are taxed on their proportionate share of the S-Corporation’s taxable income. Accordingly,
we were only subject to income taxes for a portion of 2014. We recognize deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial statements or tax returns in accordance with applicable
accounting guidance for accounting for income taxes, using currently enacted tax rates in effect for the year in which the differences
are expected to reverse. We record a valuation allowance when necessary to reduce deferred tax assets to the amount expected to
be realized.  For the year ended December 31, 2019 and December 31, 2018, due to cumulative losses since our corporate status
changed, we recorded a valuation allowance against our deferred tax asset that reduced our income tax benefit for the period to
zero. As of December 31, 2019, and December 31, 2018, we had no liabilities related to federal or state income taxes and the carrying
value of our deferred tax asset was zero. The years 2010 to 2015 remain subject to examination by the Company’s major tax
jurisdictions.

 

Net
Loss Per Common Share

We report
net 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 loss per share is computed by dividing net income attributable to common stockholders by the weighted average number of shares
of common stock outstanding during the period and excludes the effects of any potentially dilutive securities. Diluted net income
(loss) per share gives effect to any dilutive potential common stock outstanding during the period. The computation does not assume
conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect on earnings.

 

Related
Party Transactions

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

 

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

 

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

 

ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

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

 

 

REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors
and Shareholders

American Cannabis
Company, Inc. 5690 Logan St Unit A

Denver, CO 80216

 

 

Opinion
on the consolidated Financial Statements

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

 

Basis
for Opinion

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

 

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

 

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

 

 

/s/ L&L
CPAS, PA L&L CPAS, PA

Certified Public
Accountants Cornelius, NC

The United States
of America April 12, 2019

The firm has served
this client since August 2018.

  

 

 

Report of
Independent Registered Public Accounting Firm

 

Board of Directors
and Shareholders

American Cannabis
Company, Inc.

 

Opinion
on the financial statements

 

We have audited
the accompanying consolidated balance sheet of American Cannabis Company, Inc. (the “Company”) as of December 31,
2019, and the related consolidated statement of operations, stockholders’ equity, and cash flows for the year then ended,
and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019,
and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally
accepted in the United States of America.

 

Basis
for Opinion

 

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

 

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

 

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

 

 

/s/ Hall &
Company CPAs

 

We have served
as the Company’s auditor since 2020.

 

Irvine, CA

 

March 30,
2020

  

 

 

ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

 

AMERICAN CANNABIS COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
 
      December 31,       December 31,  
      2019       2018  
ASSETS                
Current Assets                
Cash and Equivalents   $ 945,181     $ 1,086,565  
Accounts Receivable, Net     95,655       58,885  
Deposits     4,500       4,500  
Inventory     53,310       61,005  
Prepaid Expenses and Other Current Assets     30,847       56,376  
Right to Use Lease Asset     34,418       —    
Total Current Assets     1,163,911       1,267,331  
                 
Property and Equipment – Net     40,042       8,038  
TOTAL ASSETS   $ 1,203,953     $ 1,275,369  
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY                
Current Liabilities                
Accounts Payable   $ 9,748     $ 32,931  
Advances from Clients     112,959       147,349  
Stock payable     49,406       —    
Accrued and Other Current Liabilities     117,303       89,768  
Operating Lease Liability     34,943       —    
Total Current Liabilities     324,359       270,048  
                 
Shareholders’ Equity                
Preferred Stock $0.01 par value, 5,000,000 shares authorized; 0 shares issued and outstanding at December 31, 2019 and December 31, 2018     —         —    
Common stock, $0.00001 par value; 100,000,000 shares authorized; 52,978,605 and 51,513,064 shares issued and outstanding at December 31, 2019 and December 31, 2018, respectively     529       515  
Additional paid-in capital     8,354,920       8,178,919  
Accumulated deficit     (7,475,855 )     (7,174,113 )
Total Shareholders’ Equity     879,594       1,005,321  
                 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY   $ 1,203,953     $ 1,275,369  
                 

 

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

 

 

 

 

AMERICAN
CANNABIS COMPANY, INC.

CONSOLIDATED
STATEMENTS OF OPERATIONS

 

    For The Year Ended   For The Year Ended
    December 31,   December 31,
    2019   2018
Revenues                
Consulting Services   $ 1,470,245     $ 395,840  
Product & Equipment     660,490       586,508  
Total Revenues     2,130,735       982,348  
Cost of Revenues                
Cost of Consulting Services     292,375       121,641  
Cost of Products and Equipment     499,408       402,206  
Total Cost of Revenues     791,783       523,847  
Gross Profit     1,338,952       458,501  
Operating Expenses                
General and Administrative     981,424       868,295  
Investor Relations     67,644       20,983  
Selling and Marketing     309,232       293,241  
Research and Development     347       590  
Stock Based Compensation expense     73,514       73,742  
Warrant expense     151,906       204,955  
Bad Debt expense     88,749       2,815  
Total Operating Expenses     1,672,816       1,464,621  
Loss from Operations     (333,864 )     (1,006,120 )
Other income     32,122       55,429  
NET LOSS     (301,742 )     (950,691 )
                 
Basic and diluted net loss per common share   $ (0.01 )   $ (0.02 )
                 
Basic and diluted weighted average common shares outstanding     52,468,502       51,465,188  
                 

 

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

 

 

        AMERICAN
CANNABIS COMPANY, INC.

CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE
YEARS ENDED DECEMBER 31, 2019 AND 2018

 

            Additional       Total
    Common Stock   Paid-In   Accumulated   Stockholders’
    Shares   Amount   Capital   Deficit   Equity
                     
                     
Balance, December 31, 2017     51,434,050     $ 514     $ 7,004,363     $ (6,223,422 )   $ 781,455  
Shares issued for services     29,014               25,242               25,242  
APIC Cashless Warrants                     204,955               204,955  
Exercised Cashless Warrants by employees             1       895,859               895,860  
Stock-based compensation to employees     50,000               48,500               48,500  
Net Loss                             (950,691 )     (950,691 )
Balance, December 31, 2018     51,513,064     $ 515     $ 8,178,919     $ (7,174,113 )   $ 1,005,321  
                                         
Shares issued for services     39,708       1       21,244               21,245  
Exercised Cashless Warrants by employees     1,392,500       13       151,893               151,906  
Stock-based compensation to employees     33,333               2,864               2,864  
Net Loss                             (301,742 )     (301,742 )
Balance, December 31, 2019     52,978,605     $ 529     $ 8,354,920     $ (7,475,855 )   $ 879,594  

 

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

 

 

 

 

 

AMERICAN
CANNABIS COMPANY, INC.

