10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2016

or

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

For the transition period from ____________ to ____________

Commission File Number: 000-54582

United Cannabis Corporation

(Exact name of registrant as specified in its charter)

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

1600 Broadway, Suite 1600, Denver, Colorado 80202

(Address of principal executive offices)(Zip code)

(303) 386-7104

(Registrant’s telephone number, including area code)

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

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

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

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

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

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (check one):

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

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

As of June 30, 2016, the market value of shares held by non-affiliates was approximately $1,365,000.

The number of shares outstanding of the registrant’s common stock as of February 28, 2017 was 50,650,994.

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

None.

Table of Contents to Annual Report on Form 10-K

For the Fiscal Year Ended December 31, 2016

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

i

PART I

FORWARD-LOOKING STATEMENTS

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

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

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

ITEM 1.

BUSINESS.

Background

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

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

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

In connection with this transaction:

· Messrs. Blackmon, Verzura and Ruby licensed to us all of their knowledge and know-how relating to the design and buildout of cultivation facilities, growing/cultivation systems, seed-to-sale protocols and procedures, products, access to a genetic catalogue including over 150 different strains, an advanced (non-psychoactive) cannabinoid sequencing therapy program utilizing patent-pending Prana Bio Nutrient Medicinals called the A.C.T. Now Program (“ACT Now” or “ACT Now Program”), security, regulatory compliance, and other methods and processes which relate to the cannabis industry.

· The territory for this license is the entire world and the license runs in perpetuity. There are no royalty payments under the License Agreement.

· Mr. Blackmon was elected as our President, Mr. Ruby was elected as Chief Operating Officer and Mr. Verzura was elected as Vice President.

· A total of 41,690,000 previously outstanding shares of common stock were cancelled resulting in a total of 43,620,000 shares of common stock outstanding on March 26, 2014.

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

1

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

Business Overview

We own distinct intellectual property relating to the legalized growth, production, manufacture, marketing, management, utilization and distribution of medical marijuana and marijuana infused products.  

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

Our Products

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

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

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

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

Our short term plan involves licensing the technology associated with our products to companies which are licensed to grow and sell medical marijuana in states where medical marijuana is legal.  

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

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

WeedMD (Canada)

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

2

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

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

Harborside Health Center

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

Harborside has a license to use our intellectual property, and products in California.  In consideration for this license, Harborside pays us 25% of the wholesale price of all products sold using our Prana Bio Nutrient Medicinal line.

Blue River Extracts

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

On January 1, 2016, we granted a license to Blue River for the right to use our pending global utility patent for the use of terpenes as a diluent in aromatherapy, vaporization, essential oils, edibles, aerosols, and for product branding purposes.  We are paid $5,000 each month for the license, plus $500 for each hour of consulting service we provide Blue River.  The license expires on December 31, 2020.  

Cannibinoid Research & Development Company Limited (“CRD”)

In August 2014, we acquired 50% of the capital stock of CRD.  In August, 2014, we agreed to fund the operations of CRD on terms mutually agreed upon by us and CRD.  As of December 31, 2016, CRD did not have any operations or operating activities.  As of the date of this prospectus, CRD had five employees and had applied to the Jamaican government for a license to conduct research on the benefits of cannabis which will be grown by CRD in Jamaica.

Cherubim Interests, Inc.

In October, 2016, we signed an agreement with Cherubim Interests, Inc.  Pursuant to the agreement, Cherubim will design and sell mobile extraction laboratories for sale to the marijuana industry.  We have the exclusive right to solicit orders for the mobile laboratories throughout the world.  All orders we obtain will be subject to acceptance by Cherubim.  For any mobile laboratory sold, we will receive a commission equal to the sales price of the mobile laboratory less:

·

Shipping costs,

·

custom duties or similar charges, and

·

$47,000.

Cherubim’s fully-functioning mobile laboratory fits in a trailer and can be used to process cannabis.  As of the date of this prospectus, we had not sold any mobile laboratories.

3

ACT Now Program

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

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

Competition

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

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

Government Regulation

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

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

As of February 28, 2017, 28 states and the District of Columbia allow their citizens to use Medical Marijuana.  Additionally, voters in the states of Colorado, Washington, Alaska, Oregon, California, Nevada, Massachusetts, Maine and the District of Columbia approved ballot measures to legalize cannabis for recreational use by adults.  The state laws are in conflict with the federal Controlled Substances Act, which makes marijuana use and possession illegal on a national level. The former Obama administration has effectively stated that it is not an efficient use of resources to direct federal law enforcement agencies to prosecute those lawfully abiding by state-designated laws allowing the use and distribution of medical marijuana.    However, the new Trump administration could change this policy and decide to enforce the federal laws strongly.  Any such change in the federal government’s enforcement of current federal laws could cause significant financial damage to us and our shareholders.  While we do not intend to harvest, distribute or sell cannabis, we may be irreparably harmed by a change in enforcement by the federal or state governments or the enactment of new and more restrictive laws.

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

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

4

Intellectual Property

Our intellectual property includes our management’s knowledge and know-how relating to the legalized growth, production, manufacture, marketing, management, utilization and distribution of medical marijuana and marijuana infused products.  It also includes a genetic catalogue including over 150 different strains of marijuana, and an advanced cannabinoid therapy program called “A.C.T. Now.”

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

Employees

As of February 28, 2017, we had four employees. There is no union representation of our employees, and we have never experienced an involuntary work stoppage. We believe that our continued success depends, in part, on our ability to attract and retain qualified personnel. We consider our relations with our employees to be good.

Effect of Environmental Laws

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

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

Website Access

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

ITEM 1A.

RISK FACTORS.

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

ITEM 1B.

UNRESOLVED STAFF COMMENTS.

None.

ITEM 2.

PROPERTIES.

In May 2014 we entered into a month-to-month office lease for space at 1600 Broadway, Suite 1600, Denver, Colorado 80202 with lease payments of $269 per month. We believe that this space will be sufficient for our present needs.

ITEM 3.

LEGAL PROCEEDINGS.

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

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

ITEM 4.

MINE SAFETY DISCLOSURES.

Not applicable.

5

PART II

ITEM 5.

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

Market Information

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

	High		Low
Year ended December 31, 2015
First Quarter	$	2.00	$	0.56
Second Quarter	$	1.09	$	0.41
Third Quarter	$	.55	$	0.27
Fourth Quarter	$	.43	$	0.12
Year ended December 31, 2016
First Quarter	$	0.79	$	0.17
Second Quarter	$	0.48	$	0.15
Third Quarter	$	0.42	$	0.16
Fourth Quarter	$	3.35	$	0.43

On February 28, 2017, the closing price of our common stock was $1.82

Stockholders

As of February 28, 2017, we had 57 shareholders of record and 50,650,994 outstanding shares of common stock.

Dividends

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

Transfer Agent

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

 ITEM 6. 

SELECTED FINANCIAL DATA.

Not applicable.

ITEM 7.

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

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

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

6

Overview

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

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

Results of Operations

The Year Ended December 31, 2016 Compared to the Year Ended December 31, 2015

Revenues and Cost of Revenues

Revenues and cost of revenues were $715,095 and $562,673, and $343,071 and $150,236, respectively, for the years ended December 31, 2016 and 2015. This increase in revenues in 2016 over 2015 was due to an increase in product support from a major customer, and certain changes in the mix of products and services provided during the twelve months ended December 31, 2016 as compared to the twelve months ended December 31, 2015. The increase in cost of revenues in 2016 over 2015 was due to the costs associated with the greater amount of product support from a major customer during 2016.

Sales and Marketing Expenses

Sales and marketing expenses were $68,007 and $86,797 for the years ended December 31, 2016 and 2015, respectively. The decrease in sales and marking expenses was due to our focus on serving existing customers during the year ended December 31, 2016 as compared to our sales and marketing efforts applicable to new products and services throughout the year ended December 31, 2015.  

Research and Development Expenses

Research and development expenses (“R&D”) were $23,124 and $329 for the years ended December 31, 2016 and 2015, respectively. The increase in R&D was due to our focus on developing new products from extracting processes during the year ended December 31, 2016, as compared to our R&D efforts applicable to new products and services during the twelve months ended December 31, 2015.

Operating Expenses

Operating expenses were $1,139,046 and $1,833,981the years ended December 31, 2016 and 2015, respectively. The decrease in operating expenses was due to a decrease in general and administrative expenses in the amount of $650,966. This decrease in general and administrative expenses was due to a reduction of $612,512 in share-based compensation paid to our officers and directors during the year ended December 31, 2015.

Other Non-operating Expense, net

Our other non-operating expense was $3,086,982 and $1,461,566, for the years ended December 31, 2016 and 2015, respectively.  The increase is due for the most part to: (i) the $1,870,665 loss on derivative liabilities; (ii) $310,689 increase in interest expense; (iii) an increase in the amortization of debt discount in the amount of $184,758; and (iv) offset by an increase of other income in the amount of $184,875.

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

·

Regulatory changes to different territories in the United States

·

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

·

Rescheduling of Cannabis by the DEA or congress.

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

7

Capital Resources and Liquidity

Our consolidated financial statements have been prepared on a going concern basis, which assumes we will be able to realize our assets and discharge our liabilities in the normal course of business for the foreseeable future. During the year ended December 31, 2016, we incurred losses of $3,854,004 and used cash in operating activities of $274,670, respectively, compared to $2,883,362 of losses and $525,148 of cash used in our operating activities for the year ended December 31, 2015. At December 31, 2016 and 2015, we had a working capital deficit of $393,182 and $2,410,679, respectively, and an accumulated deficit of $9,362,333 at December 31, 2016.  Our ability to continue as a going concern is dependent upon our ability to generate profitable operations in the future and, or, obtaining the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. There is no assurance that these events will be satisfactorily completed.

Net cash used in operating activities for the years ended December 31, 2016 and 2015, was $274,670 and $525,148, respectively. This $250,478 decrease was primarily due to the positive impacts on our operating cash flows resulting from a decrease in general and administrative expenses during the twelve months ended December 31, 2016 as compared to the same period in 2015.

Net cash used in investing activities for the years ended December 31, 2016 and 2015 was $ 0.0 and $17,685, respectively. This decrease was due for the most part to $14,385 of payments applicable to our trademarks and provisional patents during the twelve months ended December 31, 2015,

Net cash provided by financing activities for the years ended December 31, 2016 and 2015 was $268,871 and $339,900, respectively. The decrease was primarily due to the fact that net proceeds from the issuance of convertible debt and warrants during the year ended December 31, 2015, in the amount of $339,000, was greater than the total amount of net proceeds from the issuance of convertible debt and warrants in the amount of $316,478, the sale of our common shares and deposit on warrant exercises in the amount of $145,000, and the proceeds from notes payable to certain officers and directors in the amount of $50,000, reduced by the repayment of convertible debt and notes payable in the amount of $242,607, during the year ended December 31, 2016.

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

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

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

ITEM 9.

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

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

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

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

On April 6, 2016, we engaged BF Borgers CPA PC as our independent registered public accounting firm.

See our 8-K reports filed on July 24, 2014, November 16, 2015 and April 25, 2016 for more information.

8

ITEM 9A.

CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

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

Our management, with the participation of our CEO, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Annual Report. Based upon this evaluation, our CEO concluded that our disclosure controls and procedures were not effective as of December 31, 2016, because of the identification of a material weakness in our internal control over financial reporting which is described below. We intend to continue to review and document our disclosure controls and procedures, including our internal controls over financial reporting, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.

Management’s Report on Internal Control Over Financial Reporting

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

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

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2016. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in their Internal Control-Integrated Framework, updated in May 2013.  Based on this evaluation, our management concluded that that our internal control over financial reporting was not effective as of December 31, 2016.

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

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

While we have not yet remediated these material weaknesses, we will continue our remediation efforts during fiscal 2017.

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

9

This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to the SEC rules that permit us to provide only management's report in this Annual Report.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2016, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Controls and Procedures

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

ITEM 9B.

OTHER INFORMATION.

None.

10

PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

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

Name	Age	Positions
Earnest Blackmon	45	CEO, President, Principal Financial and Accounting Officer and director
Chad Ruby	41	Chief Operating Officer, Secretary, Treasurer and director
Tony Verzura	39	Vice President, Chief Technical Officer and director

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

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

Chad Ruby has been a director since April 2014. He was elected Chief Operating Officer in March 2014 and was elected Secretary and Treasurer in August 2014.  He has been a portfolio manager, real estate broker and appraiser for the last 15 years.  He started with Hudson Appraisals, Inc. in 2002 and became a partner and Chief Operating Officer in February of 2005, and he resigned as Chief Operating Officer in June of 2008.  Mr. Ruby was employed by NRT REO Experts, LLC, Orlando, Florida, as a portfolio manager from June of 2008 until April 2014.  During 2013 and 2014 he was a part-time consultant for RiverRock LLC, a company that is engaged in growing and selling medical and recreational marijuana in Denver, Colorado.  Mr. Ruby graduated from the University of Central Florida in 2010 with a B.S. in Finance.  We believe that Mr. Ruby’s 15 years of real estate and business experience combined with his college degree in finance and his consulting experience with RiverRock LLC qualify him to serve as a member of our board of directors.

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

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

Employment Agreements

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

11

Involvement in Certain Legal Proceedings

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

· Any bankruptcy petition filed by or against such person or any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

· Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

· Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting his involvement in any type of business, securities or banking activities or to be associated with any person practicing in banking or securities activities;

· Being found by a court of competent jurisdiction in a civil action, the SEC or the Commodity Futures Trading Commission to have violated a Federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;

· Being subject of, or a party to, any Federal or state judicial or administrative order, judgment decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of any Federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

· Being subject of or party to any sanction or order, not subsequently reversed, suspended, or vacated, of any self-regulatory organization, any registered entity or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires that our executive officers and directors, and persons who own more than ten percent of a registered class of our equity securities, file reports of ownership and changes in ownership with the SEC. Executive officers, directors and greater-than-ten percent stockholders are required by SEC regulations to furnish us with all Section 16(a) forms they file. Specific due dates for these reports have been established and we are required to report in this Report any failure to file by these dates.  Based solely on our review of the copies of the forms received by us and written representations from certain reporting persons that they have complied with the relevant filing requirements, we believe that, during the year ended December 31, 2016, all of our executive officers, directors and greater-than-ten percent stockholders complied with all Section 16(a) filing requirements, with the exception of Earnest Blackmon, who filed six Form 4’s covering twelve transactions after their due dates, Chad Ruby, who filed four Form 4’s covering six transactions after their due dates, and Tony Verzura, who filed three Form 4’s covering four transactions after their due dates.

Code of Ethics

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

Stockholder Communications

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

Audit Committee and Audit Committee Financial Expert

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

12

ITEM 11.

EXECUTIVE COMPENSATION.

Summary Compensation Table

 The following Summary Compensation Table sets forth for fiscal 2016 and 2015, the compensation awarded to, paid to, or earned by our Named Executive Officers.