CONSOLIDATED
STATEMENTS OF CASHFLOWS

FOR THE
YEARS ENDED DECEMBER 31, 2019 AND 2018

 

    2019   2018
CASH FLOWS FROM OPERATING ACTIVITIES                
Net Loss   $ (301,742 )   $ (950,691 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Allowance for Bad Debt Expenses     88,749       2,815  
Depreciation     6,533       3,745  
Stock-based compensation expense and stock payable     73,514       73,742  
Warrant expense     151,906       204,955  
Changes in operating assets and liabilities:                
Accounts receivable     (125,520 )     85,104  
Inventory     7,695       (25,248 )
Prepaid expenses and other current assets     25,529       (45,051 )
Right to Use Lease Asset     (34,418 )     —    
Accounts Payable     (23,183 )     4,929  
Advances from Clients     (34,390 )     46,762  
Operating Lease Liability     34,943       —    
Accrued and other current liabilities     27,536       37,416  
Net Cash used in Operating Activities   $ (102,848 )   $ (561,522 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
Purchase of property and equipment     (38,536 )     —    
Net Cash used in Investing Activities   $ (38,536 )   $ —    
                 
                 
NET DECREASE IN CASH     (141,384 )     (561,522 )
                 
CASH AT BEGINNING OF PERIOD     1,086,565       1,648,087  
                 
CASH AT END OF PERIOD   $ 945,181     $ 1,086,565  
                 
Supplemental disclosure of cash flow information:                
Cash paid during the period for interest   $ —       $ 52  

 

 

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

 

 

AMERICAN
CANNABIS COMPANY, INC. AND SUBISIDIARY

NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER
31, 2019 and 2018

 

Note 1.
Principles of Consolidation.

 

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

 

Note 2.
Description of Business.

 

American Cannabis
Company, Inc. and its wholly owned subsidiary Company, Hollister & Blacksmith, Inc., doing business as American Cannabis Consulting
(“American Cannabis Consulting”), (collectively “the “Company”) are based in Denver, Colorado and
operate a fully-integrated business model that features end-to-end solutions for businesses operating in the regulated cannabis
industry in states and countries where cannabis is regulated and/or has been de-criminalized for medical use and/or legalized
for recreational use. We provide advisory and consulting services specific to this industry, design industry-specific products
and facilities, and sell both exclusive and non-exclusive customer products commonly used in the industry.

 

Note
3. Summary of Significant Accounting Policies

 

Basis
of Accounting

The financial
statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.
GAAP”). The Company has elected a fiscal year ending on December 31.

 

Use
of Estimates in Financial Reporting

The preparation
of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect amounts
of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and
reported amounts of revenues and expenses during the periods presented. Actual results could differ from these estimates. Estimates
and assumptions are reviewed periodically, and the effects of revisions are reflected in the financial statements in the period
they are deemed to be necessary. Significant estimates made in the accompanying financial statements include but are not limited
to following those related to revenue recognition, allowance for doubtful accounts and unbilled services, lives and recoverability
of equipment and other long-lived assets, contingencies and litigation. The Company is subject to uncertainties, such as the impact
of future events, economic, environmental and political factors, and changes in the business climate; therefore, actual results
may differ from those estimates. When no estimate in a given range is deemed to be better than any other when estimating contingent
liabilities, the low end of the range is accrued. Accordingly, the accounting estimates used in the preparation of the Company’s
financial statements will change as new events occur, as more experience is acquired, as additional information is obtained and
as the Company’s operating environment changes. Changes in estimates are made when circumstances warrant. Such changes and refinements
in estimation methodologies are reflected in reported results of operations; if material, the effects of changes in estimates
are disclosed in the notes to the financial statements.

 

Cash
and Cash Equivalents

The Company
considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Cash and cash
equivalents are held in operating accounts at a major financial institution. Cash balances may exceed federally insured limits.
Management believes the financial risk associated with these balances is minimal and has not experienced any losses to date. As
of December 31, 2019, and 2018, the Company had cash balances in excess of FDIC insured limits of $250,000.

 

Inventory

Inventory
is comprised of products and equipment owned by the Company to be sold to end-customers. Inventory is valued at cost (net realizable
value) using the first-in first-out and specific identification methods, unless and until the market value for the inventory is
lower than cost, in which case an allowance is established to reduce the valuation to market value. As of December 31, 2019, market
values of all the Company’s inventory were greater than cost, and accordingly, no such valuation allowance was recognized.

 

Research
and Development

As
a component of our equipment and supplies offerings, from time-to-time we design and develop our own proprietary products to meet
demand in markets where current offerings are insufficient. These products include, but are not limited to: The Satchel™,
Cultivation Cube™, So-Hum Living Soils™ and the HDCS™. Costs associated with the development of new products
are expensed as incurred as research and development operating expenses. During the year ended December 31, 2019, our research
and development costs were $348 as compared to $590 for the fiscal year ended December 31, 2018.
 

 

Deposits

Deposits are
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 December 31, 2019, and December 31, 2018 our allowance
for doubtful accounts and was $39,677 and $2,635, respectively. For December 31, 2019 and December 31, 2018, we recorded bad debt
expense of $88,749 and $2,815, respectively, which is reflected as a component of general and administrative expenses on the consolidated
statement of operations.

 

Significant
Customers

As
of December 31, 2019, there was one customer who equated 10% of the all revenues. For the year ended December 31, 2018, three
customers accounted for 47.5% of the Company’s total product sales revenues, and four customers accounted for 70.65% of
the Company’s total service-based revenue.

 

Property
and Equipment, net

Property and
Equipment is stated at net book value, cost less depreciation. Maintenance and repairs are expensed as incurred. Depreciation
of owned equipment is provided using the straight-line method over the estimated useful lives of the assets, ranging from two
to seven years. Depreciation of capitalized construction in progress costs, a component of property and equipment, net, begins
once the underlying asset is placed into service. Property and equipment are reviewed for impairment as discussed below under
“Accounting for the Impairment of Long-Lived Assets.” The Company had not capitalized any interest as of December
31, 2019 and 2018.

 

Accounting
for the Impairment of Long-Lived Assets

The Company
evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Upon such an occurrence, recoverability of assets to be held and used is measured by comparing the
carrying amount of an asset to forecasted undiscounted net cash flows expected to be generated by the asset. If the carrying amount
of the asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount
of the asset exceeds the fair value of the asset. For long-lived assets held for sale, assets are written down to fair value,
less cost to sell. Fair value is determined based on discounted cash flows, appraised values or management’s estimates, depending
upon the nature of the assets. The Company did not record any impairment charges related to long-lived assets during the years
ended December 31, 2019 and 2018.

 

Fair Value Measurements

 

Fair value is defined as the exchange
price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous
market for the asset or liability, in an orderly transaction between market participants on the measurement date. Valuation techniques
used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value
hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows:

 

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

 

Level 2 – Inputs other than
Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices
in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially
the full term of the assets or liabilities.

 

Level 3 – Unobservable inputs
that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets
or liabilities.

 

Our financial instruments include
cash, deposits, accounts receivable, accounts payables, advances from clients, accrued expense, and other current liabilities.
The carrying values of these financial instruments approximate their fair value due to their short maturities.  

 

Revenue
Recognition

 

During the first quarter of 2019,
we adopted the following accounting principles related to revenue recognition: (a) FASB ASU 2016-12 “Revenue from Contracts
with Customers (Topic 606)
;” (b) FASB ASU 2016-11 “Revenue Recognition (Topic 605) and (c) FASB ASU 2016-10
Revenue from Contracts with Customers (Topic 606).”  Due to the nature of our contracts with customers,
adopting the new accounting principles did not have a significant impact on our prior period results of operations, cash flows
or financial position.

 

Our service and product revenues
arise from contracts with customers.  Service revenue includes Operations Divisions consulting revenue. Product revenue includes
(a) Operations Division product sales (So-Hum Living Soils) and (b) Equipment Sales
Division.  The majority of our revenue is derived from distinct performance obligations, such as time spent delivering a
service or the delivery of a specific product.