Name and Principal Position	Year	Salary ($)		Option Awards ($) (4)		All other Compensation ($)		Total ($)
Ernie Blackmon	2016		—		—				—
CEO, President, principal financial officer and director (1)	2015		173,854		139,207		—		313,140
Chad Ruby	2016		70,798		—				70,798
Chief Operating Officer, Secretary, Treasurer and director (2)	2015		173,933		139,207		—		313,140
Tony Verzura	2016		52,000		—		—		52,000
Vice President, Chief Technical Officer and director (3)	2015		173,854		139,207		—		313,140

———————

(1)   Mr. Blackmon was elected as our President on March 26, 2014, he was elected as our CEO on June 24, 2014, and he has served as our principal financial officer since June 24, 2014. Mr. Blackmon was appointed as a director effective April 7, 2014.
Mr. Blackmon’s salary for the year ended December 31, 2015, was $173,854 (of which $69,604 was forgone by Mr. Blackmon and paid for with 350,000 stock options valued at $69,604) and during fiscal 2015 he earned stock option awards with a grant date fair value of $139,207 as more fully described in footnote (4).

(2)   Mr. Ruby was elected as our Chief Operating Officer on March 26, 2014, he was elected Secretary and Treasurer on August 15, 2014, and he was appointed as a director on April 7, 2014.
Mr. Ruby’s salary for the year ended December 31, 2015, was $173,933 (of which $55,683 was forgone by Mr. Ruby and paid for with 280,000 stock options valued at $55,683) and during fiscal 2015 he earned stock option awards with a grant date fair value of $139,207 as more fully described in footnote (4).  

(3)  

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

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

(4)

During fiscal 2014, Messrs. Blackmon, Verzura and Ruby each earned 200,000 stock options under our Equity Incentive Plan.  The options were granted on January 9, 2015, were fully vested at the time of grant and gave the option holder the right to purchase shares of our common stock at $0.70 per share during the ten year term of the option.  

During fiscal 2015, Messrs. Blackmon, Verzura and Ruby each earned 700,000 stock options under the Equity Incentive Plan. The options were granted on January 15, 2016, were fully vested at the time of grant and gave the option holder the right to purchase shares of our common stock at $0.20 per share during the ten year term.

On January 3, 2016, Messrs. Blackmon and Verzura each agreed to forego $70,000 of 2015 salary in lieu of 350,000 stock options each under the Equity Incentive Plan and Mr. Ruby agreed to forego $56,000 of 2015 salary in lieu of 280,000 stock options under the Equity Incentive Plan. The options were granted on January 15, 2016, were fully vested at the time of grant and gave the option holder the right to purchase shares of our common stock at $0.20 per share during the ten year term.

13

The following shows the amounts we expect to pay to our officers during the twelve months ending December 31, 2017, and the amount of time these persons expect to devote to our business.

	Projected	% of time to be
Name	Compensation	devoted to our business
Ernie Blackmon	$250,000	50%
Chad Ruby	$250,000	50%
Tony Verzura	$250 000	25%

As of February 28, 2017, we have not entered into any employment agreements with any of our executive officers.

During the fiscal year ended December 31, 2016, we did not compensate our directors for acting as such.

Stock Option and Bonus Plans

We have an Equity Incentive Plan, a Non-Qualified Stock Option Plan and a Stock Bonus Plan.  A summary description of these Plans follows.  In some cases these Plans are collectively referred to as the “Plans”.

Equity Incentive Plan. Our Equity Incentive Plan (the “Plan”) provides officers, directors, selected employees and outside consultants an opportunity to acquire or increase a direct ownership interest in our operations and future success.

A maximum of 4,000,000 common shares are subject to the Plan. The Plan provides for the grant of stock options, stock awards, restricted stock units and stock appreciation rights. Stock options may be non-qualified stock options or incentive stock options except that stock options granted to outside directors, consultants or advisers providing services to us shall in all cases be non-qualified stock options.

Non-Qualified Stock Option Plan. The Non-Qualified Stock Option Plans authorize the issuance of shares of our common stock to persons that exercise options granted pursuant to the Plans. Our employees, directors, officers, consultants and advisors are eligible to be granted options pursuant to the Plans, provided however that bona fide services must be rendered by such consultants or advisors and such services must not be in connection with sale a capital-raising transaction or promoting our common stock. The option exercise price is determined by our Board of Directors.

Stock Bonus Plan. Under the Stock Bonus Plans shares of our common stock may be issued to our employees, directors, officers, consultants and advisors, provided however that bona fide services must be rendered by consultants or advisors and such services must not be in connection with a capital-raising transaction or promoting our common stock.

Other Information Regarding the Plans.  Our Board of Directors administers the Plans and makes all decisions concerning which officers, directors, employees and other persons are granted awards, how many to grant to each recipient, when awards are granted, the terms and conditions applicable to awards, how the Plans should be interpreted, and whether to delegate administration of the Plans to a committee.  Our Directors may, at any time, and from time to time, amend, terminate, or suspend one or more of the Plans in any manner they deem appropriate, provided that such amendment, termination or suspension will not adversely affect rights or obligations with respect to shares or options previously granted.  Our Directors serve for a one-year tenure and until their successors are elected.  

Any option granted pursuant to the Plans may include installment exercise terms such that the option becomes fully exercisable in a series of cumulating portions.

Any shares or options will be forfeited if the “vesting” schedule established at the time of the grant is not met. For this purpose, vesting means the period during which the employee must remain our employee, or the period of time a non-employee must provide services to us.  At the time an employee ceases working for us (or at the time a non-employee ceases to perform services for us), any shares or options not fully vested will be forfeited and cancelled. At the discretion of our Board of Directors, payment for the shares of common stock underlying options may be paid through the delivery of shares of our common stock having an aggregate fair market value equal to the option price, provided such shares have been owned by the option holder for at least one year prior to such exercise. A combination of cash and shares of common stock may also be permitted at the discretion of the Board of Directors.

Options are generally non-transferable except upon death of the option holder. Shares issued as a stock bonus will generally not be transferable until the person receiving the shares satisfies the vesting requirements imposed when the shares were issued.

14

Summary. The following shows certain information as of February 28, 2017 concerning the Plans.  Each option represents the right to purchase one share of our common stock.  The Equity Incentive Plan has been approved by our shareholders.  The other Plans have not been approved by our shareholders.

Name of Plan	Total Shares Reserved Under Plans	Shares Reserved for Outstanding Options	Shares Issued	Remaining Options/Shares Under Plans
Equity Incentive Plan	4,000,000	3,680,000	N/A	320,000
Non-Qualified Stock Option Plan	200,000	—	N/A	200,000
Stock Bonus Plan	500,000	N/A	368,000	132,000

Outstanding equity awards as of December 31, 2016 are as follows: 

Name	Number of securities underlying unexercised options (#) exercisable	Number of securities underlying unexercised options (#) unexercisable	Number of securities underlying unexercised unearned options (#)	Option exercise price ($)	Option expiration date
Ernie Blackmon	200,000	200,000	200,000	0.70	1/08/2024
Chad Ruby	200,000	200,000	200,000	0.70	1/08/2024
Tony Verzura	200,000	200,000	200,000	0.70	1/08/2024
Ernie Blackmon	700,000	700,000	700,000	0.20	1/15/2026
Chad Ruby	700,000	700,000	700,000	0.20	1/15/2026
Tony Verzura	700,000	700,000	700,000	0.20	1/15/2026
Ernie Blackmon	350,000	350,000	350,000	0.20	1/15/2026
Chad Ruby	280,000	280,000	280,000	0.20	1/15/2026
Tony Verzura	350,000	350,000	350,000	0.20	1/15/2026

Securities Authorized for Issuance under Equity Compensation Plans

The following table shows information with respect to each equity compensation plan under which our common stock is authorized for issuance as of December 31, 2016:

Equity Compensation Plan Information

Plan Category	Number of Securities to be Issued upon Exercise of Outstanding Options	Weighted-Average Exercise Price of Outstanding Options, Warrants, and Rights	Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans
Equity Incentive Plan	3,680,000	$0.28	320,000
Non-Qualified Stock Option Plan	—	—	200,000

The Equity Incentive Plan has been approved by our shareholders.

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

Compensation Policy

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

15

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.

The following table shows the beneficial ownership of our common stock as of February 28, 2017, by (i) each person whom we know beneficially owns more than 5% of the outstanding shares of our common stock; (ii) each of our executive officers; (iii) each of our directors; and (iv) all of our executive officers and directors as a group.  Unless otherwise indicated, to our knowledge each of the stockholders listed below has sole voting and investment power over the shares beneficially owned. Unless otherwise specified, the address of each of the persons set forth below is in care of UCANN at 1600 Broadway, Suite 1600, Denver, Colorado 80202.

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

———————

(1)

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

(2)

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

(3)

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

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, DIRECTOR INDEPENDENCE.

Transactions with Officers and Directors

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

· in which the amount involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years; and

· in which any director, executive officer, stockholder who beneficially owns 5% or more of our common stock or any member of their immediate family had or will have a direct or indirect material interest.

Messrs. Blackmon and Verzura have made loans to or equity investments in RiverRock LLC, a Colorado company which is licensed by the Colorado Department of Revenue to operate a dispensary, to manufacture marijuana infused products and to operate a cultivation facility.  We had sales of non-marijuana products to this entity in the amounts of $0.0 and $4,425 during 2016 and 2015, respectively.  During 2015, Messrs. Blackmon and Verzura divested those interests.  As Messrs. Blackmon and Verzura may have had significant influence on management or operating polices of the customer, we have classified sales to this customer as revenues, affiliate, in our consolidated statements of operations and accounts receivable from this customer as due from related parties on our consolidated balance sheets.

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

On April 6, 2016, we borrowed $25,000 from Ernest Blackmon and $25,000 from Tony Verzura and used the proceeds to repay principal and interest applicable on our $102,000 convertible promissory note dated October 12, 2015, to JSJ Investments Inc. The loans, together with interest at 12% per year, are payable on December 30, 2016. We may prepay the loans at any time. If the loans are repaid on or before September 30, 2016, the principal amount which is being repaid will increase by 10%. If the loans are repaid after September 30, 2016, the principal amount which is being repaid will increase by 15%.  Since the loans were not repaid at September 30, 2016, we owe $27,500 to Earnest Blackmon and $27,500 to Tony Verzura at December 31, 2016.

16

ITEM 14. 

PRINCIPAL ACCOUNTING FEES AND SERVICES.

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

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

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

The following table sets forth fees billed to us by our independent registered public accounting firms during the fiscal years ended December 31, 2016 and December 31, 2015.

Anton	2016		2015
Audit Fees	$	—	$	2,500
Audit-Related Fees	$	—	$	—
Tax Fees	$	—	$	—
All Other Fees	$	—	$	—

Borgers	2016		2015
Audit Fees	$	38,400	$	—
Audit-Related Fees	$	—	$	—
Tax Fees	$	—	$	—
All Other Fees	$	—	$	—

Cutler	2016		2015
Audit Fees	$	—	$	16,500
Audit-Related Fees	$	2.500	$	—
Tax Fees	$	—	$	—
All Other Fees	$	—	$	—

Pritchett	2016		2015
Audit Fees	$	—	$	2,500
Audit-Related Fees	$	—	$	—
Tax Fees	$	—	$	—
All Other Fees	$	—	$	—

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

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

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

17

PART IV

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(A)

Financial Statement Schedules for each of the two years in the period ended December 31, 2016 have been omitted because they are either not required or the information is included in the financial statements and notes thereto.

(B)

Exhibits

The following exhibits are filed with this Annual Report on Form 10-K:

Number	Description
2	Plan of Merger dated April 10, 2014 (1)
3.1	Articles of Incorporation (2)
3.2	Bylaws (3)
4.1	Warrant issued to Sláinte Ventures, LLC (12)
4.2	Non-Qualified Stock Option Plan (13)
4.3	Stock Bonus Plan (14)
10.1	License Agreement with Earnest Blackmon, Tony Verzura and Chad Ruby dated March 26, 2014 (4)
10.2	Asset Assignment and Purchase Agreement dated March 31, 2014 (5)
10.3	(Reserved)
10.4	Assignment of Debt Agreement, dated March 24, 2016, by and between Buckingham Group Limited, WeedMD Rx Inc. and United Cannabis Corporation (6)
10.5	Promissory Note, dated April 6, 2016, payable to Earnest Blackmon (7)
10.6	Promissory Note, dated April 6, 2016, payable to Tony Verzura (8)
10.7	Agreement with Cannibinoid Research and Development Company Limited (15)
10.8	Agreement with WeedMD RX, Inc. (15)
10.9	Agreement with Harborside Health Center (15)
10.10	Agreements with Blue River, Inc. (15)
10.11	Agreement with Cherubim Interests, Inc. (15)
10.12	Investment Agreements with Tangiers Global, LLC (15)
16.1	Letter from Cutler & Co. LLC addressed to SEC, dated November 13, 2015 (9)
16.2	Letter from Pritchett, Siler & Hardy, P.C. addressed to SEC, dated April 25, 2016 (10)
21	Subsidiaries (11)
23	Consent of Accountants.
31	Certification of the Chief Executive Officer and Principal Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of the Chief Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Presentation Linkbase Document

———————

(1)

Incorporated by reference to Appendix A of the Registrant’s Definitive Schedule 14C dated April 11, 2014, filed on April 11, 2014.

(2)

Incorporated by reference to Exhibit 3.4 to the Registrant’s 10-K report filed on April 15, 2015.

(3)

Incorporated by reference to Exhibit 3.5 to the Registrant’s Form 10-K filed on April 15, 2015.

(4)

Incorporated by reference to Exhibit 10 to the Registrant’s Form 8-K filed on March 28, 2014.  

(5)

Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on April 3, 2014.

(6)

Incorporated by reference to Exhibit 10.3 to the Registrant’s Form 8-K filed on April 5, 2016.

(7)

Incorporated by reference to Exhibit 10.6 to the Registrant’s Form 8-K filed on April 13, 2016.

(8)

Incorporated by reference to Exhibit 10.7 to the Registrant’s Form 8-K filed on April 13, 2016.

(9)

Incorporated by reference to Exhibit 16.1 to the Registrant’s Form 8-K filed on November 16, 2015.

(10)

Incorporated by reference to Exhibit 16 to the Registrant’s Form 8-K filed on April 25, 2016.

18

(11)

Incorporated by reference to Exhibit 21.1 filed with the Registrant’s 10-K report for the year ended December 31, 2014.

(12)

Incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed on March 24, 2016.

(13)

Incorporated by reference to Exhibit 4(b) filed with the Registrant’s S-8 registration statement (file number 333-214253).

(14)

Incorporated by reference to Exhibit 4(c) filed with the Registrant’s S-8 registration statement (file number 333-214253).

(15)

Incorporated to the same exhibit filed with the Registrant’s Form S-1 registration statement (file number 333-216222)

19

UNITED CANNABIS CORPORATION

Audited Financial Statements

TABLE OF CONTENTS

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets	F-3
Consolidated Statements of Operations	F-4
Consolidated Statements of Stockholders' (Deficit) Equity	F-5
Consolidated Statements of Cash Flows	F-6
Notes to Consolidated Financial Statements	F-8

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

We have audited the accompanying consolidated balance sheets of United Cannabis Corporation (“the Company”) as of December 31, 2016 and 2015 and the related statement of operations, stockholders’ equity (deficit) and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

In our opinion, the financial statement referred to above present fairly, in all material respects, the financial position of United Cannabis Corporation, as of December 31, 2016 and 2015, and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles in the United States of America.

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

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

/s/ B F Borgers CPA PC

B F Borgers CPA PC

Lakewood, CO

February 24, 2017

F-2

UNITED CANNABIS CORPORATION

CONSOLIDATED BALANCE SHEETS

	December 31,
	2016			2015
ASSETS
Current assets:
Cash and cash equivalents	$	112,621		$	118,420
Accounts receivable		24,484			53,435
Due from related parties		26,775			8,284
Prepaid expenses		—			56,341
Deferred financing costs, net		—			32,400
Total current assets		163,880			268,880
Intangible assets		32,273			32,273
Investments in non-marketable equity securities		—			205,275
Equity method investments		88,000			88,000
Total assets	$	284,153		$	594,428
LIABILITIES & STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable	$	25,048		$	104,238
Accrued expenses		55,264			928,533
Derivative liabilities		—			383,581
Current portion of deferred revenue		180,000			380,000
Notes payable		—			775,000
Notes payable to and advances from officers and directors		171,203			—
Convertible notes payable, net of $34,543 and $272,793 debt discount, respectively		125,547			108,207
Total current liabilities		557,062			2,679,59
Long term liabilities:
Deferred revenue, net of current portion		203,750			383,750
Total liabilities		760,812			3,063,309
Stockholders' deficit:
Preferred stock, no par value; 10,000,000 shares authorized; none issued and outstanding		—			—
Common stock, no par value; 100,000,000 shares authorized; 50,650,994 and 44,988,500 shares issued and outstanding, respectively		8,885,674			3,039,448
Accumulated deficit		(9,362,333	)		(5,508,329	)
Total stockholders' deficit		(476,659	)		(2,468,881	)
Total liabilities and stockholders' deficit	$	284,153		$	594,428

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

F-3

UNITED CANNABIS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

	Year Ended December 31,
	2016			2015
Revenues:
Revenues, non-affiliates	$	695,095		$	558,248
Revenues, affiliate		20,000			4,425
Total revenues		715,095			562,673
Cost of revenues:
Cost of revenues, non-affiliate		335,571			75,672
Cost of revenues, affiliate		7,500			74,564
Total cost of revenues		343,071			150,236
Gross profit		372,024			412,437
Operating expenses:
Marketing, advertising and new business development		68,007			86,797
Research and development		23,124			329
Legal, accounting, consulting and public reporting		643,913			645,503
General and administrative		404,002			1,101,604
Total operating expenses		1,139,046			1,834,233
Loss from operations		(767,022	)		(1,421,796	)
Other income (expense):
Other income and expenses		184,875			—
Loss on derivative liabilities		(1,894,258	)		(23,593	)
Interest expense		(418,437	)		(107,496	)
Amortization of debt discount		(267,258	)		(82,500	)
Equity in net loss of unconsolidated affiliate		—			(90,900	)
Loss on extinguishment of debt and repurchase of warrants		(691,904	)		(768,602	)
Loss on investment in non-marketable equity securities		—			(388,475	)
Total other income (expense), net		(3,086,982	)		(1,461,566	)
Net Loss	$	(3,854,004	)	$	(2,883,362	)
Basic and diluted net loss per share:	$	(0.08	)	$	(0.06	)
Basic and diluted weighted-average common shares outstanding:		46,722,407			44,793,510

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

F-4

UNITED CANNABIS CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY

	Shares		Amount			Accumulated Deficit			Total
Balance at December 31, 2014		44,060,001	$	1,626,968		$	(2,624,967	)	$	(997,999	)
Shares issued for repurchase of warrant		621,000		987,390			—			987,390
Cancellation of warrant		—		(218,788	)		—			(218,788	)
Shares issued for services		307,500		226,215			—			226,215
Stock options issued for compensation		—		417,663			—			417,663
Net loss		—		—			(2,883,362	)		(2,883,362	)
Balance at December 31, 2015		44,988,501		3,039,448			(5,508,329	)		(2,468,881	)
Options issued to officers and directors for accrued wages		—		612,512			—			612,512
Warrants issued for services		—		319,419			—			319,419
Shares issued for compensation		565,576		271,097			—			271,097
Shares issued for payables and accrued expenses		509,549		223,484			—			223,484
Conversion of note to Tangiers Investment Group		2,843,698		473,966			—			473,966
Conversion of notes to Slainte Ventures		1,638,731		3,845,748			—			3,845,748
Share buy-back with exercise of put option		104,939		100,000			—			100,000
Net Loss		—		—			(3,854,004	)		(3,854,004	)
Balance at December 31, 2016		50,650,994	$	8,885,674		$	(9,362,333	)	$	(476,659	)

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

F-5

UNITED CANNABIS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2016			2015
Operating activities:
Net loss	$	(3,854,004	)	$	(2,883,362	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Increase (decrease) in provision for losses on accounts receivable		(4,619	)		24,185
Amortization of debt discount		267,258			82,500
Amortization of deferred financing costs		32,400			8,700
Non-cash interest expense		199,206			4,694
Loan origination discount		15,500			—
Share-based compensation, net		622,450			1,030,681
Deferred revenue in the form of non-marketable equity securities recognized as revenue		(180,000	)		(180,000	)
Loss on revaluation of derivative liabilities		1,894,258			23,593
Loss on extinguishment of debt and repurchase of warrants		691,904			768,602
Loss on non-marketable equity securities		15,125			388,475
Equity in net loss of unconsolidated affiliate		—			90,900
Abandonment of FoxBarry consulting project and resultant recognition of deferred revenue		(200,000	)		—
Changes in operating assets and liabilities:
Accounts receivable		33,570			(68,263	)
Due from related party		(18,491	)		(8,284	)
Prepaid expenses		56,341			(3,394	)
Accounts payable and accrued expenses		40,729			195,825
Accrued wages payable to officers and directors		42,695			—
Advances from officers and directors		71,008			—
Net cash used in operating activities		(274,670	)		(525,148	)
Investing activities:
Purchase of intangible assets		—			(17,685	)
Purchase of equity method investments		—			—
Net cash provided by (used in) investing activities		—			(17,685	)
Financing activities:
Proceeds from notes payable to officers and directors		50,000			—
Net proceeds from issuance of convertible debt and warrants		316,478			339,900
Repayment of convertible debt and notes payable		(242,607	)		—
Proceeds from issuance of common shares and deposit on warrant exercise		145,000			—
Net cash provided by (used in) financing activities		268,871			339,900
Net increase (decrease) in cash		(5,799	)		(202,933	)
Cash, beginning of period		118,420			321,353
Cash, end of period	$	112,621		$	118,420

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

F-6

UNITED CANNABIS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2016			2015
Supplemental schedule of cash flow information:
Cash paid for interest	$	8,165		$	—
Cash paid for income taxes	$	—		$	—
Supplemental disclosure of non-cash investing and financing activities:
Issuance of stock options in exchange for accrued wages payable to officers and directors	$	612,512		$	—
Reduction of convertible notes payable due to the conversion by Tangiers Investment Group	$	220,000		$	—
Issuance of common stock upon conversion of Tangiers Investment Group convertible note	$	473,965
Reduction of three convertible notes payable due to the conversion by Slainte Ventures	$	206,978		$	—
Issuance of common stock upon conversion of Slainte Ventures note payable	$	218,038
Reduction of  note payable due to the conversion by Slainte Ventures	$	600,000		$	—
Issuance of common stock upon conversion of Slainte Ventures note payable	$	3,845,748		$	—
Reduction of notes payable in exchange for 1,100,000 shares of common stock of WeedMD	$	175,000		$	—
Intangible asset costs included in accounts payable	$	—		$	12,279
Issuance of common stock for services	$	—		$	47,880
Issuance of common stock for prepaid professional fees	$	—		$	187,335
Issuance of common stock for repurchase of warrant	$	—		$	987,390
Warrants cancelled	$	(3,000,000	)	$	(218,788	)
Issuance of options for compensation, accrued expenses and accounts payable	$	—		$	417,664
Issuance of convertible note payable for debt issuance costs	$	—		$	41,000
Debt conversion feature issued for debt discount	$	—		$	(355,293	)

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

F-7

 UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 –BUSINESS ORGANIZATION AND NATURE OF OPERATIONS

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

Background and Current Operations

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

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

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

In connection with this transaction:

· Messrs. Blackmon, Verzura and Ruby licensed to us all of their knowledge and know-how relating to the design and buildout of cultivation facilities, growing/cultivation systems, seed-to-sale protocols and procedures, products, a genetic catalogue including over 150 different strains, an advanced cannabinoid therapy program called "A.C.T. Now", security, regulatory compliance, and other methods and processes which relate to the cannabis industry.

· The territory for this license is the entire world and the license runs in perpetuity. There are no royalty payments under the License Agreement.

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

· Mr. Blackmon was elected as our President, Mr. Ruby was elected as Chief Operating Officer and Mr. Verzura was elected as Vice President.

· A total of 41,690,000 previously outstanding shares of common stock were cancelled resulting in a total of 43,620,000 shares of common stock outstanding on March 26, 2014.

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

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

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

F-9

UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2016, 28 states and the District of Columbia allow their citizens to use medical marijuana, and four states and the District of Columbia have legalized marijuana for recreational use. The state laws are in conflict with the federal Controlled Substances Act, which makes marijuana use and possession illegal on a national level. The Obama administration has effectively stated that it is not an efficient use of resources to direct federal law enforcement agencies to prosecute those lawfully abiding by state-designated laws allowing the use and distribution of medical and recreational marijuana. However, there is no guarantee that the current administration will not change its stated policy regarding the low-priority enforcement of federal laws, or that any future administration would not change this policy and decide to enforce the federal laws vigorously. Any such change in the federal government’s enforcement of current federal laws could cause significant financial damage to us.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

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

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

Level 1: Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

Level 2: Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated with observable market data.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies, and similar techniques that use significant unobservable inputs.

The carrying amount of our cash and cash equivalents, accounts receivable, accounts payable, and other current assets and liabilities in our consolidated financial statements approximates fair value because of the short-term nature of the instruments. Investments in non-marketable equity securities are carried at cost less other-than-temporary impairments. The carrying amount of our notes payable and convertible debt at December 31, 2016, approximates their fair values based on our incremental borrowing rates.

There have been no changes in Level 1, Level 2, and Level 3 categorizations and no changes in valuation techniques for these assets or liabilities for the years ended December 31, 2016 and 2015.

F-10

UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cash and Cash Equivalents - We consider investments with original maturities of 90 days or less to be cash equivalents. Because of current banking regulations, marijuana centric entities are not afforded normal banking privileges, and thus, we have not able to consistently have access to the federal banking system. Thus, at the beginning of 2016, the Company entered into an agreement with our Chief Executive Officer to hold cash funds in his personal bank account, on an as-need basis, in trust for the Company. Under the terms of our trust agreement with our Chief Executive Officer, he agreed to hold our cash in his personal bank account, and to make payments of our funds only for our business purposes, and to allow daily access to the bank account for ongoing oversight of his fiduciary responsibility to the Company. Additionally, the trust agreement requires that the Chief Executive Officer make copies available to our accounting staff of all transactions applicable to our operations, on a weekly, or as requested basis.  At December 31, 2016 and 2015 there is cash deposits in the personal bank accounts of the Chief Executive Officer held in trust for us in the amount of $4,158 and $0, respectively.

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

Our allowance for doubtful accounts was $30,000 and $4,340 as of December 31, 2016 and 2015, respectively. We recorded bad debt expense, included in general and administrative expenses, of $82,831 and $24,185 during the years ended December 31, 2016 and 2015, respectively.

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

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

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

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

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

We have not recorded any impairment charges related to long-lived assets as of December 31, 2016 or December 31, 2015.

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

F-11

UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

Revenue for services with a payment in the form of stock, warrants or other financial assets is recognized when the services are performed. The value of revenue paid for with warrants is measured using the Black-Scholes-Merton pricing model. Revenue from product sales, including delivery fees, is recognized when an order has been obtained, the price is fixed and determinable, the product is shipped, title has transferred and collectability is reasonably assured.

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

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

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

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

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

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

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

F-12

UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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

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

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

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

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

F-13

UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

	Years Ended December 31,
	2016		2015
Warrants to purchase common stock		666,667		3,000,000
Cashless warrants not converted to common stock		783,112		—
Stock options		3,680,000		600,000
Total potentially dilutive securities		5,129,779		3,600,000

Other Comprehensive Income (Loss) – We report as other comprehensive income (loss) those revenues, gains and losses not included in the determination of net income.  During the years ended December 31, 2016 and 2015, we did not have any gains and losses resulting from activities or transactions that resulted in other comprehensive income or loss.

Segment Reporting – UCANN operates as one segment.

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

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

Percentage of Revenue:

	Years Ended December 31,
	2016			2015
Customer A		95	%		36	%
Customer B		3	%		32	%
Customer C		2	%		18	%

Percentage of Accounts Receivable:

	Years Ended December 31,
	2016			2015
Customer D		75	%		56	%
Customer E		25	%		41	%
Customer F			%		1	%

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

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

F-14

UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

In November 2015, the FASB issued guidance requiring entities to present deferred tax assets and liabilities as noncurrent in a classified balance sheet instead of separating into current and noncurrent amounts. This guidance is effective for us at the beginning of fiscal year 2017, on a prospective or retrospective basis, and thus, we will implement such guidance beginning in 2017.

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

NOTE 3 – GOING CONCERN

Our consolidated financial statements have been prepared on a going concern basis which assumes we will be able to realize our assets and discharge our liabilities in the normal course of business for the foreseeable future. During the year ended December 31, 2016, we incurred losses of $3,854,004 and used cash of $274,670 in our operating activities. As at December 31, 2016, we had a working capital deficit of $393,182 and an accumulated deficit of $9,362,333.  Our ability to continue as a going concern is dependent upon our ability to generate profitable operations in the future and, or, obtaining the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. There is no assurance that these events will be satisfactorily completed.

NOTE 4 – INVESTMENTS IN NON-MARKETABLE EQUITY SECURITIES

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

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

On March 24, 2016, an unrelated third party agreed to assume all of our obligations, including accrued and unpaid interest, pursuant to the terms of a $175,000 note payable we owed to WeedMD, in consideration for the transfer by us of 1,100,000 shares of the common stock of WMD to the unrelated third party. WMD consented to the assumption of the loan by the unrelated third party, and released us from any further liability with respect to the loan.  After the exchange of the 1,100,000 shares of common stock of WMD to the unrelated third party, we own 87,500 shares of common stock of WMD, and reduced our investment in none-marketable equity securities to $15, 125. Because of the difficulty in validating a fair market value for our investment in WMD, we elected to write-off such carrying value as a charge to other income and expenses in our consolidated statements of operations in the amount of $15,125, in the year ended December 31, 2016.

F-15

UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 – PREPAID EPENSES

Our prepaid expenses consist of:

	December 31,
	2016		2015
Prepaid investor relations services	$	—	$	1,667
Prepaid licensing fees		—		35,000
Other prepaid services and fees		—		19,674
	$	—	$	56,341

NOTE 6 – INTANGIBLES

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

NOTE 7 – EQUITY METHOD INVESTMENTS

On August 15, 2014, we acquired a 50% interest in Cannabinoid Research & Development Company Limited (“CRD”), a Jamaican company, in exchange for 40,000 shares of our common stock valued at $88,000 based on the previous day’s closing price of our stock. We also committed to provide expertise on design-build, genetics, cultivation, production, processing, productizing, labeling, packaging, marketing, branding and distribution of products, as well as use of our intellectual property in the operations of CRD. During the year ended December 31, 2016, CRD had minimal operating activities. However, in November 2016, the Jamaican government accepted applications from CRD for a Tier 1 Cultivar license and a Research and Development license. Predicated upon the potential approval of the license applications from the Jamaican government, CRD entered to an agreement with the Caribbean Institute of Medical Research in January 2017, for collaboration in the use of medical cannabis therapies through biomedical research and development for the nutraceutical industry. We accounted for this $88,000 as an equity method investment on our consolidated balance sheets.