 

We may also enter into contracts
with customers that identify a single, or few, distinct performance obligations, but that also have non-distinct, underlying performance
obligations.  These contracts are typically fulfilled within one to three months.  Only an insignificant portion of
our revenue would be assessed for allocation between distinct (contractual) performance obligations and non-distinct deliverables
between reporting periods and, accordingly, we do not record a contract asset for completed, non-distinct performance obligations
prior to invoicing the customer.

 

We recognize revenue when the following
criteria are met:

 

The parties to the contract
have approved the contract and are committed to perform their respective obligations – 
our customary practice is
to obtain written evidence, typically in the form of a contract or purchase order.

 

Each party’s rights regarding
the goods or services have been identified – 
we have rights to payment when services are completed in accordance
with the underlying contract, or for the sale of goods when custody is transferred to our customers either upon shipment to or
receipt at our customers’ locations, with no right of return or further obligations.

 

The payment terms for the goods
or services have been identified – 
prices are typically fixed, and no price protections or variables are offered.

 

The contract has commercial
substance – 
our practice is to only enter into contracts that will positively affect our future cash flows.

 

Collectability is probable – we
typically require a retainer for all or a portion of the goods or services to be delivered, as well as continually monitoring
and evaluating customers’ ability to pay.  Payment terms are typically zero to fifteen days within delivery of the
good or service.

 

Advances from Clients deposits
are contract liabilities with customers that represent our obligation to either transfer goods or services in the future, or refund
the amount received.  Where possible, we obtain retainers to lessen our risk of non-payment by our customers.  Advances
from Clients deposits are recognized as revenue as we perform under the contract.

 

Product
Sales

 

Revenue from
product and equipment sales, including delivery fees, is recognized when an order has been obtained from the customer, the price
is fixed and determinable when the order is placed, the product is delivered, title has transferred and collectability is reasonably
assured. Generally, our suppliers’ drop-ship orders to our clients with destination terms. The Company realizes revenue
upon delivery to the customer. Given the facts that (1) our customers exercise discretion in determining the timing of when they
place their product order; and, (2) the price negotiated in our product sales contracts is fixed and determinable at the time
the customer places the order, we are not of the opinion that our product sales indicate or involve any significant financing
that would materially change the amount of revenue recognized under the contract, or would otherwise contain a significant financing
component for us or the customer under FASB ASC Topic 606. During the year ended December 31, 2019, sales returns were $51,209
comprised of product returns and replacement.

 

Consulting
Services

 

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

 

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

 

Occasionally,
our fixed-fee hourly engagements are recognized under the completed performance method. Some fixed fee arrangements are for completion
of a final deliverable or act which is significant to the arrangement as a whole. These engagements do not generally exceed a
one-year term. If the performance is for a final deliverable or act, we recognize revenue under the completed performance method,
in which revenue is recognized once the final act or deliverable is performed or delivered for a fixed fee. Revenue recognition
is affected by a number of factors that change the estimated amount of work required to complete the deliverable, such as changes
in scope, timing, awaiting notification of license award from local government, and the level of client involvement. Losses, if
any, on fixed-fee engagements are recognized in the period in which the loss first becomes probable and reasonably estimable.
FASB ASC Topic 606 provides a practical expedient to disregard the effects of a financing component if the period between payment
and performance is one year or less. As, our fixed fee hourly engagements do not exceed one year, no significant customer-based
financing is implicated under FASB ASC Topic 606. During the year ended December 31, 2019, and December 31, 2018, we have incurred
no losses from fixed fee engagements that terminate prior to completion. We believe if an engagement terminates prior to completion,
we can recover the costs incurred related to the services provided.

 

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

 

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

 

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

 

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

 

Costs
of Revenues

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

 

Advertising
and Promotion Costs

Advertising
and promotion costs are included as a component of selling and marketing expense and are expensed as incurred. During the year
ended December 31, 2019 and 2018, these costs were $32,071 and $124,026, respectively.

 

Shipping
and Handling Costs

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

 

Stock-Based
Compensation

Restricted
shares are awarded to employees and entitle the grantee to receive shares of common stock at the end of the established vesting
period. The fair value of the grant is based on the stock price on the date of grant. We recognize related compensation costs
on a straight-line basis over the requisite vesting period of the award, which to date has been one year from the grant date.
During the years ended December 31, 2019 and 2018, stock-based compensation expense for restricted shares for Company employees
and service providers was $73,514 and $73,742, respectively. Compensation expense for warrants are based on the fair value of
the instruments on the grant date, which is determined using the Black-Scholes valuation model and are expensed over the expected
term of the awards.

 
       

Income
Taxes

We recognize
deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial
statements or tax returns in accordance with applicable accounting guidance for accounting for income taxes, using currently enacted
tax rates in effect for the year in which the differences are expected to reverse. We record a valuation allowance when necessary
to reduce deferred tax assets to the amount expected to be realized.  For the years ended December 31, 2019 and 2018, we
recorded a valuation allowance against our deferred tax assets that reduced our income tax benefit for the period to zero. As
of December 31, 2019, and 2018, we had no liabilities related to federal or state income taxes and the carrying value of our deferred
tax asset was zero.

 

Net
Loss Per Common Share

The Company
reports net 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 loss per share is computed by dividing net income attributable to common stockholders by the weighted average number
of shares of common stock outstanding during the period and excludes the effects of any potentially dilutive securities. Diluted
earnings per share is equal to basic earnings per share because there are no potential dilatable instruments that would have an
anti-dilutive effect on earnings. Diluted net loss per share gives effect to any dilutive potential common stock outstanding during
the period. The computation does not assume conversion, exercise or contingent exercise of securities since that would have an
anti-dilutive effect on earnings.

 

Related
Party Transactions

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

 

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

  

Recent
Accounting Pronouncements

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

 

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

 

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

 

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

 

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

 

Public
business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim
periods within those fiscal years (i.e., January 1, 2019, for a calendar year entity). The Company has adopted this pronouncement
as of January 1, 2019 and determined such adoption did not have a material effect in the Company’s consolidated financial
statements.

 

In
March 2016, the FASB issued Accounting Standards Update No. 2016-09, Compensation —Stock Compensation (Topic 718): Improvements
to Employee Share-Based Payment Accounting. The amendments are intended to improve the accounting for employee share-based payments
and affect all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based
payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity
or liabilities; and (c) classification on the statement of cash flows. For public companies, the amendments are effective for
annual periods beginning after December 15, 2018, and interim periods within those annual periods. For private companies, the
amendments are effective for annual periods beginning after December 15, 2020, and interim periods within annual periods beginning
after December 15, 2019. Early adoption is permitted for any organization in any interim or annual period. The Company has adopted
this pronouncement as of January 1, 2019 and determined such adoption did not have a material effect in the Company’s consolidated
financial statements.

 

In
April 2016, the FASB issued Accounting Standards Update No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying
Performance Obligations and Licensing. The amendments clarify the following two aspects of Topic 606: (a) identifying performance
obligations; and (b) the licensing implementation guidance. The amendments do not change the core principle of the guidance in
Topic 606. This guidance became effective for annual reporting and interim periods beginning after December 15, 2017. The
Company adopted the modified standard on January 1, 2018 and has concluded that the adoption of this standard did not have a material
impact or cause the Company to make any adjustments to the Company’s consolidated financial statements and results of operations.

 

In
January 2017, FASB issued Accounting Standards Update (ASU) No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition
of a Business. The amendments in ASU 2017-01 became effective for public entities for annual and interim periods after December
15, 2017. The Company adopted the modified standard on January 1, 2018 and has concluded that the adoption of this standard did
not have a material impact or cause the Company to make any adjustments to the Company’s consolidated financial statements
and results of operations. 
 