On January 19, 2017, the Company and CRD signed a letter of intent (the “LOI”) with the Caribbean Institute of Medical Research (“CARIMER”) to collaborate on advancing clinical research on medical cannabis. CARIMER is the Jamaican-based division of MPR Development Group, a full service global Clinical Research and Development Organization (“CRO”). CARIMER also serves as the research arm of several medical facilities and hospitals in the Caribbean and collaborates with health institutions to support health care research projects around the world. According to the terms of the LOI, during the next two months the parties will work to finalize the clinical trial and financial terms.

NOTE 8 – ACCRUED EXPENSES

Our accrued expenses consist of:

	December 31,
	2016		2015
Accrued consulting fees	$	45,000	$	110,000
Accrued wages and related expenses		—		629,780
Accrued interest expense		10,264		101,185
Accrued other expenses		—		87,568
Total accrued expenses	$	55,264	$	928,533

F-16

UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On May 6, 2014, we entered into a consultancy agreement with two third party consultants that had a nine month term, which could be renewed and/or extended by mutual agreement. The agreement provided for a $50,000 payment at signing, which has been paid, and for three more $50,000 payments (a total of $200,000) and the issuance of 100,000 shares of our common stock upon the achievement of certain goals, as set forth in appendix II of the agreement. During the year ended December 31, 2014 we recognized $160,000 of expense applicable to this agreement. At December 31, 2015, the project was approximately 80% complete and $110,000 is included in accrued expenses on our consolidated balance sheet at that date. On December 7, 2016, upon mutual agreement, the consultancy agreement was deemed to be abandoned, because the project was not completed. In turn, one of the consultants, Dr. Brent Reynolds, has been performing other services for the Company during the year ended December 31, 2016, and has agreed to join our Board of Advisors. Dr Reynolds is currently a professor in the Department of Neurosurgery at the University of Florida, College of Medicine, where his lab focuses on the application of natural products for treating diseases and dysfunction of the nervous system. In recognition of his services to the Company during the year ended December 31, 2016, and as an inducement to join our Board of Advisors, he was issued 100,000 shares of our common stock for such services, and the fair market value of these shares in the amount of $163,783 was charged to common stock on the consolidated balance sheet at December 31, 2016, and the residual amount of $53,783 was recognized as a loss on the extinguishment of a debt in our consolidated statement of operations.

NOTE 9– FAIR VALUE MEASUREMENTS AND DERIVATIVE LIABILITIES

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

	Level 1		Level 2		Level 3		Total
Derivative liabilities	$	—	$	—	$	383,581	$	383,581

We did not have any liabilities carried at fair value measured on a recurring basis as of December 31, 2016.

Derivative Liabilities

We valued our derivative liabilities related to warrants and embedded conversion features applicable to our borrowings under our convertible notes payable (see Notes 10 and 11 below) and accrued interest payable thereon in accordance with fair value measurement guidelines. For the years ended December 31, 2016 and 2015, the following table reconciles the beginning and ending balances for our financial instruments that are carried at fair value measured on a recurring basis:

Derivative liabilities as of December 31, 2014	$	—
Additions to derivative liabilities for convertible debt conversion features and interest		359,988
Loss on revaluation of derivative liabilities during the year		23,593
Derivative liabilities as of December 31, 2015		383,581
Additions to derivative liabilities for convertible debt conversion features		557,000
Additions for modifications of note payable to Sláinte Ventures		686,612
Reductions due to conversions or repayments of convertible debt		(3,317,986	)
Loss on revaluation of derivative liabilities during the year		1,690,793
Derivative liabilities as of December 31, 2016	$	—

The estimated fair value of the derivative liabilities related to our convertible notes payable was measured as the aggregate estimated fair value of each component of the compound embedded derivative liabilities (see Note 11 and 12 below), based on Level 2 and Level 3 inputs, using a binomial lattice pricing model. Changes in the fair value of the compound embedded derivative liability at each reporting date are included in gain/ (loss) on derivative liabilities in our consolidated statement of operations.

F-17

UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 – DEFERRED REVENUE

Our deferred revenue consists of:

	December 31,
	2016			2015
Deferred revenue – WeedMD	$	383,750		$	563,750
Deferred revenue - FoxBarry		—			200,000
		383,750			763,750
Less – current portion		(180,000	)		(380,000	)
Deferred revenue, net of current portion	$	203,750		$	383,750

As described in Note 4 above, on June 9, 2014, we received 1,187,500 common shares and 3,000,000 warrants to purchase common shares of WMD in exchange for future consulting services and use of our intellectual property. We recorded the $893,750 fair value of these securities as deferred revenue and we recognized $150,000 of this amount as revenue during the period July 1, 2014 through December 31, 2014, based upon our initial three year estimate of the service period involved. Based on recent discussions with WMD, we now expect to deliver the remaining consulting services and use of our intellectual property to WMD on a relatively consistent monthly basis during the four year period January 1, 2015 through December 31, 2018. Accordingly, we are now recognizing $15,000 of deferred revenue per month. We recognized $180,000 of revenue applicable to this arrangement, in each of the years ended December 31, 2016 and 2015. At December 31, 2016, we expect to recognize $180,000 of the remaining $383,750 WMD deferred revenue during the next twelve months and accordingly, we have classified the $180,000 as a current liability on our consolidated balance sheets.

On December 28, 2014, we entered into a royalty and consulting services agreement with FoxBarry Farms, LLC (“FoxBarry”) whereby we received a $200,000 prepaid royalty payment from FoxBarry. At the time, we planned to recognize deferred royalty revenue based on actual applicable sales as defined in the agreement. During the years ended December 31, 2015 and 2014, we did not recognize any deferred revenue related to this agreement. In August 2015, we discontinued providing consulting services to FoxBarry, as our initial project with FoxBarry was abandoned due to operational issues. However, FoxBarry appears to no longer be in existence, and since all of our conditions pursuant to the agreement have been satisfied, we elected to recognize the $200,000 of deferred income during the year ended December 31, 2016, as other income.

NOTE 11 – NOTES PAYABLE 

Our notes payable consist of:

	December 31,
	2016		2015
Note payable - WeedMD	$	—	$	175,000
Note payable – Slainte		—		600,000
Total notes payable	$	—	$	775,000

On July 7, 2014, we issued a $175,000, unsecured, demand promissory note bearing interest at 5% to WeedMD for cash used in our business development activities. On March 24, 2016, an unrelated third party agreed to assume all of our obligations, including accrued and unpaid interest, pursuant to the terms of a $175,000 note payable we owed to WeedMD, in consideration for the transfer by us of 1,100,000 shares of the common stock of WMD to the unrelated third party. WMD consented to the assumption of the loan by the unrelated third party, and released us from any further liability with respect to the loan.

On December 18, 2014, we issued a $600,000 unsecured promissory note (the “Slainte Note”) bearing interest at 12% to Slainte Ventures, LLC (“Slainte”). The principal and accrued interest were due on the earlier of December 17, 2015, or  upon the closing of certain capital raising transactions as described in the note. The default rate of interest under the note is 18%. Debt issuance costs of $13,500 were immediately recognized as interest expense as, at the time, we expected to close on a capital raising transaction in early 2015.

F-18

UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On October 6, 2015, we borrowed funds from a third party and did not apply the borrowed funds to the Slainte Note resulting in a default under the terms of the note, and thus, we received a default waiver from Slainte.

On March 18, 2016, we entered into an agreement with Slainte whereby Slainte waived default, amended the terms and extended the maturity date of the Slainte Note until December 17, 2016, and agreed to accept a warrant in lieu of interest due on the loan. The warrant allows Slainte to purchase 416,667 shares of our common stock; plus that number of shares of our common stock equal in number to (i) the product of the then-applicable interest rate under the Slainte Note and the amount of principal outstanding on the Note, calculated on a daily basis and paid for actual days elapsed, during the period beginning on December 18, 2015, and ending on the date on which the Note is paid in full, divided by (ii) $0.18; plus that number of shares of our common stock equal in number to (i) the product of 0.02 and the sum of the amount of principal and interest outstanding on the Note on the first day of each calendar month, beginning with February 1, 2016, divided by (ii) $0.18. The warrant is exercisable at a price of $0.18 per share, subject to adjustment in the event of stock splits, the sale of our shares of common stock at a price below $0.18 per share or the sale of equity securities with a conversion price of less than $0.18 per share.

On November 14, 2016, the Slainte Note was again amended to extend the maturity date to December 30, 2017 and to allow the note to be converted into shares of the Company's common stock. The number of shares to be issued upon conversion of the note will be determined by dividing the dollar amount of the principal to be converted by 70% of the average closing price of the Company's common stock for the ten business days immediately preceding the date of the conversion. The warrant can be exercised at any time during the five year period following the full repayment of the loan; the exercise price can be paid in cash or through a cashless exercise feature; and the warrant grants certain registration rights to Slainte applicable to all shares of our common stock owned or controlled by Slainte, including shares issued upon exercise of the warrant. In addition, Slainte granted us a put option, exercisable upon repayment of the loan prior to December 17, 2016, that requires Slainte to purchase from us, for $100,000, that number of shares of our common stock equal in number to (i) $100,000 divided by (ii) the product of 80% and the average price of our common stock for the 30 trading days immediately prior to the date the put option is exercised.

Due to the fair value of the warrants issued and conversion feature added in connection with the amended note agreements, the modifications were considered substantial (i.e. greater than 10% of the carrying value of the debt). As a result, an extinguishment of debt was deemed to have occurred, resulting in the recognition of extinguishment losses totaling $674,666.

Following the amendment in November 2016, Slainte converted the entire principal amount of the note into 594,540 shares of the Company's common stock. Slainte also exercised the warrants through the cashless exercise feature resulting in the issuance of 1,330,007 shares of the Company's common stock. He also purchased 104,939 shares of the Company's common stock for $100,000 in connection with the Company's exercise of the put option.

Prior to their exercise in November 2016, these warrants and conversion feature were accounted for as a liability under ASC 815. The Company assessed the fair value of the warrants and conversion feature upon issuance and conversion and at each reporting period based on the Black-Scholes pricing model. See below for the range of variables used in assessing the fair value during the year ended December 31, 2016.

	Warrants December 31, 2016	Conversion Feature December 31, 2016
Expected life (years)	4.29 - 5.0	1.09 - 1.13
Risk-free interest rate	1.01% - 1.90%	0.78% - 0.79%
Expected volatility	214% - 227%	200% - 203%

In connection with these warrants, the Company recognized a loss on the change in fair value of warrant liability of $1,616,215 during the year ended December 31, 2016. In connection with the conversion feature, the Company recognized a loss on the change in fair value of derivative liability of $13,947.

F-19

UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Expected volatility is based primarily on historical volatility. Historical volatility was computed using weekly pricing observations for recent periods that correspond to the expected life of the warrants or conversion feature. The Company believes this method produces an estimate that is representative of our expectations of future volatility over the expected term of these warrants or conversion feature. The expected life is based on the remaining term of the warrants or conversion feature. The risk-free interest rate is based on U.S. Treasury securities rates.

On March 24, 2016, an unrelated third party agreed to assume all of our obligations, including accrued and unpaid interest, pursuant to the terms of a $175,000 note payable we owed to WeedMD, in consideration for the transfer by us of 1,100,000 shares of the common stock of WMD to the unrelated third party. WMD consented to the assumption of the loan by the unrelated third party, and released us from any further liability with respect to the loan.

NOTE 12 – CONVERTIBLE NOTES PAYABLE

From time to time during the year ended December 31, 2016 and 2015, we issued convertible promissory notes to unaffiliated third parties. The net proceeds from these transactions are used for general working capital purposes. The debt discounts and deferred financing costs on the convertible promissory notes are amortized on a straight-line basis, which approximates the effective interest rate method, over the term of the note, and this amortization is included in interest expense in our consolidated statements of operations.

The following table summarizes our convertible promissory notes outstanding as of December 31, 2016 and 2015:

			Maturity	Interest			Base	December 31,
Issue Date	Holder	Security	Date	Rate			Conversion Rate	2016			2015
12/28/2016	Tangiers Investment Group	Unsecured	7/8/2017		10	%	$1.00 through maturity; 55% of lowest closing price thereafter	$	35,000		$	—
8/10/2016	JSJ Investments	Unsecured	5/10/2017		12	%	$0.20 during first 180 days; 45% of lowest closing price thereafter		125,000			—
10/6/2015	Vis Vires Group	Unsecured	6/30/2016		8	%	58% of three lowest closing bids		—			59,000
10/12/2015	JSJ Investments	Unsecured	7/8/2016		12	%	55% of five lowest trades		—			102,000
12/9/2015	Tangiers Investment Group	Secured	12/8/2016		10	%	55% of three lowest closing bids		—			220,000
									160,000			381,000
							Less unamortized discount		(34,453	)		(272,793	)
								$	125,547		$	108,207

The convertible notes, including accrued interest payable, may be converted into shares of our common stock at the Conversion Price, in whole, or in part, at various times, after the date of issuance, at the option of the holder (the “Conversion Feature”), as defined by the terms of the convertible note.

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

F-20

UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

If these conversion rates results in a beneficial conversion feature (“BCF”), the BCF is recorded as an unamortized convertible debt discount, which is required to be valued and amortized to interest expense over the term of the Note. We amortize our convertible debt discount on a straight-line basis, which approximates the effective interest rate method, and this amortization is included in amortization of debt discount in our consolidated statements of operations. If a convertible note is repaid, any remaining unamortized deferred financing costs and unamortized debt discount are expensed on the date of repayment.

If a convertible notes is convertible into an unlimited number of unregistered, restricted common shares, it is classified as having an unlimited shares feature (“Unlimited Shares Feature”). The difference between the closing price of our common stock and the VCR is referred to as the Variable Conversion Rate Differential (“VCRD”). If, both the Unlimited Shares Feature and the VCRD meet the definition of an embedded derivative, then together they create a compound embedded derivative liability or, hereafter, simply a “derivative liability.”

In accordance with U.S. GAAP, our derivative liabilities are recorded at fair value on the date of issuance and subsequently remeasured to fair value each reporting period with any change in fair value being recognized as gain (loss) on derivative liabilities in our consolidated statement of operations. See Note 9.

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

During the years ended December 31, 2016 and 2015, we recorded deferred financing fees of $0 and $41,100, respectively, in connection with the issuance of our convertible notes and we recognized $32,400 and $8,700 of amortization of deferred financing costs during the year ended December 31, 2016 and 2015, respectively. This amount is included in interest expense in our consolidated statements of operations.

The aggregate fair value of the derivative liabilities applicable to our convertible notes on the dates of issuance was $557,000 and $355,293 for convertible notes issued during the years ended December 31, 2016 and 2015, respectively, and was recorded as derivative liabilities on our consolidated balance sheets. The related BCF debt discount was recorded as a reduction to our convertible notes payable on our consolidated balance sheets. During the years ended December 31, 2016 and 2015, we recognized $267,258 and $82,500, respectively, of amortization related to the convertible notes and recorded this amount as amortization of debt discount in our consolidated statements of operations.

We recognized $35,719 and $5,121 of interest expense applicable to our convertible notes during the years ended December 31, 2016 and 2015, respectively. As of December 31, 2016 and 2015, $5,876 and $5,121, respectively, of this interest is accrued within accrued expenses on our consolidated balance sheets.

2015 Convertible Notes

At various times during the year ended December 31, 2015, the Company issued convertible promissory notes (the "2015 Notes") in the aggregate principal balance of $381,000. The 2015 Notes, including accrued interest payable, may be converted into shares of our common stock at the Conversion Price, as defined below, in whole, or in part, at any time beginning 180 days after the date of issuance, at the option of the holder. The 2015 Notes also contain prepayment options whereby we may, during the first 180 days that each note is outstanding, prepay the note by paying prepayment premiums ranging from 10% to 40% of the principal then outstanding depending on the date of prepayment.

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

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

F-21

UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the year ended December 31, 2016, two of these notes in the aggregate principal balance of $161,000 were repaid. The $220,000 note dated December 9, 2015 from Tangiers Investment Group, LLC was converted in full into a total of 2,843,698 shares of the Company's common stock at various dates during the year ended December 31, 2016.

Slainte Convertible Notes

On March 30, 2016, we borrowed $81,978, from Slainte Ventures and used the proceeds to repay principal and accrued interest applicable to our $59,000 convertible promissory note dated October 6, 2015, to Vis Vires Group, Inc. On April 6, 2016, we borrowed an additional $75,000 from Slainte Ventures and used the proceeds, along with $52,500 of advances to the Company by officers and directors of the Company, to repay principal and accrued interest applicable to our $102,000 convertible promissory note, dated October 12, 2015, to JSJ Investments, Inc. On July 5, 2016, we borrowed $50,000 from Slainte Ventures and used the proceeds for working capital purposes. These loans, together with interest at 12% per year, are payable on December 30, 2016. We can prepay the loans at any time. If the loans are repaid on or before September 30, 2016, the principal amount which is being repaid will increase by 10%. If the loans are repaid after September 30, 2016, the principal amount which is being repaid will increase by 15%. The amount of the principal increase may be paid with shares of our common stock. The number of shares to be issued for such purpose will be determined by dividing the average closing price of our common stock (which in no case can be greater than $0.45) for the ten trading days preceding the prepayment date. The original principal of the loan was not convertible prior to maturity. If the loans were not paid when due, then at any time between the maturity date and January 10, 2017, Slainte may convert the outstanding principal and interest on the loan into shares of our common stock. The number of shares to be issued on conversion was to be determined by dividing the average closing price of our common stock (which in no case can be greater than $0.45) for the ten trading days preceding the conversion date by the outstanding principal and interest on the loan on the conversion date.

The notes were not paid prior to the maturity date of December 30, 2016. As a result, the notes became convertible effective December 31, 2016. Derivative liabilities in the aggregate amount of $557,000 were recorded upon these notes becoming convertible. The notes along with their accrued interest were converted into 497,296 shares of the Company's common stock on December 31, 2016, and the value of the derivative liabilities were extinguished to common stock.

JSJ Convertible Note

On August 10, 2016, we borrowed $125,000 from JSJ Investments and used the proceeds for working capital purposes. The loan, together with interest at 12% per year, is payable on May 10, 2017. We can prepay the loan at any time. If the loan is repaid on or before October 16, the principal amount which is being repaid will increase by 25%. If the loan is repaid on or before October 16, 2016 through February 12, 2016, the principal amount which is being repaid will increase by 30%. Thereafter, the note may be repaid only upon written consent from JSJ, and the principal amount that is being repaid will increase by 30%. At any time after the date of the note, JSJ is entitled to convert all of the outstanding and unpaid principal in to shares of our common stock. Until February 12, 2017, the conversion price is $0.20 per share, and thereafter, the conversion price will be at a 45% discount to the lowest closing price of our common stock for the ten trading days preceding the conversion date. JSJ may not make any conversions that would result in the note holder holding more than 4.99% of our issued and outstanding common stock at any one time. If the notes are held through February 12, 2017, derivative accounting will apply upon the change to a variable conversion price. This convertible note was paid in full on February 9, 2017, as more fully described in Note 19 – Subsequent Events.

Tangiers Convertible Note

In connection with an equity line agreement discussed in Note 20, the Company issued a promissory note to Tangiers for the principal sum of $35,000 as a commitment fee for the equity line. The note bears interest at 10% per year, is unsecured, and is due and payable on July 8, 2017. At the option of Tangiers, all or any part of the unpaid principal amount of the note may be converted into shares of the Company's common stock. The number of shares to be issued on any conversion will be determined by dividing the principal amount of the note to be converted by $1.00. If the note is not repaid or converted prior to maturity, the conversion price will change to 55% of the lowest closing bid price during the 20 days preceding the conversion date. If the note is held past maturity, derivative accounting will apply upon the change to a variable conversion price.

F-22

UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 – NOTES PAYABLE TO AND ADVANCES FROM OFFICERS AND DIRECTORS

Notes payable to and advance from officers and directors consisted of the following, at December 31, 2016 and 2015:

	December 31,
	2016		2015
Note payable to Earnie Blackmon, an officer and director	$	28,750	$	—
Note payable to Tony Verzura, an officer and director		28,750		—
Advances from officers and directors		71,008		—
Accrued wages payable to officers and directors		42,695		612,512
	$	171,203	$	612,512

On April 6, 2016, we borrowed $25,000 from Ernest Blackmon and $25,000 from Tony Verzura and used the proceeds to repay principal and interest applicable on our $102,000 convertible promissory note dated October 12, 2015, to JSJ Investments Inc. The loans, together with interest at 12% per year, are payable on December 30, 2016. We may prepay the loans at any time. If the loans are repaid on or before September 30, 2016, the principal amount, which is being repaid, will increase by 10%. If the loans are repaid after September 30, 2016, the principal amount, which is being repaid will increase by 15%. As of December 31, 2016, the loans were not repaid, when they were due, per the terms of the notes, and thus, the principal balance of the notes was increased to $57,500 in the aggregate, with the addition to the principal balance charged to interest expense.

During the year ended December 31, 2016, Messrs. Blackmon, Verzura and Ruby, who are officers and directors of the Company, paid obligations and expenses on behalf of the Company, from their own individual, personal funds.  Such payments have been recorded in the consolidated balance sheets as a component of Notes payable to and advances from officers and directors.

NOTE 14 – STOCKHOLDERS’ DEFICIT

2014 Stock Split

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

2014 Equity Offering

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

2014 Change in Authorized Share Capital

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

Common Stock Issued For Warrant Outstanding

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

F-23

UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

Warrants:

The following table summarizes our share warrants outstanding as of December 31, 2016 and 2015:

	Year Ended December 31,
	2016					2015
	Number of Shares			Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
Warrants outstanding, beginning of period		3,000,000		$	12.00	3,170,044		$	11.52
Warrants issued to consultant		666,667			0.18	—			—
Cashless issued upon conversion of Slainte note		1,746,674			—
Warrants exercised		(963,562	)		—	—			—
Repurchased and cancelled		—				(170,044	)		3.00
Expired		(3,000,000	)		—	—			—
Warrants outstanding, end of period		1,449,779		$	0.180	3,000,000		$	12.00
Warrants exercisable, end of period		1,449,779		$	0.180	3,000,000		$	12.00

The weighted-average remaining contractual life for warrants outstanding and exercisable at December 31, 2016, is 4.5 years, and the aggregate intrinsic value of warrants outstanding and exercisable at December 31, 2016 is $0.

The warrants issued during the year ended December 31, 2016 were valued utilizing the Black Scholes option pricing model and the following range of assumptions on the date of valuation:

Stock price	$0.16 - $2.18
Exercise price	$0.18
Risk free interest rate	1.01% - 1.37%
Expected term (years)	5
Expected volatility	322% - 504%
Expected dividends	0%

F-24

UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2014 Equity Incentive Plan

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

Stock Options

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

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

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

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

On January 12, 2016, we awarded 1,050,000 stock options to each of Messrs. Blackmon, Verzura and 980,000 stock options to Mr. Ruby under our 2014 Stock Incentive Plan. The options were fully vested at the time of grant and give the option holder the right to purchase shares of our common stock at $0.20 per share during the ten year term of the option.

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

Stock price	$	0.20
Exercise price	$	0.20
Risk free interest rate		1.98	%
Expected term (years)		10.0
Expected volatility		173	%
Expected dividends		0	%

At December 31, 2015 the fair value of these 3,080,000 options totaling $612,512, which was included in accrued expenses on our consolidated balance sheets, and on January 15, 2016, the option grant date, we increased common stock and decreased accrued expenses by this amount to account for the issuance of these options on that date.

F-25

UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes our stock options outstanding as of both December 31, 2016 and 2015, respectively:

	Number of Shares	Weighted Average Remaining Life (Years)	Weighted Average Exercise Price
Stock options outstanding at December 31, 2014	—		—
Issued	600,000	9.8	$0.70
Exercised	—	—	—
Expired	—	—	—
Stock options outstanding at December 31, 2015	600,000	9.8	$0.70
Stock options exercisable at December 31, 2015	600,000		$0.70
Stock options outstanding at December 31, 2015	600,000	9.8
Issued	3,080,000	10.0	$0.20
Exercised	—	—	—
Expired	—	—	—
Stock options outstanding at December 31, 2016	3,680,000	8.9	$0.28
Stock options exercisable at December 31, 2016	3,680,000	8.9	$0.28

The weighted-average remaining contractual life for stock options outstanding and exercisable at December 31, 2016, is 8.9 years, and the aggregate intrinsic value of options outstanding and exercisable at December 31, 2016 is $0.

NOTE 15 – SHARE-BASED COMPENSATION

Share-based Compensation

We recognize share-based compensation expense in cost of revenues, sales and marketing expenses, R&D expenses and general and administrative expenses based on the fair value of common shares issued for services. In addition, we accrue share-based compensation expense for estimated share-based awards earned during the years ended December 31, 2016 and 2015, under our 2014 Equity Incentive Plan. Share-based compensation expense for the years ended December 31, 2016 and 2015 is, as follows:

	December 31,
	2016		2015
Warrants issued for consulting services	$	319,419	$	47,880
Warrants issued for accrual of share-based awards to officers and directors		—		612,512
Common stock issued for accounts payable and accrued expenses		223,484		—
Common stock issued for services		271,097		67,500
Amortization of common stock issued for prepaid services		—		302,789
	$	814,000	$	1,030,681

Of the $814,000 of share-based compensation, $191,550 was reported as a reduction of accounts payable and accrued expenses pertaining to amounts owed as of the beginning of the year ended December 31, 2016, and $31,934 was recognized as a loss on the extinguishment of debt during the year ended December 31, 2016.

NOTE 16 – INCOME TAXES

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

F-26

UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

We have not taken a tax position that, if challenged, would have a material effect on our consolidated financial statements for the years ended December 31, 2016 and 2015, as defined under ASC 740. We did not recognize any adjustment to our liability for uncertain tax positions and therefore did not record any adjustment to the beginning balance of our accumulated deficit on our consolidated balance sheets.

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

	Years Ended December 31,
	2016			2015
Statutory U.S. federal tax rate		39	%		39	%
Effect of increase in valuation allowance		(39	%)		(39	%)
		—	%		—	%

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

	December 31,
	2016			2015
Net loss carry forward	$	3,648,316		$	2,148,248
Valuation allowance		(3,648,316	)		(2,148,248	)
	$	—		$	—

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

	Years Ended December 31,
	2016			2015
Tax benefit at statutory rate	$	1,500,068		$	1,124,511
Valuation allowance		(1,500,068	)		(1,124,511	)
	$	—		$	—

NOTE 17 – RELATED PARTY TRANSACTIONS

Affiliate Customer

During 2010, Messrs. Blackmon and Verzura, who are officers and directors of our Company, made loans to, or equity investments in, one of our customers. Effective June 30, 2015, Messrs. Blackmon and Verzura completely divested themselves of those interests. As Messrs. Blackmon and Verzura may have had significant influence on management or operating polices of the customer until June 30, 2015, we classified professional fees in the amount of $4,425 to this customer as revenues - affiliate, in our consolidated statements of operations and accounts receivable from this customer, as due from related parties on our consolidated balance sheets.

Lone Mountain

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

F-27

UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CRD

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

Blue River Inc.

In February 2015, Messrs. Blackmon and Verzura, who are officers and directors of our Company, formed Blue River Inc. (“Blue River”), a Colorado corporation in the cannabis industry that plans to manufacture and wholesale medicinal and recreational cannabis including our Prana medicinals products. On January 1, 2016, our wholly owned subsidiary, UCANN California Corporation (“UCANN CA”), entered into a five year consulting and intellectual property licensing arrangement with Blue River whereby UCANN CA will provide consulting services to Blue River at hourly rates and a non-exclusive license to our intellectual property for $5,000 per month. The arrangement can be terminated by either party by written agreement. During the year ended December 31, 2015, we advanced Blue River $3,284 and included this amount in due from related parties. For the year ended December 31, 2016 and 2015, we recognized consulting fee revenue in the amounts of $71,680 and $4,425, respectively, which amounts are included as Revenue, affiliate in our consolidated statements of operations. At December 31, 2016 and 2015, we owed Blue River $4,293 and $0, respectively, in trade payables and included this amount in accounts payable.

Advesa Corporation

Advesa Corporation (“Advesa”), a California corporation, was formed in September 2016, and is 100% owned by Mr. Verzura.  The Company entered into a memo of understanding in November 2016, under which we provide consulting services to Advesa, and Advesa assists our largest customer, who is located in California, produce our Prana biomedical line of products under a licensing agreement with that California customer.  During the year ended December 31, 2016 we advanced Advesa approximately $20,499 and included this amount in Due from related parties in our consolidated balance sheet.

Amounts due from related parties consist of:

	December 31,
	2016		2015
Blue River	$	—	$	3,284
Advesa		21,755		—
CRD		5,000		5,000
Total due from related parties	$	26,755	$	8,284

NOTE 18 – COMMITMENTS AND CONTINGENCIES

Contractual Obligations and Commercial Commitments

Consulting Agreement for GAAP Reporting Services

On February 20, 2016, we entered into a consulting agreement with a third party that has a twelve month term, and which can be extended by mutual agreement. The agreement provides for the issuance of a five (5) year warrant to the consultant, upon the execution of the agreement, to purchase 250,000 shares of our common stock at a price of $0.18 per share, plus the payment of $7,500 on the first day of each month, beginning March 1, 2016, coupled with the monthly issuance of five (5) year warrants to purchase our common stock in an amount of shares determined by dividing $7,500 by $0.18 per share. These warrants are exercisable at a price of $0.18 per share. During the year ended 31, 2016, we recognized in our consolidated statements of operations expenses in the total amount of $394,215 related to this contract, as follows:

	Year Ended December 31, 2016
Cash paid to consultant	$	15,000
Shares of common stock issued to consultant		62,781
Fair value of warrants issued to consultant		319,419
	$	397,200

F-28

UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Financing Commitment

On December 28, 2016, we entered into an equity line of credit agreement with Tangiers Global, LLC (“Tangiers”). Under the equity line agreement, Tangiers has agreed to provide the Company with up to $10,000,000 of funding through the purchase of shares of the Company’s common stock. During the term of the agreement, the Company may deliver a put notice to Tangiers, which will specify the number of shares which the Company will sell to Tangiers. The minimum amount the Company can draw down at any one time is $5,000, and the maximum amount the Company can draw down at any one time is $350,000 as determined by the formula contained in the equity line agreement.