 

In
June 2018, FASB issued Accounting Standards Update (ASU) No. 2018-07, Compensation – Stock Compensation (Topic 718): Improvement
to Non-Employee Share Based Payment Accounting
This
update is intended to reduce cost and complexity and to improve financial reporting for share-based payments issued to non-employees
(for example, service providers, external legal counsel, suppliers, etc.). The ASU expands the scope of Topic 718, Compensation—Stock
Compensation, which currently only includes share-based payments issued to employees, to also include share-based payments issued
to non-employees for goods and services. Consequently, the accounting for share-based payments to non-employees and employees
will be substantially aligned. This standard will be effective for financial statements issued by public companies for the annual
and interim periods beginning after December 15, 2018. Early adoption of the standard is permitted. The standard will be applied
in a retrospective approach for each period presented. Adoption of this ASU did not have a significant impact on our consolidated
financial statements and related disclosures.

 

In
August 2018, FASB issued Accounting Standards Update (ASU) No. 2018-13, Fair Value Measurement (Topic 820): Disclosure of Fair
Value Measurement. The amendments in ASU 2018-13 becomes effective for public entities with fiscal years beginning after December
15, 2019. The Company is currently evaluating the effects, if any, that the application of ASU 2018-13 will have on disclosures
associated with fair value measurement.

 

Note 4.
Accounts Receivable and Advance from Clients

 

Accounts
receivable was comprised of the following:

    December 31, 2019   December 31, 2018
Gross accounts receivable   $ 135,332     $ 61,520  
Less: allowance for doubtful accounts     (39,677 )     (2,635 )
Accounts receivable, net   $ 95,655     $ 58,885  

 

 

For
the years ended December 31, 2019 and December 31, 2018, the Company had bad debt expense of $88,749 and $2,815, respectively.

 

Our Advances from Clients had the following activity:    
    Amount
December 31, 2018   $ 147,349  
  Additional deposits received     2,073,846  
  Less: Deposits recognized as revenue     (2,108,236 )
December 31, 2019   $ 112,959  

 

Note 5.
Inventory

 

Inventory
consisted of the following:

 

    December 31, 2019   December 31, 2018
Raw materials   $ 23,091     $ 1,646  
Finished goods     30,219       59,359  
Total   $ 53,310     $ 61,005  
                 

Note
6. Property and Equipment, net

 

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

 

    December 31, 2019   December 31, 2018
Office equipment   $ 35,624     $ 8,482  
Furniture and fixtures     7,240       7,240  
Machinery and equipment     7,796       7,336  
Work In Progress     10,935       —    
Property and equipment, gross     61,595       23,058  
Less: accumulated depreciation     (21,553 )     (15,020 )
Property and equipment, net   $ 40,042     $ 8,038  

 

 

For the year
ended December 31, 2019 and December 31, 2018, the Company recorded depreciation expense of $6,533 and $3,745, respectively.

 

Note 7.
Accrued and Other Current Liabilities

Accrued
and other current liabilities consisted of the following:

 

 

    December 31, 2019   December 31, 2018
Accrued Bonus   $ 1,500     $ —    
Accrued Payroll     16,173       10,924  
Other Accrued Expenses & Payables     99,630       78,844  
Accrued and other current liabilities   $ 117,303     $ 89,768  

 

Note
8. Stock payable

 

The
following summarizes the changes in common stock payable:

 

    Amount   Number of Shares
December 31, 2018   $ —   _     —   _
  Additional Expensed Incurred     73,210       610,052  
  Shares Issued for Expensed Incurred     (23,804 )     (73,041 )
December 31, 2019   $ 49,406       537,011  

 

Note 9.
 Commitments and Contingencies

 

Leases

 

Leases with
an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line
basis over the lease term. Leases with a term greater than one year are recognized on the balance sheet at the time of lease commencement
or modification of a right of use (“RoU”) operating lease asset and a lease liability, initially measured at the present
value of the lease payments. Lease costs are recognized in the income statement over the lease term on a straight-line basis.
RoU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to
make lease payments arising from the lease.

 

The Company’s
lease consists of real estate lease for office space.

 

The Company’s
operating leases include options to extend or terminate the lease, which are not included in the determination of the RoU asset
or lease liability unless reasonably certain to be exercised. The Company’s operating leases have remaining lease terms of less
than one year. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive
covenants.

 

As the Company’s
leases do not provide an implicit rate, we used an incremental borrowing rate based on the information available at the lease
commencement date in determining the present value of lease payments. The discount rate used in the computations was 6%.

    December 31, 2019
Assets:        
  Right to Use Lease Asset   $ 34,418  
Liabilities:        
  Operating Lease Liability   $ 34,943  

 

On
July 28, 2015, the Company entered into a 5-year lease for 6,500 square feet of office space to house its corporate offices. Under
the terms of the lease, payments are $4,500 per month for the first 36 months of the lease and escalate thereafter.

 

Rent expense
was $54,000 and $54,000 for the years ended December 31, 2019 and 2018, respectively.

 

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

 

         
Year   Amount
2020
(Net of interest component of $1,057)
    $         34,943

 

Note
10. Related Party Transactions

The
Company has a related party entity, Tabular Investments, LLC (“Tabular”) which was set to assign the Company’s
interest in various equity partnership. The sole member of Tabular is Tad Mailander, the Company’s internal legal counsel
and Director. The Company has valued all of its equity partnership investments at $0. Neither our direct equity ownership in,
nor our assignments of equity to Tabular Investments, LLC are, or are reasonably likely to allow for, substantive terms, transactions,
and arrangements, whether contractual or not contractual, that will have a current or future effect on our financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. We have no direct or indirect
majority influence or control over any entity in which we have a direct equity interest or equity interests assigned to Tabular.
We do not have any direct or indirect interest in, and do not control Tabular. We have not absorbed losses from either our direct
equity interests or assignments to Tabular, and we have provided no subordinated financial support to any project

 

Note 11.
Stock-based Compensation

 

During
the year ended December 31, 2019 and December 31, 2018, the Company issued stock-based compensation for employees and service
providers pursuant to its 2015 Equity Incentive Plan. As of December 31, 2018, the Company determined to issue employees and services
providers warrants instead of common stock. During the year ended December 31, 2019 and December 31, 2018, the Company’s
expense for restricted shares to Company employees and service providers was $73,514 and $73,742, which was the result of the
following activity:

 

Restricted
Shares

 

From
time to time, the Company grants certain employees restricted shares of its common stock to provide further compensation in-lieu
of wages and to align the employee’s interests with the interests of its stockholders. Because vesting is based on continued
employment, these equity-based incentives are also intended to attract, retain and motivate personnel upon whose judgment, initiative
and effort the Company’s success is largely dependent.

 

The
following table summarizes the Company’s restricted share award activity during the years ended December 31, 2019 and 2018:

 

  Restricted
Shares
  Weighted
Average
  Common
Stock

Grant Date

Fair Value

Outstanding
unvested at December 31, 2016
                   –
  $                   –   
Granted        430,227
                  0.92
Vested
restricted shares
    (430,227)                   0.92
Forfeited      —
                      –   
Outstanding
unvested at December 31, 2017
                   –
  $                   –   
Granted          79,014
                  0.93
Vested
restricted shares
    (79,014)                   0.93
Forfeited                    –
                      –   
Outstanding
unvested at December 31, 2018
                   –
  $                   –   
Granted          73,041
                  0.33
Vested
restricted shares
    (73,041)                   0.33
Forfeited      —
     —
Outstanding
unvested at December 31, 2019
     —
  $  —

 

During
the year ended December 31, 2019, the Company granted 73,041 restricted shares and recognized $24,108 in associated employee stock-based
compensation expense. During the year ended December 31, 2018, the Company granted 79,014 restricted shares to Company employees
and service providers and recognized $73,742 in associated stock-based compensation expense. 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.