A closing will occur on the date which is no earlier than five trading days following, and no later than seven trading days following, the applicable put notice. On each closing date, the Company will sell, and Tangiers will purchase, the shares of the Company’s common stock specified in the put notice. The amount to be paid by Tangiers on a particular closing date will be determined by multiplying the purchase price by the number of shares specified in the put notice. The purchase price is 85% of the average of the two lowest trading prices of the Company’s common stock during the pricing period applicable to the put notice. The pricing period, with respect to a particular put notice, is five consecutive trading days including, and immediately following, the delivery of a put notice to Tangiers. The Company may submit a put notice once every ten trading days provided the closing of the previous transaction has taken place. The Company is under no obligation to submit any put notices.

The equity line agreement has a term of 36 months, which will begin on the effective date of the registration statement, which the Company has agreed to file with the Securities and Exchange Commission so that the shares of common stock to be sold to Tangiers may be sold in the public market. The Company issued a promissory note to Tangiers for the principal sum of $35,000 as a commitment fee for the equity line. The note bears interest at 10% per year, is unsecured, and is due and payable on July 8, 2017. The note is recorded on our consolidated balance sheet at December 31, 2016 in the amount of $35,000, net of a discount of $34,453. At the option of Tangiers, all or any part of the unpaid principal amount of the note may be converted into shares of the Company’s common stock. The number of shares to be issued on any conversion will be determined by dividing the principal amount of the note to be converted by $1.00.

Legal Proceedings

There have been no material developments in legal proceedings in which we are involved during the year ended December 31, 2016.

NOTE 19 – SUBSEQUENT EVENTS

JSJ Convertible Note

On August 10, 2016, we borrowed $125,000 from JSJ Investments and used the proceeds for working capital purposes. The note, together with interest at 12% per year, was due and payable on May 10, 2017. We could prepay the loan at any time, and if we were to repay the note on or before October 16, 2016 through February 12, 2016, the principal amount which was being repaid would increase by 30%. On February 13, 2017, the note was repaid in the form of the issuance of 379,100 shares of our common stock to JSJ Investments.

In accordance with ASC 855-10 we have analyzed its operations subsequent to December 31, 2016, to the date these consolidated financial statements were issued, and has determined that, other that as disclosed above, we do not have any material subsequent events to disclose in these consolidated financial statements.

F-29

UNITED CANNABIS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIGNATURES

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

	UNITED CANNABIS CORPORATION
Date: March 13, 2017	By:	/s/ Earnest Blackmon
		Earnest Blackmon
		Chief Executive Officer

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

Signature	Title	Date
/s/ Earnest Blackmon
Earnest Blackmon	Chief Executive Officer, Principal Financial Officer, Principal Accounting Officer and Director	March 13, 2017
/s/ Chadwick Ruby
Chadwick Ruby	Director	March 13, 2017
/s/ Tony Verzura
Tony Verzura	Director	March 13, 2017

EX-23

EXHIBIT 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

United Cannabis Corporation

Denver, Colorado

We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (File number 333-214253) of United Cannabis Corporation of our report dated February 24, 2017 relating to the financial statements of United Cannabis Corporation which appear in this Form 10-K. Our report on the financial statements contains an explanatory paragraph regarding the Company’s ability to continue as a going concern.

/s/ B.F. Borgers, CPA, PC

B.F. Borgers, CPA, PC

Lakewood, Colorado

March 10, 2017

EX-31

EXHIBIT 31

CERTIFICATIONS

I, Earnest Blackmon, certify that;

1.

I have reviewed this annual report on Form 10-K of United Cannabis Corporation;

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 the 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(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer(s) 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.

March 13, 2017	By:	/s/ Earnest Blackmon
		Earnest Blackmon, Principal Executive Officer

CERTIFICATIONS

I, Earnest Blackmon, certify that;

1.

I have reviewed this annual report on Form 10-K of United Cannabis Corporation;

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 the 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(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer(s) 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.

March 13, 2017	By:	/s/ Earnest Blackmon
		Earnest Blackmon, Principal Financial Officer

EX-32

EXHIBIT 32

In connection with the Annual Report of United Cannabis Corporation (the “Company”) on Form 10-K for the period ending December 31, 2016 as filed with the Securities and Exchange Commission (the “Report”), Earnest Blackmon, the Principal Executive and Financial Officer of the Company, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of their knowledge:

(1)

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

(2)

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

March 13, 2017	By:	/s/ Earnest Blackmon
		Earnest Blackmon, Principal Executive and Financial Officer

XML

Document and Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2016	Feb. 28, 2017	Jun. 30, 2016
Document And Entity Information
Entity Registrant Name	United Cannabis Corp
Entity Central Index Key	0001436161
Document Type	10-K
Document Period End Date	Dec. 31, 2016
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Is Entity a Well-known Seasoned Issuer	No
Is Entity a Voluntary Filer	No
Is Entity's Reporting Status Current	Yes
Entity Public Float			$ 1,365,000
Entity Common Stock, Shares Outstanding		50,650,994
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2016

XML

CONSOLIDATED BALANCE SHEETS - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 112,621	$ 118,420
Accounts receivable	24,484	53,435
Due from related parties	26,775	8,284
Prepaid expenses		56,341
Deferred financing costs, net		32,400
Total current assets	163,880	268,880
Intangible assets	32,273	32,273
Investments in non-marketable equity securities		205,275
Equity method investments	88,000	88,000
Total assets	284,153	594,428
Current liabilities:
Accounts payable	25,048	104,238
Accrued expenses	55,264	928,533
Derivative liabilities		383,581
Current portion of deferred revenue	180,000	380,000
Notes payable		775,000
Notes payable to and advances from officers and directors	171,203
Convertible notes payable, net of $34,543 and $272,793 debt discount, respectively	125,547	108,207
Total current liabilities	557,062	2,679,559
Long term liabilities:
Deferred revenue, net of current portion	203,750	383,750
Total liabilities	760,812	3,063,309
Stockholders' deficit:
Preferred stock, no par value; 10,000,000 shares authorized; none issued and outstanding
Common stock, no par value; 100,000,000 shares authorized; 50,650,994 and 44,988,500 shares issued and outstanding, respectively	8,885,674	3,039,448
Accumulated deficit	(9,362,333)	(5,508,329)
Total stockholders' deficit	(476,659)	(2,468,881)
Total liabilities and stockholders' deficit	$ 284,153	$ 594,428

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Convertible notes payable, debt discount	$ 34,543	$ 272,793
Preferred stock, no par value
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, no par value
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	50,650,994	44,988,500
Common stock, shares outstanding	50,650,994	44,988,500

XML

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Revenues:
Revenues, non-affiliates	$ 695,095	$ 558,248
Revenues, affiliate	20,000	4,425
Total revenues	715,095	562,673
Cost of revenues:
Cost of revenues, non-affiliate	335,571	75,672
Cost of revenues, affiliate	7,500	74,564
Total cost of revenues	343,071	150,236
Gross profit	372,024	412,437
Operating expenses:
Marketing, advertising and new business development	68,007	86,797
Research and development	23,124	329
Legal, accounting, consulting and public reporting	643,913	645,503
General and administrative	404,002	1,101,604
Total operating expenses	1,139,046	1,834,233
Loss from operations	(767,022)	(1,421,796)
Other income (expense):
Other income and expenses	184,875
Loss on derivative liabilities	(1,894,258)	(23,593)
Interest expense	(418,437)	(107,496)
Amortization of debt discount	(267,258)	(82,500)
Equity in net loss of unconsolidated affiliate		(90,900)
Loss on extinguishment of debt and repurchase of warrants	(691,904)	(768,602)
Loss on investment in non-marketable equity securities		(388,475)
Total other income (expense), net	(3,086,982)	(1,461,566)
Net Loss	$ (3,854,004)	$ (2,883,362)
Basic and diluted net loss per share:	$ (0.08)	$ (0.06)
Basic and diluted weighted-average common shares outstanding:	46,722,407	44,793,510

XML

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY - USD ($)	Common Stock [Member]	Accumulated Deficit [Member]	Total
Beginning balance at Dec. 31, 2014	$ 1,626,968	$ (2,624,967)	$ (997,999)
Beginning balance, shares at Dec. 31, 2014	44,060,001
Shares issued for repurchase of warrant	$ 987,390		987,390
Shares issued for repurchase of warrant, shares	621,000
Cancellation of warrant	$ (218,788)		(218,788)
Cancellation of warrant, shares
Shares issued for services	$ 226,215		226,215
Options issued to officers and directors for accrued wages			12,279
Warrants issued for services			47,880
Shares issued for services, shares	307,500
Stock options issued for compensation	$ 417,663		417,663
Stock options issued for compensation, shares
Net loss		(2,883,362)	(2,883,362)
Ending balance at Dec. 31, 2015	$ 3,039,448	(5,508,329)	(2,468,881)
Ending balance, shares at Dec. 31, 2015	44,988,501
Options issued to officers and directors for accrued wages	$ 612,512
Options issued to officers and directors for accrued wages, shares
Warrants issued for services	$ 319,419		319,419
Stock options issued for compensation	$ 271,097		271,097
Stock options issued for compensation, shares	565,576
Shares issued for payables and accrued expenses	$ 223,484		223,484
Shares issued for payables and accrued expenses, shares	509,549
Conversion of note to Tangiers Investment Group	$ 473,966		473,966
Conversion of note to Tangiers Investment Group, shares	2,843,698
Conversion of notes to Slainte Ventures	$ 3,845,748		3,845,748
Conversion of notes to Slainte Ventures, shares	1,638,731
Share buy-back with exercise of put option	$ 100,000		100,000
Share buy-back with exercise of put option, shares	104,939
Net loss		(3,854,004)	(3,854,004)
Ending balance at Dec. 31, 2016	$ 8,885,674	$ (9,362,333)	$ (476,659)
Ending balance, shares at Dec. 31, 2016	50,650,994

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Operating activities:
Net loss	$ (3,854,004)	$ (2,883,362)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Increase (decrease) in provision for losses on accounts receivable	(4,619)	24,185
Amortization of debt discount	267,258	82,500
Amortization of deferred financing costs	32,400	8,700
Non-cash interest expense	199,206	4,694
Loan origination discount	15,500
Share-based compensation, net	622,450	1,030,681
Deferred revenue in the form of non-marketable equity securities recognized as revenue	(180,000)	(180,000)
Loss on revaluation of derivative liabilities	1,894,258	23,593
Loss on extinguishment of debt and repurchase of warrants	691,904	768,602
Loss on non-marketable equity securities	15,125	388,475
Equity in net loss of unconsolidated affiliate		90,900
Abandonment of FoxBarry consulting project and resultant recognition of deferred revenue	(200,000)
Changes in operating assets and liabilities:
Accounts receivable	33,570	(68,263)
Due from related party	(18,491)	(8,284)
Prepaid expenses	56,341	(3,394)
Accounts payable and accrued expenses	40,729	195,825
Accrued wages payable to officers and directors	42,695
Advances from officers and directors	71,008
Net cash used in operating activities	(274,670)	(525,148)
Investing activities:
Purchase of intangible assets		(17,685)
Purchase of equity method investments
Net cash provided by (used in) investing activities		(17,685)
Financing activities:
Proceeds from notes payable to officers and directors	50,000
Net proceeds from issuance of convertible debt and warrants	316,478	339,900
Repayment of convertible debt and notes payable	(242,607)
Proceeds from issuance of common shares and deposit on warrant exercise	145,000
Net cash provided by (used in) financing activities	268,871	339,900
Net increase (decrease) in cash	(5,799)	(202,933)
Cash, beginning of period	118,420	321,353
Cash, end of period	112,621	118,420
Supplemental schedule of cash flow information:
Cash paid for interest	8,165
Cash paid for income taxes
Supplemental disclosure of non-cash investing and financing activities:
Issuance of stock options in exchange for accrued wages payable to officers and directors	612,512
Reduction of convertible notes payable due to the conversion by Tangiers Investment Group	220,000
Issuance of common stock upon conversion of Tangiers Investment Group convertible note	473,965
Reduction of three convertible notes payable due to the conversion by Slainte Ventures	206,978
Issuance of common stock upon conversion of Slainte Ventures note payable	218,038
Reduction of note payable due to the conversion by Slainte Ventures	600,000
Issuance of common stock upon conversion of Slainte Ventures note payable	3,845,748
Reduction of notes payable in exchange for 1,100,000 shares of common stock of WeedMD	175,000
Intangible asset costs included in accounts payable		12,279
Issuance of common stock for services		47,880
Issuance of common stock for prepaid professional fees		187,335
Issuance of common stock for repurchase of warrant		987,390
Warrants cancelled	3,000,000	218,788
Issuance of options for compensation, accrued expenses and accounts payable		417,664
Issuance of convertible note payable for debt issuance costs		41,000
Debt conversion feature issued for debt discount		$ (355,293)

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical)	12 Months Ended
	Dec. 31, 2016 shares
WeedMD RX Inc. (''WMD'') [Member]
Notes payable in exchange for shares of common stock	1,100,000

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BUSINESS ORGANIZATION AND NATURE OF OPERATIONS

12 Months Ended

Dec. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BUSINESS ORGANIZATION AND NATURE OF OPERATIONS

NOTE 1 –BUSINESS ORGANIZATION AND NATURE OF OPERATIONS

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

Background and Current Operations

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

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

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

In connection with this transaction:

· Messrs. Blackmon, Verzura and Ruby licensed to us all of their knowledge and know-how relating to the design and buildout of cultivation facilities, growing/cultivation systems, seed-to-sale protocols and procedures, products, a genetic catalogue including over 150 different strains, an advanced cannabinoid therapy program called "A.C.T. Now", security, regulatory compliance, and other methods and processes which relate to the cannabis industry.

· The territory for this license is the entire world and the license runs in perpetuity. There are no royalty payments under the License Agreement.

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

· Mr. Blackmon was elected as our President, Mr. Ruby was elected as Chief Operating Officer and Mr. Verzura was elected as Vice President.

· A total of 41,690,000 previously outstanding shares of common stock were cancelled resulting in a total of 43,620,000 shares of common stock outstanding on March 26, 2014.

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

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

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

As of December 31, 2016, 28 states and the District of Columbia allow their citizens to use medical marijuana, and four states and the District of Columbia have legalized marijuana for recreational use. The state laws are in conflict with the federal Controlled Substances Act, which makes marijuana use and possession illegal on a national level. The Obama administration has effectively stated that it is not an efficient use of resources to direct federal law enforcement agencies to prosecute those lawfully abiding by state-designated laws allowing the use and distribution of medical and recreational marijuana. However, there is no guarantee that the current administration will not change its stated policy regarding the low-priority enforcement of federal laws, or that any future administration would not change this policy and decide to enforce the federal laws vigorously.  Any such change in the federal government’s enforcement of current federal laws could cause significant financial damage to us.  

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2016

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

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

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

Level 1: Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

Level 2: Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated with observable market data.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies, and similar techniques that use significant unobservable inputs.

The carrying amount of our cash and cash equivalents, accounts receivable, accounts payable, and other current assets and liabilities in our consolidated financial statements approximates fair value because of the short-term nature of the instruments. Investments in non-marketable equity securities are carried at cost less other-than-temporary impairments. The carrying amount of our notes payable and convertible debt at December 31, 2016, approximates their fair values based on our incremental borrowing rates.