 

Net Loss Per Share

 

Basic net loss per share is computed
by dividing net loss by the weighted-average number of common shares outstanding during the reporting period. Diluted net loss
per share is computed similarly to basic loss per share, except that it includes the potential dilution that could occur if dilutive
securities are exercised.

 

Outstanding stock options and common
stock warrants are considered anti-dilutive because we are in a net loss position.  Accordingly, the number of weighted average
shares outstanding for basic and fully diluted net loss per share are the same.

 

The following summarizes equity
instruments that may, in the future, have a dilutive effect on earnings per share:

 

Warrants

 

In
connection with his appointment to the Company’s board of directors on November 19, 2014, the Company granted its former
board member, Vincent “Tripp” Keber, warrants to purchase up to two hundred and fifty thousand (250,000) shares of
common stock at an exercise price of sixty-three cents ($0.63) per share, exercisable within five (5) years of the date of issuance
on November 19, 2014. Concurrently, the Company agreed to award Mr. Keber an option to purchase three hundred thousand (300,000)
shares of common stock at an exercise price of sixty-three cents ($0.63) per share. The warrants expired on November 19, 2019. 

 

 

            Weighted
Average
    Common
Stock Warrants
  Grant
Date Fair Value
Outstanding unvested at December 31, 2015     250,000     $                         0.91
Granted     —                                     —    
Exercised     —                                     —    
Expired
or forfeited
    —                                     —    
Outstanding
unvested at December 31, 2016
    250,000     $                         0.91
Granted     50,000                               0.93
Exercised     —                                     —    
Expired
or forfeited
    —                                     —    
Outstanding
unvested at December 31, 2017
    300,000     $                         0.91
Granted     2,085,000                               0.58
Exercised     —                                     –   
Expired
or forfeited
    (50,000)       0.93
Outstanding
at December 31, 2018
    2,335,000     $ 0.59
Granted                5,000
      0.30
Exercised        (1,392,500)       0.20
Expired
or forfeited
          (250,000)       0.30
Outstanding
at December 31, 2019
    697,500     $ 0.30
               

The Company
approved the cashless exercise of 1,392,500 warrants in 2019 by employees for a total of $151,906 in warrant expense for services
rendered to the Company.

 

The following summarizes equity instruments that may, in the future, have a dilutive effect on earnings per share:  

 

    December 31, 2019   December 31, 2018
Warrants     697,500       2,335,000  
Stock payables     537,011       0  
Total     1,234,511       2,335,000  

 

Note 12.
Income Taxes

 

The
Tax Cuts and Jobs Act (the Tax Legislation) in the United States enacted on December 22, 2017 significantly revised the United
States corporate income tax by, among other things, lowering the corporate income tax rate to 21% effective January 1, 2018, implementing
a modified territorial tax system and imposing a one-time repatriation tax on deemed repatriated earnings and profits of U.S.-owned
foreign subsidiaries (the Toll Charge). As a fiscal-year taxpayer, certain provisions of the Tax Legislation impacted us in fiscal
2018, including the change in the corporate income tax rate, while other provisions will be effective starting at the beginning
of fiscal 2019. Accordingly, our federal statutory income tax rate for fiscal 2018 reflected a blended rate including State income
tax of approximately 26%.

 

The following
table displays a reconciliation from the U.S. statutory rate to the effective tax rate and the provision for (benefit from) income
taxes for the years ended December 31, 2019 and 2018, respectively:

 

 

Tax benefit at the US statutory rate of 21% for 2019 and 2018   $ 14,267     $ 199,645  
State income tax benefit     2,765       44,017  
Non-deductible expenses including non-deductible pre-merger losses     —         —    
Change in valuation allowance     (17,032 )     (243,662 )
Total income tax benefit   $ —       $ —    
                 

 

Deferred tax
assets (liabilities) consisted of the following:

 

         
    December 31, 2019   December 31, 2018
Net operating loss carryforwards   $ 3,632,101     $ 3,564,164  
Beneficial Conversion feature     13,791       13,791  
Allowance for Doubtful Accounts     37,677       2,635  
Valuation allowance     (3,683,569 )     (3,580,590 )
Total deferred tax assets   $ —       $ —    
                 

 

The Company
determined that it is not more likely than not that its deferred tax asset would be realizable. Accordingly, the Company recorded
a valuation allowance for the full amount of its deferred tax asset, resulting in a zero carrying value of the Company’s
deferred tax asset and no benefit from or provision for income taxes for the year ended December 31, 2019 and 2018. Federal and
state operating loss carry forwards are $3,632,101 and $3,564,164 as of December 31, 2019 and 2018, respectively and begin to
expire in 2034. The years 2010 to 2018 remain subject to examination by the Company’s major tax jurisdictions.

 

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

 

Note 13.
Stockholders’ Equity

 

Preferred
Stock

 

The American
Cannabis Company, Inc. is authorized to issue 5,000,000 shares of preferred stock at $0.01 par value.

 

No shares
of preferred stock were issued and outstanding during the year ended December 31, 2019 and 2018.

 

Common
Stock

As
of December 31, 2019, we granted the following stock-based compensation awards pursuant to our 2015 Equity Incentive Plan (“Plan”).
The Plan is intended to promote the best interest of the Company and its stockholders by assisting the Company in the recruitment
and retentions of person with ability and initiative and providing an incentive to such person to contribute to the growth of
the Company’s business. Eligible person under the Plan include employees, directors and consultants of the Company or any
affiliated of the Company. Unless earlier terminated, the Plan will remain in force unless a new Plan has been adopted by the
Board of the Company. Ten million common shares are authorized under the Plan; 7,964,792 are outstanding as at December 31, 2019.

 

On
January 16, 2019 the Company issued 39,708 common shares to Gayle Barr pursuant to services provide for the Company.

 

On
September 9, 2019, the Company issued 33,333 common shares to Michael Schwanbeck (former CFO) pursuant to an executive employment
agreement.

 

Note 14.
Subsequent Events

 

On January
22, 2020, the Registrant reappointed its executive officers for 2020, including Terry Buffalo as the Registrant’s Principal
Executive Officer; Ellis Smith as the Registrant’s Chief Development Officer; Jon Workman as the Registrant’s Vice
President for the development of the Registrant’s Hemp Division; and, Tyler A. Schloesser, as the Registrant’s Chief
Operations Officer.

On February
4, 2020, the Company issued 478,261 shares as part of the Company’s Equity Incentive Plan for services rendered in fiscal
year 2019, which are included in Stock payable as of December 31, 2019.

On January
30, 2020, the World Health Organization (“WHO”) announced a global health emergency in response to a new strain of
a coronavirus (the “COVID-19 outbreak”). In March 2020, the WHO classified the COVID-19 outbreak as a pandemic based
on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve as of the date of this
report. Management is actively monitoring the global situation and its effects on the Company’s industry, financial condition,
liquidity, and operations. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the
Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity
for fiscal year 2020. However, if the pandemic continues, it may have a material adverse effect on the Company’s results
of future operations, financial position, and liquidity in fiscal year 2020.

 

SUPPLEMENTARY
DATA

 

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

 

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

 

None.

 

ITEM
9A. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls
and Procedures

 

We maintain disclosure controls
and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information
required to be disclosed in our reports filed under the Exchange Act, is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated
and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow
timely decisions regarding required disclosure.

 

We carried out an evaluation under
the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of
the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2019, the end of the
period covered by this Report.  Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses
discussed below.

 

Internal Control over Financial
Reporting

 

Our management is responsible for
establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) promulgated
under the Exchange Act as a process designed by, or under the supervision of, our principal executive officer and principal financial
officer and effected by the Board, management, and other personnel, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes
those policies and procedures that:

 

· pertain
to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our
assets.

· provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that our receipts and expenditures of are being made only in accordance with authorizations
of our management and directors; and

· provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that
could have a material effect on the financial statements.

 

Because of our inherent limitations,
our internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined
to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Management identified the following
material weaknesses:

 

· we
do not have an Audit Committee – While not being legally obligated to have an Audit Committee, it is the management’s
view that such a committee, including a financial expert board member, is an utmost important entity level control of the Company’s
financial statements. Currently the Board
of Directors acts in the capacity of the Audit Committee and does not include a member that is considered to be independent of
management to provide the necessary oversight over management’s activities.

 

 

· not
performed a risk assessment and mapped our processes to control objectives.

 

· we
have not implemented comprehensive entity-level internal controls.

 

· we have not
implemented adequate system and manual controls; and

 

· we
do not have sufficient segregation of duties.

 

Our management assessed the effectiveness
of internal control over financial reporting as of December 31, 2019.  In making this assessment, management used the criteria
set forth by the Committee of Sponsoring Organization of the Treadway Commission (“COSO”) in Internal Control –
Integrated Framework (2013).  Based on management’s assessment, management concluded that the above material weaknesses
have not been remediated and, accordingly, our internal control over financial reporting is not effective as of December 31, 2019.

 

Remediation of Material Weaknesses

 

We have designed and plan to implement,
or in some cases have already implemented, the specific remediation initiatives described below:

 

· We
intend to allocate resources to perform a risk assessment and map processes to control objectives and, where necessary, implement
and document internal controls in accordance with COSO.

· Our
entity-level controls are, generally, informal and we intend to evaluate current processes, supplement where necessary, and document
requirements.

· While
we have implemented procedures to identify, evaluate and record significant transactions, we need to formally document these procedures
and evidence the performance of the related controls.

· We
plan to evaluate system and manual controls, identify specific weaknesses, and implement a comprehensive system of internal controls.

 

Management understands that in
order to remediate the material weaknesses, additional segregation of duties, changes in personnel and technologies are necessary.
We will not consider these material weaknesses fully remediated until management has tested those internal controls and found
them to be operating effectively.

 

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

 

Changes in Internal Control
over Financial Reporting

 

We made the following changes to
our internal control over financial reporting during the year ended December 31, 2019:

 

· Appointed
a certified public accountant as our Chief Financial Officer.

 

· Implemented
a formal quarterly review of financial information with our Chief Executive Officer, in comparison with quarterly budget with
each managing director that oversees an operating segment.  These individuals provide a certification that the operating
results are accurate to the best of their knowledge.

 

· Account
reconciliations are now prepared for all material accounts and independently reviewed on a monthly basis

 

· Implementation
of an Inventory Tracking system with controls in place for verification of inventory numbers and Cost of Goods Sold.

 

· Implementation
of Revenue Recognition system with controls in place for verification of proof of deliverables
and deliver of said deliverables

 

ITEM
9B. OTHER INFORMATION

 

None.

PART
III.

 

ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

Our Board of Directors

 

The following table sets forth
information regarding our current directors and each director as of December 31, 2019.

 

Name Principal
Occupation
Age Director
Since
       
Ellis Smith Chief Development Officer, Director 43 2014
Terry Buffalo Chief Executive Officer, Director 55 2017
Tad Mailander Principal, Mailander Law Office, Inc., Director 64 2018

 

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

 

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

 

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

 

Our Executive Officers

 

We designate
persons serving in the following positions as our named executive officers: our chief executive officer, chief financial officer,
chief development officer, chief operating officer and chief technology officer. The following table sets forth information regarding
our executive officers as of December 31, 2019.

 

Name   Principal
Occupation
  Age   Officer
Since
Terry Buffalo(1)   Chief
Executive Officer
    55       2016  
Ellis Smith   Chief
Development Officer
    43       2014  
Michael Schwanbeck(2)   Chief
Financial Officer
    27       2018  
David M. Godfrey   Chief
Financial Officer
    64       2019  
        Tyler
A. Schloesser
  Chief
Operations Officer
    29       2019  
Jon Workman   Vice
President
    55       2019  

 

Ellis
Smith, Chief Development Officer. Mr. Smith’s 
biographical summary is included under “Our Board of Directors.”

 

Terry
Buffalo, Chief Executive Officer; Interim Chief Financial Officer. Mr. Buffalo’s 
biographical summary is included
under “Our Board of Directors.”(1)

  

Michael
Schwanbeck, Chief Financial Officer, 
worked as a tax professional preparing and managing income tax returns for corporations,
s-corps, partnerships, and individuals. Mr. Schwanbeck also has experience in auditing business organizations, and managing business
taxes including sales tax, payroll tax, and property tax returns. Mr. Schwanbeck graduated from the University of Minnesota Duluth
in December of 2014 with a bachelor’s degree in Accountancy and a minor in Mathematics. Mr. Schwanbeck was certified as
a college business and math tutor though the College Reading & Learning Association. Mr. Schwanbeck is pending issuance of
his certified public accountancy license in Colorado.(2)

 

David
M. Godfrey, Chief Financial Officer,
holds a Bachelor of Arts in Finance and Business awarded by Wichita State University,
Wichita, Kansas. Mr. Godfrey was licensed and practiced as a certified public accountant from 1979 through 1984. From 2019 until
his appointment with the Company, Mr. Godfrey was a consultant to Clifton Larson & Allen, a Certified Public Accounting firm
in Denver, CO, and the Registrant’s Vice-President of Finance.

 

From
2015 to 2019 Mr. Godfrey was Vice President of Finance and Controller of Mac Acquisitions, LLC that operated Romano’s Macaroni
Grill/Sullivan’s Steakhouse Denver, CO, where Mr. Godfrey supervised the financial information, reporting and infrastructure
for a 130 plus restaurant units throughout United States, Dubai, Mexico, Japan and Germany; changed the accounting infrastructure
from a third party provider and brought it in-house accounting, imaging, and reconciliations systems, saving over $500k in cash
flow; and, developed Business Intelligence reporting system with Synergy Suites for data warehousing, data mining of operations
daily financial data.

 

From
2012 through 2015, Mr. Godfrey was Corporate Controller of A’GACI, LLC San Antonio, TX , where he oversaw the financial
information, reporting and infrastructure for a 50 plus unit Retail Apparel Company with locations in Texas, Tennessee, Florida,
New York, Illinois, New Mexico Puerto Rico, Mexico and California.

 

From
2011-2012, Mr. Godfrey was Vice President of Finance of Emerald Foods, Houston, TX. Mr. Godfrey was responsible for the oversight
of financial information, reporting and infrastructure for a 75-unit Wendy’s franchise, with locations in Texas and Louisiana.
From 1999 to 2010, Mr. Godfrey was Chief Financial Officer for Palo Alto, Inc., Denver, CO, where he developed financial reporting
standards for over 135 Multi Brand (YUM Brands) restaurants in multi states, with over $130 million in Gross Sales.