There have been no changes in Level 1, Level 2, and Level 3 categorizations and no changes in valuation techniques for these assets or liabilities for the years ended December 31, 2016 and 2015.

Cash and Cash Equivalents - We consider investments with original maturities of 90 days or less to be cash equivalents. Because of current banking regulations, marijuana centric entities are not afforded normal banking privileges, and thus, we have not able to consistently have access to the federal banking system. Thus, at the beginning of 2016, the Company entered into an agreement with our Chief Executive Officer to hold cash funds in his personal bank account, on an as-need basis, in trust for the Company. Under the terms of our trust agreement with our Chief Executive Officer, he agreed to hold our cash in his personal bank account, and to make payments of our funds only for our business purposes, and to allow daily access to the bank account for ongoing oversight of his fiduciary responsibility to the Company. Additionally, the trust agreement requires that the Chief Executive Officer make copies available to our accounting staff of all transactions applicable to our operations, on a weekly, or as requested basis.  At December 31, 2016 and 2015 there is cash deposits in the personal bank accounts of the Chief Executive Officer held in trust for us in the amount of $4,158 and $0, respectively.

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

Our allowance for doubtful accounts was $30,000 and $4,340 as of December 31, 2016 and 2015, respectively. We recorded bad debt expense, included in general and administrative expenses, of $82,831 and $24,185 during the years ended December 31, 2016 and 2015, respectively.

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

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

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

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

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

We have not recorded any impairment charges related to long-lived assets as of December 31, 2016 or December 31, 2015.

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

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

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

Revenue for services with a payment in the form of stock, warrants or other financial assets is recognized when the services are performed. The value of revenue paid for with warrants is measured using the Black-Scholes-Merton pricing model. Revenue from product sales, including delivery fees, is recognized when an order has been obtained, the price is fixed and determinable, the product is shipped, title has transferred and collectability is reasonably assured.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

	Years Ended December 31,
	2016		2015
Warrants to purchase common stock		666,667		3,000,000
Cashless warrants not converted to common stock		783,112		—
Stock options		3,680,000		600,000
Total potentially dilutive securities		5,129,779		3,600,000

Other Comprehensive Income (Loss) – We report as other comprehensive income (loss) those revenues, gains and losses not included in the determination of net income.  During the years ended December 31, 2016 and 2015, we did not have any gains and losses resulting from activities or transactions that resulted in other comprehensive income or loss.

Segment Reporting – UCANN operates as one segment.

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

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

Percentage of Revenue:

	Years Ended December 31,
	2016			2015
Customer A		95	%		36	%
Customer B		3	%		32	%
Customer C		2	%		18	%

Percentage of Accounts Receivable:

	Years Ended December 31,
	2016			2015
Customer D		75	%		56	%
Customer E		25	%		41	%
Customer F			%		1	%

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

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

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

In November 2015, the FASB issued guidance requiring entities to present deferred tax assets and liabilities as noncurrent in a classified balance sheet instead of separating into current and noncurrent amounts. This guidance is effective for us at the beginning of fiscal year 2017, on a prospective or retrospective basis, and thus, we will implement such guidance beginning in 2017.

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

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GOING CONCERN

12 Months Ended

Dec. 31, 2016

GOING CONCERN [Abstract]

GOING CONCERN

NOTE 3 – GOING CONCERN

Our consolidated financial statements have been prepared on a going concern basis which assumes we will be able to realize our assets and discharge our liabilities in the normal course of business for the foreseeable future. During the year ended December 31, 2016, we incurred losses of $3,854,004 and used cash of $274,670 in our operating activities. As at December 31, 2016, we had a working capital deficit of $393,182 and an accumulated deficit of $9,362,333.  Our ability to continue as a going concern is dependent upon our ability to generate profitable operations in the future and, or, obtaining the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. There is no assurance that these events will be satisfactorily completed.

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INVESTMENTS IN NON-MARKETABLE EQUITY SECURITIES

12 Months Ended

Dec. 31, 2016

Investments, All Other Investments [Abstract]

INVESTMENTS IN NON-MARKETABLE EQUITY SECURITIES

NOTE 4 – INVESTMENTS IN NON-MARKETABLE EQUITY SECURITIES

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

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

On March 24, 2016, an unrelated third party agreed to assume all of our obligations, including accrued and unpaid interest, pursuant to the terms of a $175,000 note payable we owed to WeedMD, in consideration for the transfer by us of 1,100,000 shares of the common stock of WMD to the unrelated third party. WMD consented to the assumption of the loan by the unrelated third party, and released us from any further liability with respect to the loan.  After the exchange of the 1,100,000 shares of common stock of WMD to the unrelated third party, we own 87,500 shares of common stock of WMD, and reduced our investment in none-marketable equity securities to $15, 125. Because of the difficulty in validating a fair market value for our investment in WMD, we elected to write-off such carrying value as a charge to other income and expenses in our consolidated statements of operations in the amount of $15,125, in the year ended December 31, 2016.

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PREPAID EXPENSES

12 Months Ended

Dec. 31, 2016

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

PREPAID EXPENSES

NOTE 5 – PREPAID EPENSES

Our prepaid expenses consist of:

	December 31,
	2016		2015
Prepaid investor relations services	$	—	$	1,667
Prepaid licensing fees		—		35,000
Other prepaid services and fees		—		19,674
	$	—	$	56,341

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INTANGIBLES

12 Months Ended

Dec. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

INTANGIBLES

NOTE 6 – INTANGIBLES

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

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EQUITY METHOD INVESTMENTS

12 Months Ended

Dec. 31, 2016

Equity Method Investments and Joint Ventures [Abstract]

EQUITY METHOD INVESTMENTS

NOTE 7 – EQUITY METHOD INVESTMENTS

On August 15, 2014, we acquired a 50% interest in Cannabinoid Research & Development Company Limited (“CRD”), a Jamaican company, in exchange for 40,000 shares of our common stock valued at $88,000 based on the previous day’s closing price of our stock. We also committed to provide expertise on design-build, genetics, cultivation, production, processing, productizing, labeling, packaging, marketing, branding and distribution of products, as well as use of our intellectual property in the operations of CRD. During the year ended December 31, 2016, CRD had minimal operating activities. However, in November 2016, the Jamaican government accepted applications from CRD for a Tier 1 Cultivar license and a Research and Development license. Predicated upon the potential approval of the license applications from the Jamaican government, CRD entered to an agreement with the Caribbean Institute of Medical Research in January 2017, for collaboration in the use of medical cannabis therapies through biomedical research and development for the nutraceutical industry. We accounted for this $88,000 as an equity method investment on our consolidated balance sheets.

On January 19, 2017, the Company and CRD signed a letter of intent (the “LOI”) with the Caribbean Institute of Medical Research (“CARIMER”) to collaborate on advancing clinical research on medical cannabis. CARIMER is the Jamaican-based division of MPR Development Group, a full service global Clinical Research and Development Organization (“CRO”). CARIMER also serves as the research arm of several medical facilities and hospitals in the Caribbean and collaborates with health institutions to support health care research projects around the world. According to the terms of the LOI, during the next two months the parties will work to finalize the clinical trial and financial terms.

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ACCRUED EXPENSES

12 Months Ended

Dec. 31, 2016

Accrued Liabilities, Current [Abstract]

ACCRUED EXPENSES

NOTE 8 – ACCRUED EXPENSES

Our accrued expenses consist of:

	December 31,
	2016		2015
Accrued consulting fees	$	45,000	$	110,000
Accrued wages and related expenses		—		629,780
Accrued interest expense		10,264		101,185
Accrued other expenses		—		87,568
Total accrued expenses	$	55,264	$	928,533

On May 6, 2014, we entered into a consultancy agreement with two third party consultants that had a nine month term, which could be renewed and/or extended by mutual agreement. The agreement provided for a $50,000 payment at signing, which has been paid, and for three more $50,000 payments (a total of $200,000) and the issuance of 100,000 shares of our common stock upon the achievement of certain goals, as set forth in appendix II of the agreement. During the year ended December 31, 2014 we recognized $160,000 of expense applicable to this agreement. At December 31, 2015, the project was approximately 80% complete and $110,000 is included in accrued expenses on our consolidated balance sheet at that date. On December 7, 2016, upon mutual agreement, the consultancy agreement was deemed to be abandoned, because the project was not completed. In turn, one of the consultants, Dr. Brent Reynolds, has been performing other services for the Company during the year ended December 31, 2016, and has agreed to join our Board of Advisors. Dr Reynolds is currently a professor in the Department of Neurosurgery at the University of Florida, College of Medicine, where his lab focuses on the application of natural products for treating diseases and dysfunction of the nervous system. In recognition of his services to the Company during the year ended December 31, 2016, and as an inducement to join our Board of Advisors, he was issued 100,000 shares of our common stock for such services, and the fair market value of these shares in the amount of $163,783 was charged to common stock on the consolidated balance sheet at December 31, 2016, and the residual amount of $53,783 was recognized as a loss on the extinguishment of a debt in our consolidated statement of operations.

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FAIR VALUE MEASUREMENTS AND DERIVATIVE LIABILITIES

12 Months Ended

Dec. 31, 2016

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS AND DERIVATIVE LIABILITIES

NOTE 9– FAIR VALUE MEASUREMENTS AND DERIVATIVE LIABILITIES

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

	Level 1		Level 2		Level 3		Total
Derivative liabilities	$	—	$	—	$	383,581	$	383,581

We did not have any liabilities carried at fair value measured on a recurring basis as of December 31, 2016.

Derivative Liabilities

We valued our derivative liabilities related to warrants and embedded conversion features applicable to our borrowings under our convertible notes payable (see Notes 10 and 11 below) and accrued interest payable thereon in accordance with fair value measurement guidelines. For the years ended December 31, 2016 and 2015, the following table reconciles the beginning and ending balances for our financial instruments that are carried at fair value measured on a recurring basis:

Derivative liabilities as of December 31, 2014	$	—
Additions to derivative liabilities for convertible debt conversion features and interest		359,988
Loss on revaluation of derivative liabilities during the year		23,593
Derivative liabilities as of December 31, 2015		383,581
Additions to derivative liabilities for convertible debt conversion features		557,000
Additions for modifications of note payable to Sláinte Ventures		686,612
Reductions due to conversions or repayments of convertible debt		(3,317,986	)
Loss on revaluation of derivative liabilities during the year		1,690,793
Derivative liabilities as of December 31, 2016	$	—

The estimated fair value of the derivative liabilities related to our convertible notes payable was measured as the aggregate estimated fair value of each component of the compound embedded derivative liabilities (see Note 11 and 12 below), based on Level 2 and Level 3 inputs, using a binomial lattice pricing model. Changes in the fair value of the compound embedded derivative liability at each reporting date are included in gain/ (loss) on derivative liabilities in our consolidated statement of operations.

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DEFERRED REVENUE

12 Months Ended

Dec. 31, 2016

Deferred Revenue Disclosure [Abstract]

DEFERRED REVENUE.

NOTE 10 – DEFERRED REVENUE

Our deferred revenue consists of:

	December 31,
	2016			2015
Deferred revenue – WeedMD	$	383,750		$	563,750
Deferred revenue - FoxBarry		—			200,000
		383,750			763,750
Less – current portion		(180,000	)		(380,000	)
Deferred revenue, net of current portion	$	203,750		$	383,750

As described in Note 4 above, on June 9, 2014, we received 1,187,500 common shares and 3,000,000 warrants to purchase common shares of WMD in exchange for future consulting services and use of our intellectual property. We recorded the $893,750 fair value of these securities as deferred revenue and we recognized $150,000 of this amount as revenue during the period July 1, 2014 through December 31, 2014, based upon our initial three year estimate of the service period involved. Based on recent discussions with WMD, we now expect to deliver the remaining consulting services and use of our intellectual property to WMD on a relatively consistent monthly basis during the four year period January 1, 2015 through December 31, 2018. Accordingly, we are now recognizing $15,000 of deferred revenue per month. We recognized $180,000 of revenue applicable to this arrangement, in each of the years ended December 31, 2016 and 2015. At December 31, 2016, we expect to recognize $180,000 of the remaining $383,750 WMD deferred revenue during the next twelve months and accordingly, we have classified the $180,000 as a current liability on our consolidated balance sheets.

On December 28, 2014, we entered into a royalty and consulting services agreement with FoxBarry Farms, LLC (“FoxBarry”) whereby we received a $200,000 prepaid royalty payment from FoxBarry. At the time, we planned to recognize deferred royalty revenue based on actual applicable sales as defined in the agreement. During the years ended December 31, 2015 and 2014, we did not recognize any deferred revenue related to this agreement. In August 2015, we discontinued providing consulting services to FoxBarry, as our initial project with FoxBarry was abandoned due to operational issues. However, FoxBarry appears to no longer be in existence, and since all of our conditions pursuant to the agreement have been satisfied, we elected to recognize the $200,000 of deferred income during the year ended December 31, 2016, as other income.

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NOTES PAYABLE

12 Months Ended

Dec. 31, 2016

Notes Payable [Abstract]

NOTES PAYABLE

NOTE 11 – NOTES PAYABLE 

Our notes payable consist of:

	December 31,
	2016		2015
Note payable - WeedMD	$	—	$	175,000
Note payable – Slainte		—		600,000
Total notes payable	$	—	$	775,000

On July 7, 2014, we issued a $175,000, unsecured, demand promissory note bearing interest at 5% to WeedMD for cash used in our business development activities. On March 24, 2016, an unrelated third party agreed to assume all of our obligations, including accrued and unpaid interest, pursuant to the terms of a $175,000 note payable we owed to WeedMD, in consideration for the transfer by us of 1,100,000 shares of the common stock of WMD to the unrelated third party. WMD consented to the assumption of the loan by the unrelated third party, and released us from any further liability with respect to the loan.

On December 18, 2014, we issued a $600,000 unsecured promissory note (the “Slainte Note”) bearing interest at 12% to Slainte Ventures, LLC (“Slainte”). The principal and accrued interest were due on the earlier of December 17, 2015, or  upon the closing of certain capital raising transactions as described in the note. The default rate of interest under the note is 18%. Debt issuance costs of $13,500 were immediately recognized as interest expense as, at the time, we expected to close on a capital raising transaction in early 2015.

On October 6, 2015, we borrowed funds from a third party and did not apply the borrowed funds to the Slainte Note resulting in a default under the terms of the note, and thus, we received a default waiver from Slainte.

On March 18, 2016, we entered into an agreement with Slainte whereby Slainte waived default, amended the terms and extended the maturity date of the Slainte Note until December 17, 2016, and agreed to accept a warrant in lieu of interest due on the loan. The warrant allows Slainte to purchase 416,667 shares of our common stock; plus that number of shares of our common stock equal in number to (i) the product of the then-applicable interest rate under the Slainte Note and the amount of principal outstanding on the Note, calculated on a daily basis and paid for actual days elapsed, during the period beginning on December 18, 2015, and ending on the date on which the Note is paid in full, divided by (ii) $0.18; plus that number of shares of our common stock equal in number to (i) the product of 0.02 and the sum of the amount of principal and interest outstanding on the Note on the first day of each calendar month, beginning with February 1, 2016, divided by (ii) $0.18. The warrant is exercisable at a price of $0.18 per share, subject to adjustment in the event of stock splits, the sale of our shares of common stock at a price below $0.18 per share or the sale of equity securities with a conversion price of less than $0.18 per share.