 

Tyler
A. Schloesser, 
Mr. Schloesser attended the University of Colorado at Boulder receiving a double major degree in Psychology
and Philosophy. After graduation, Mr. Schloesser worked in the banking industry with Wells Fargo, U.S. Bank and Credit Union of
Colorado. Mr. Schloesser’s functions with the Registrant. include developing and maintaining policies, procedures, processes
and risk mitigation best practices as well as manage and perform day-to-day internal operational tasks required by the Registrant.

 

Jon
Workman, 
Mr. Workman graduated from the University of Arkansas at Little Rock in 1989 and was awarded a Bachelor
of Business Administration and Marketing. Mr. Workman is a member of the Arkansas Cannabis Industry Association and a Charter
Member of the Arkansas Hemp Association. In 2017, the Arkansas Economic Development Commission certified Mr. Workman in its Lean
Manufacturing program. Mr. Workman received his HACCP (Hazard Analysis Critical Control Point) & SQF Food Safety Certifications
in 2016.

 

(1)
Mr. Buffalo served also served as Interim Chief Financial Officer from August 26, 2019 until December 31, 2019, when the Company
appointed David M. Godfrey Chief Financial Officer.

(2)
Mr. Schwanbeck resigned his position as Chief Financial Officer on August 26, 2019.

 

Section 16(a)
Beneficial Ownership Reporting Compliance

 

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

 

Based solely
on our review of such forms furnished to us, and written representations from certain reporting persons, we believe that all filing
requirements applicable to our executive officers, directors and greater than 10% stockholders during the fiscal year ended December
31, 2019 were satisfied.

  

ITEM
11. EXECUTIVE COMPENSATION

Summary
Compensation Table

 

The following
table sets forth information concerning the compensation of our principal executive officer, our principal financial officer and
each of our other executive officers during 2019. 

 

 

 

Name
and Principal Position
  Year   Salary Bonus  (
$)
Bonus
Stock Awards (in $)
Bonus
Stock Awards  (in Shares)(4)
All
Other Compensation ($)
Total
($)
J.
Michael Tuohey, Chief Financial
    2018                  –
            –
                 –
 ―
                   15,000
       15,000
Officer 1     2017                  –
            –
                 –
 ―
                   66,000
       66,000
      2016                  –
            –
                 –
 ―
                   34,050
       34,050
Ellis
Smith, Chief Development
    2019         87,600
            –
                 –
 ―
                   22,069
     109,669
Officer     2018         87,600
            –
                 –
 ―
                            –
       87,600
      2017         87,600
            –
                 –
 ―
                   29,792
     117,392
      2016         86,949
            –
                 –
 ―
                            –
       86,949
Terry
Buffalo, Chief Executive
    2019         81,950
            –
      298,000
        900,000
                            –
     379,950
Officer     2018         81,950
            –
                 –
 ―
                            –
       81,950
      2017         81,950
            –
      178,000
        200,000
                     2,316
     262,266
      2016         62,327
            –
                 –
 ―
                            –
       62,327
R.
Leslie Hymers, Chief Financial
    2018                  –
            –
        48,500
          50,000
                   39,240
       87,740
Officer 2     2017                  –
            –
                 –
 ―
                            –
                 –
      2016                  –
            –
                 –
 ―
                            –
                 –
Michael
Schwanbeck, Chief Financial
    2019         48,508
            –
        15,533
          63,333
                            –
       64,041
Officer 3     2018         41,308
            –
                 –
 ―
                            –
       41,308
      2017                  –
            –
                 –
 ―
                            –
                 –
      2016                  –
            –
                 –
 ―
                            –
                 –
Tyler
A. Schloesser, Chief Operations
    2019         73,681
            –
        62,300
        252,500
                     7,420
     143,401
Officer     2018         63,296
            –
                 –
 ―
                            –
       63,296
      2017                  –
            –
        15,860
          20,000
                            –
       15,860
      2016                  –
            –
        55,650
          52,500
                            –
       55,650
Jon
Worknam, Vice President
    2019         71,970
            –
        18,000
        100,000
                     3,145
       93,115
Officer     2018         41,538
            –
   ―
                            –
       41,538

 

      2017                  –
            –
                 –
 ―
                            –
                 –
David
M. Godfrey, Chief Financial Officer
    2019         20,516
            –
                 –
 ―
                            –
       20,516
                       
                       
1). Mr. Tuohey was terminated on April 24, 2018
2). Mr. Hymers was appointed Chief Financial Officer on April 24, 2018 and resigned on June 18, 2018.

3). Mr. Schwanbeck was appointed Chief Financial Officer on April 21, 2018 and resigned on August 26, 2019.

4) Which are included and part of Stock payables as of December 31, 2019.

                       

 

Retirement Benefits

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

Outstanding Equity Awards
at December 31, 2018

As
at December 31, 2018, we granted the following stock-based compensation awards to our named executive officers pursuant to our
2015 Equity Incentive Plan (“Plan”). The Plan is intended to promote the best interest of the Company and its stockholders
by assisting the Company in the recruitment and retentions of person with ability and initiative and providing an incentive to
such person to contribute to the growth of the Company’s business. Eligible person under the Plan include employees, directors
and consultants of the Company or any affiliated of the Company. Unless earlier terminated, the Plan will remain in force unless
a new Plan has been adopted by the Board of the Company.

On September 27, 2018,
the Company issued 50,000 shares to Robert L Hymers, III pursuant to contract.

 

Retirement Benefits

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

Equity Awards at December
31, 2019

As
of December 31, 2019, we granted the following stock-based compensation awards pursuant to our 2015 Equity Incentive Plan (“Plan”).
The Plan is intended to promote the best interest of the Company and its stockholders by assisting the Company in the recruitment
and retentions of person with ability and initiative and providing an incentive to such person to contribute to the growth of
the Company’s business. Eligible person under the Plan include employees, directors and consultants of the Company or any
affiliated of the Company. Unless earlier terminated, the Plan will remain in force unless a new Plan has been adopted by the
Board of the Company. Ten million common shares are authorized under the Plan; 7,964,792 are outstanding as at December 31, 2019.

Compensation of Directors
& Executive Officers

 

The Board
of Directors determined issued the following compensation for directors for fiscal year ended December 31, 2019:

On January 4, 2019, the
Company issued 100,000 common shares to Ellis Smith.

On February 23, 2019, the
Company issued 50,000 common shares to Tyler A. Schloesser.

On February 23, 2019, the
Company issued 400,000 common shares to Terry L. Buffalo.

On April 3, 2019, the Company
issued 100,000 common shares to Tad Mailander pursuant to his exercise of a cashless warrant.

On April 3, 2019, the Company
issued 25,000 common shares to Michael Schwanbeck pursuant to his exercise of a cashless warrant.

On July 9, 2019, the Company
issued 400,000 common shares to the Terry L. Buffalo Revocable Living Trust pursuant to its exercise of a cashless warrant.

On July 9, 2019, the Company
issued 100,000 common shares to the Terry L. Buffalo Revocable Living Trust pursuant to its exercise of a cashless warrant.

On July 13, 2019, the Company
issued 100,000 common shares to Jon Workman pursuant to his exercise of a cashless warrant.

On July 13, 2020, the Company
issued 100,000 common shares to Tyler A. Schloesser pursuant to his exercise of a cashless warrant.

On July 13, 2019, the Company
issued 102,500 common shares to Tyler A. Schloesser pursuant to his exercise of a cashless warrant.

 

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

 

The following
table sets forth information known to us regarding the beneficial ownership of our common stock as of March 25, 2020 by (1) each
stockholder who is known by us to beneficially own more than 5% of our common stock, (2) each of our directors, (3) each
of our executive officers named in the Summary Compensation Table above, and (4) all of our directors and executive officers
as a group.

 

 

    Number of    
    Shares    
    Beneficially    
Beneficial Owner(1)   Owned(2)   Percent(3)
Named Executive Officers and Directors:                
Corey Hollister     10,198,303       19.25 %
Ellis Smith     11,902,401       22.47 %
Terry Buffalo     1,200,000       2.27 %
Tad Mailander     150,000       0.20 %
Tyler A. Schloesser     375,000       0.71 %
Michael Schwanbeck     63,333       0.12 %
David M. Godfrey     61,261       0.12 %
                 
                 
All executive officers and directors as a group     23,950,298       45.12 %

 

 

(1)

 

Except
as otherwise indicated, the persons named in this table have sole voting and investment power with respect to all shares
of common stock shown as beneficially owned by them, subject to community property laws where applicable and to the information
contained in the footnotes to this table.

 

 (2)

Under
SEC rules, a person is deemed to be the beneficial owner of shares that can be acquired by such person within 60 days
upon the exercise of warrants or the settlement of other equity awards.

 

 (3) Calculated
on the basis of 53,456,866 shares of common stock outstanding as of
March 25, 2020, plus any additional shares of common stock that a stockholder has the right to acquire within 60 days
after December 31, 2019.

 

Equity
Compensation Plan Information

 

  (1) Historically,
the Company has granted restricted shares that are subject to forfeiture.

 

  (2) Historically,
the Company has granted restricted shares that are subject to forfeiture. Restricted shares subject to forfeiture have a weighted
average exercise price of $0.00.

 

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

 

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

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

 

ITEM
14. PRINCIPAL ACCOUNTING FEES AND SERVICES

 

The following
table sets forth the aggregate fees billed to us for the fiscal year ended December 31, 2019 by Hall &Co and 2018 by L&L,
CPAs:

 

    Year Ended   Year Ended
    December 31,   December 31,
    2019   2018
Audit fees (1)     115,127       16,000  
Audit-related fees (2)            
Tax fees (3)     5,550        
All other fees (4)              

 

 

  (1) Audit
fees consist of fees billed for professional services rendered for the audit of our annual financial statements, the review
of the interim financial statements included in quarterly reports and services that are normally provided by Hall & Co,
CPAs (2019) and L&L, CPAs (2018) in connection with statutory and regulatory filings or engagements, consultations in
connection with acquisitions and issuances of auditor consents and comfort letters in connection with SEC registration statements
and related SEC and non-SEC securities offerings.

 

  (2) Audit-related
fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit
or review of our consolidated financial statements and are not reported under “Audit fees” by Hall & Co (2019)
and L&L CPAs (2018).

 

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

 

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

 

  

PART
IV

 

 

ITEM
15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

(a)(1)
Financial Statements

 

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

 

Report
of Independent Registered Public Accounting Firm

Consolidated
Balance Sheets

Consolidated
Statements of Operations

Consolidated
Statements of Changes in Stockholders’ Equity

Consolidated
Statements of Cash Flows

Notes
to Consolidated Statements

 

(a)(2)
Financial Statement Schedules

 

None.

 

(a)(3)
Exhibits

Exhibit No Exhibit Title Filed Herewith Form Filing Date
2 Plan of Acquisition, Reorganization, Arrangement, Liquidation or Recession   14A 5/16/2000
2.1 Plan of Acquisition, Reorganization, Arrangement, Liquidation or Recession   14c 4/16/2013
2.2 Plan of Acquisition, Reorganization, Arrangement, Liquidation or Recession   14c 9/09/2014
3(i) Articles of Incorporation   SB-2 10/12/1995
3(i)(a) Amendment to Articles of Incorporation   14A 5/16/2000
3(i)(b) Amendment to Articles of Incorporation   14c 4/16/2013
3(i)(c) Amendment to Articles of Incorporation   14c 9/09/2014
3(i)(c) Amendment to Articles of Incorporation   8-K 10/3/2014
3(ii) By Laws   SB-2 10/12/1995
10 Material Contracts   14c 9/09/2014
16 Letter RE Change in Certifying Public Accountant   8-K 02/17/2015
17 Disclosures on Departures of Directors  

8-K

14c

10/03/2014

9/09/2014

31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) X    
31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) X    
32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. X    
32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. X    
32.3 Consent of Independent Accountant X    

 

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

SIGNATURES

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

         
Date:  March
30, 2020
  AMERICAN
CANNABIS COMPANY, INC.
   
By:
 


/s/Terry Buffalo

 

Terry
Buffalo
Chief Executive Officer

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

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

Signature Title Date
     
/S/ Terry
Buffalo
Chief Executive Officer and Director March 30, 2020
Terry Buffalo    
     
/S/ David
M. Godfrey
Chief Financial Officer March 30, 2020
David M. Godfrey    
     
/S/ Ellis
Smith
Chief Development Officer and Director March 30, 2020
Ellis Smith    
     
/S/ Tad
Mailander
Director March 30, 2020
Tad Mailander    

 

   

Exhibit 31.1

 

I, Terry Buffalo,
certify that:

 

1. I
have reviewed this annual report on Form 10-K for fiscal year 2019 of American Cannabis Company, Inc.

 

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)) 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) 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

 

(c) 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 reasonably 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 control over financial reporting.

 

By:    /s/
Terry Buffalo

Terry
Buffalo

Chief
Executive Officer

 

Date: March
30, 2020

 

Exhibit 31.2

 

I, David M.
Godfrey, certify that:

 

1. I
have reviewed this annual report on Form 10-K for fiscal year 2019 of American Cannabis Company, Inc.

 

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)) 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) 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

 

(c) 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 reasonably 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 control over financial reporting.

 

By:    /s/
David M. Godfrey

David
M. Godfrey

Chief
Financial Officer

 

Date: March
30, 2020

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 annual report of American Cannabis Company, Inc. (the “Company”) on Form 10-K for fiscal
year 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned
officers of the Company certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the
Sarbanes-Oxley Act of 2002, that, to such officer’s knowledge:

 

(1) 
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

  (1) The
information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company.

 

 

By:  /s/   Terry
Buffalo

Terry Buffalo

Chief Executive Officer

 

Date: March 30, 2020

 

By:  /s/   David
M. Godfrey

David M. Godfrey

Chief Financial Officer

 

Date: March 30, 2020

 

The
foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of
the Report or as a separate disclosure document.

CONSENT
OF INDEPENDENT ACCOUNTANTS

We hereby
consent to the incorporation by reference in this Annual Report on Form 10-K of American Cannabis Company, Inc. for the year ended
December 31, 2019 of our reports dated April 15, 2019 included in its Form 10K dated April 15, 2019 relating to the financial
statements and financial statement schedules for the two years ended December 31, 2018 and December 31, 2017.

 

/s/ L&L CPAS, PA

L&L CPAS, PA

Certified Public Accountants

Cornelius, NC

The United States of America

March 30, 2020





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