On November 14, 2016, the Slainte Note was again amended to extend the maturity date to December 30, 2017 and to allow the note to be converted into shares of the Company's common stock. The number of shares to be issued upon conversion of the note will be determined by dividing the dollar amount of the principal to be converted by 70% of the average closing price of the Company's common stock for the ten business days immediately preceding the date of the conversion. The warrant can be exercised at any time during the five year period following the full repayment of the loan; the exercise price can be paid in cash or through a cashless exercise feature; and the warrant grants certain registration rights to Slainte applicable to all shares of our common stock owned or controlled by Slainte, including shares issued upon exercise of the warrant. In addition, Slainte granted us a put option, exercisable upon repayment of the loan prior to December 17, 2016, that requires Slainte to purchase from us, for $100,000, that number of shares of our common stock equal in number to (i) $100,000 divided by (ii) the product of 80% and the average price of our common stock for the 30 trading days immediately prior to the date the put option is exercised.

Due to the fair value of the warrants issued and conversion feature added in connection with the amended note agreements, the modifications were considered substantial (i.e. greater than 10% of the carrying value of the debt). As a result, an extinguishment of debt was deemed to have occurred, resulting in the recognition of extinguishment losses totaling $674,666.

Following the amendment in November 2016, Slainte converted the entire principal amount of the note into 594,540 shares of the Company's common stock. Slainte also exercised the warrants through the cashless exercise feature resulting in the issuance of 1,330,007 shares of the Company's common stock. He also purchased 104,939 shares of the Company's common stock for $100,000 in connection with the Company's exercise of the put option.

Prior to their exercise in November 2016, these warrants and conversion feature were accounted for as a liability under ASC 815. The Company assessed the fair value of the warrants and conversion feature upon issuance and conversion and at each reporting period based on the Black-Scholes pricing model. See below for the range of variables used in assessing the fair value during the year ended December 31, 2016.

	Warrants December 31, 2016	Conversion Feature December 31, 2016
Expected life (years)	4.29 - 5.0	1.09 - 1.13
Risk-free interest rate	1.01% - 1.90%	0.78% - 0.79%
Expected volatility	214% - 227%	200% - 203%

In connection with these warrants, the Company recognized a loss on the change in fair value of warrant liability of $1,616,215 during the year ended December 31, 2016. In connection with the conversion feature, the Company recognized a loss on the change in fair value of derivative liability of $13,947.

Expected volatility is based primarily on historical volatility. Historical volatility was computed using weekly pricing observations for recent periods that correspond to the expected life of the warrants or conversion feature. The Company believes this method produces an estimate that is representative of our expectations of future volatility over the expected term of these warrants or conversion feature. The expected life is based on the remaining term of the warrants or conversion feature. The risk-free interest rate is based on U.S. Treasury securities rates.

On March 24, 2016, an unrelated third party agreed to assume all of our obligations, including accrued and unpaid interest, pursuant to the terms of a $175,000 note payable we owed to WeedMD, in consideration for the transfer by us of 1,100,000 shares of the common stock of WMD to the unrelated third party. WMD consented to the assumption of the loan by the unrelated third party, and released us from any further liability with respect to the loan.

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CONVERTIBLE NOTES PAYABLE

12 Months Ended

Dec. 31, 2016

CONVERTIBLE NOTE PAYABLE [Abstract]

CONVERTIBLE NOTES PAYABLE

NOTE 12 – CONVERTIBLE NOTES PAYABLE

From time to time during the year ended December 31, 2016 and 2015, we issued convertible promissory notes to unaffiliated third parties. The net proceeds from these transactions are used for general working capital purposes. The debt discounts and deferred financing costs on the convertible promissory notes are amortized on a straight-line basis, which approximates the effective interest rate method, over the term of the note, and this amortization is included in interest expense in our consolidated statements of operations.

The following table summarizes our convertible promissory notes outstanding as of December 31, 2016 and 2015:

			Maturity	Interest			Base	December 31,
Issue Date	Holder	Security	Date	Rate			Conversion Rate	2016			2015
12/28/2016	Tangiers Investment Group	Unsecured	7/8/2017		10	%	$1.00 through maturity; 55% of lowest closing price thereafter	$	35,000		$	—
8/10/2016	JSJ Investments	Unsecured	5/10/2017		12	%	$0.20 during first 180 days; 45% of lowest closing price thereafter		125,000			—
10/6/2015	Vis Vires Group	Unsecured	6/30/2016		8	%	58% of three lowest closing bids		—			59,000
10/12/2015	JSJ Investments	Unsecured	7/8/2016		12	%	55% of five lowest trades		—			102,000
12/9/2015	Tangiers Investment Group	Secured	12/8/2016		10	%	55% of three lowest closing bids		—			220,000
									160,000			381,000
							Less unamortized discount		(34,453	)		(272,793	)
								$	125,547		$	108,207

The convertible notes, including accrued interest payable, may be converted into shares of our common stock at the Conversion Price, in whole, or in part, at various times, after the date of issuance, at the option of the holder (the “Conversion Feature”), as defined by the terms of the convertible note.

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

If these conversion rates results in a beneficial conversion feature (“BCF”), the BCF is recorded as an unamortized convertible debt discount, which is required to be valued and amortized to interest expense over the term of the Note. We amortize our convertible debt discount on a straight-line basis, which approximates the effective interest rate method, and this amortization is included in amortization of debt discount in our consolidated statements of operations. If a convertible note is repaid, any remaining unamortized deferred financing costs and unamortized debt discount are expensed on the date of repayment.

If a convertible notes is convertible into an unlimited number of unregistered, restricted common shares, it is classified as having an unlimited shares feature (“Unlimited Shares Feature”). The difference between the closing price of our common stock and the VCR is referred to as the Variable Conversion Rate Differential (“VCRD”). If, both the Unlimited Shares Feature and the VCRD meet the definition of an embedded derivative, then together they create a compound embedded derivative liability or, hereafter, simply a “derivative liability.”

In accordance with U.S. GAAP, our derivative liabilities are recorded at fair value on the date of issuance and subsequently remeasured to fair value each reporting period with any change in fair value being recognized as gain (loss) on derivative liabilities in our consolidated statement of operations. See Note 9.

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

During the years ended December 31, 2016 and 2015, we recorded deferred financing fees of $0 and $41,100, respectively, in connection with the issuance of our convertible notes and we recognized $32,400 and $8,700 of amortization of deferred financing costs during the year ended December 31, 2016 and 2015, respectively. This amount is included in interest expense in our consolidated statements of operations.

The aggregate fair value of the derivative liabilities applicable to our convertible notes on the dates of issuance was $557,000 and $355,293 for convertible notes issued during the years ended December 31, 2016 and 2015, respectively, and was recorded as derivative liabilities on our consolidated balance sheets. The related BCF debt discount was recorded as a reduction to our convertible notes payable on our consolidated balance sheets. During the years ended December 31, 2016 and 2015, we recognized $267,258 and $82,500, respectively, of amortization related to the convertible notes and recorded this amount as amortization of debt discount in our consolidated statements of operations.

We recognized $35,719 and $5,121 of interest expense applicable to our convertible notes during the years ended December 31, 2016 and 2015, respectively. As of December 31, 2016 and 2015, $5,876 and $5,121, respectively, of this interest is accrued within accrued expenses on our consolidated balance sheets.

2015 Convertible Notes

At various times during the year ended December 31, 2015, the Company issued convertible promissory notes (the "2015 Notes") in the aggregate principal balance of $381,000. The 2015 Notes, including accrued interest payable, may be converted into shares of our common stock at the Conversion Price, as defined below, in whole, or in part, at any time beginning 180 days after the date of issuance, at the option of the holder. The 2015 Notes also contain prepayment options whereby we may, during the first 180 days that each note is outstanding, prepay the note by paying prepayment premiums ranging from 10% to 40% of the principal then outstanding depending on the date of prepayment.

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

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

During the year ended December 31, 2016, two of these notes in the aggregate principal balance of $161,000 were repaid. The $220,000 note dated December 9, 2015 from Tangiers Investment Group, LLC was converted in full into a total of 2,843,698 shares of the Company's common stock at various dates during the year ended December 31, 2016.

Slainte Convertible Notes

On March 30, 2016, we borrowed $81,978, from Slainte Ventures and used the proceeds to repay principal and accrued interest applicable to our $59,000 convertible promissory note dated October 6, 2015, to Vis Vires Group, Inc. On April 6, 2016, we borrowed an additional $75,000 from Slainte Ventures and used the proceeds, along with $52,500 of advances to the Company by officers and directors of the Company, to repay principal and accrued interest applicable to our $102,000 convertible promissory note, dated October 12, 2015, to JSJ Investments, Inc. On July 5, 2016, we borrowed $50,000 from Slainte Ventures and used the proceeds for working capital purposes. These loans, together with interest at 12% per year, are payable on December 30, 2016. We can prepay the loans at any time. If the loans are repaid on or before September 30, 2016, the principal amount which is being repaid will increase by 10%. If the loans are repaid after September 30, 2016, the principal amount which is being repaid will increase by 15%. The amount of the principal increase may be paid with shares of our common stock. The number of shares to be issued for such purpose will be determined by dividing the average closing price of our common stock (which in no case can be greater than $0.45) for the ten trading days preceding the prepayment date. The original principal of the loan was not convertible prior to maturity. If the loans were not paid when due, then at any time between the maturity date and January 10, 2017, Slainte may convert the outstanding principal and interest on the loan into shares of our common stock. The number of shares to be issued on conversion was to be determined by dividing the average closing price of our common stock (which in no case can be greater than $0.45) for the ten trading days preceding the conversion date by the outstanding principal and interest on the loan on the conversion date.

The notes were not paid prior to the maturity date of December 30, 2016. As a result, the notes became convertible effective December 31, 2016. Derivative liabilities in the aggregate amount of $557,000 were recorded upon these notes becoming convertible. The notes along with their accrued interest were converted into 497,296 shares of the Company's common stock on December 31, 2016, and the value of the derivative liabilities were extinguished to common stock.

JSJ Convertible Note

On August 10, 2016, we borrowed $125,000 from JSJ Investments and used the proceeds for working capital purposes. The loan, together with interest at 12% per year, is payable on May 10, 2017. We can prepay the loan at any time. If the loan is repaid on or before October 16, the principal amount which is being repaid will increase by 25%. If the loan is repaid on or before October 16, 2016 through February 12, 2016, the principal amount which is being repaid will increase by 30%. Thereafter, the note may be repaid only upon written consent from JSJ, and the principal amount that is being repaid will increase by 30%. At any time after the date of the note, JSJ is entitled to convert all of the outstanding and unpaid principal in to shares of our common stock. Until February 12, 2017, the conversion price is $0.20 per share, and thereafter, the conversion price will be at a 45% discount to the lowest closing price of our common stock for the ten trading days preceding the conversion date. JSJ may not make any conversions that would result in the note holder holding more than 4.99% of our issued and outstanding common stock at any one time. If the notes are held through February 12, 2017, derivative accounting will apply upon the change to a variable conversion price. This convertible note was paid in full on February 9, 2017, as more fully described in Note 19 – Subsequent Events.

Tangiers Convertible Note

In connection with an equity line agreement discussed in Note 20, the Company issued a promissory note to Tangiers for the principal sum of $35,000 as a commitment fee for the equity line. The note bears interest at 10% per year, is unsecured, and is due and payable on July 8, 2017. At the option of Tangiers, all or any part of the unpaid principal amount of the note may be converted into shares of the Company's common stock. The number of shares to be issued on any conversion will be determined by dividing the principal amount of the note to be converted by $1.00. If the note is not repaid or converted prior to maturity, the conversion price will change to 55% of the lowest closing bid price during the 20 days preceding the conversion date. If the note is held past maturity, derivative accounting will apply upon the change to a variable conversion price.

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NOTES PAYABLE TO AND ADVANCES FROM OFFICERS AND DIRECTORS

12 Months Ended

Dec. 31, 2016

NOTES PAYABLE, RELATED PARTIES [Abstract]

NOTES PAYABLE, RELATED PARTIES

NOTE 13 – NOTES PAYABLE TO AND ADVANCES FROM OFFICERS AND DIRECTORS

Notes payable to and advance from officers and directors consisted of the following, at December 31, 2016 and 2015:

	December 31,
	2016		2015
Note payable to Earnie Blackmon, an officer and director	$	28,750	$	—
Note payable to Tony Verzura, an officer and director		28,750		—
Advances from officers and directors		71,008		—
Accrued wages payable to officers and directors		42,695		612,512
	$	171,203	$	612,512

On April 6, 2016, we borrowed $25,000 from Ernest Blackmon and $25,000 from Tony Verzura and used the proceeds to repay principal and interest applicable on our $102,000 convertible promissory note dated October 12, 2015, to JSJ Investments Inc.The loans, together with interest at 12% per year, are payable on December 30, 2016. We may prepay the loans at any time. If the loans are repaid on or before September 30, 2016, the principal amount, which is being repaid, will increase by 10%. If the loans are repaid after September 30, 2016, the principal amount, which is being repaid will increase by 15%. As of December 31, 2016, the loans were not repaid, when they were due, per the terms of the notes, and thus, the principal balance of the notes was increased to $57,500 in the aggregate, with the addition to the principal balance charged to interest expense.

During the year ended December 31, 2016, Messrs. Blackmon, Verzura and Ruby, who are officers and directors of the Company, paid obligations and expenses on behalf of the Company, from their own individual, personal funds.  Such payments have been recorded in the consolidated balance sheets as a component of Notes payable to and advances from officers and directors.

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STOCKHOLDERS' DEFICIT

12 Months Ended

Dec. 31, 2016

Stockholders' Equity Note [Abstract]

STOCKHOLDERS' DEFICIT

NOTE 14 – STOCKHOLDERS’ DEFICIT

2014 Stock Split

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

2014 Equity Offering

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

2014 Change in Authorized Share Capital

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

Common Stock Issued For Warrant Outstanding

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

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

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

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

Warrants:

The following table summarizes our share warrants outstanding as of December 31, 2016 and 2015:

	Year Ended December 31,
	2016					2015
	Number of Shares			Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
Warrants outstanding, beginning of period		3,000,000		$	12.00	3,170,044		$	11.52
Warrants issued to consultant		666,667			0.18	—			—
Cashless issued upon conversion of Slainte note		1,746,674			—
Warrants exercised		(963,562	)		—	—			—
Repurchased and cancelled		—				(170,044	)		3.00
Expired		(3,000,000	)		—	—			—
Warrants outstanding, end of period		1,449,779		$	0.180	3,000,000		$	12.00
Warrants exercisable, end of period		1,449,779		$	0.180	3,000,000		$	12.00

The weighted-average remaining contractual life for warrants outstanding and exercisable at December 31, 2016, is 4.5 years, and the aggregate intrinsic value of warrants outstanding and exercisable at December 31, 2016 is $0.

The warrants issued during the year ended December 31, 2016 were valued utilizing the Black Scholes option pricing model and the following range of assumptions on the date of valuation:

Stock price	$0.16 - $2.18
Exercise price	$0.18
Risk free interest rate	1.01% - 1.37%
Expected term (years)	5
Expected volatility	322% - 504%
Expected dividends	0%

2014 Equity Incentive Plan

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

Stock Options

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

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

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

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

On January 12, 2016, we awarded 1,050,000 stock options to each of Messrs. Blackmon, Verzura and 980,000 stock options to Mr. Ruby under our 2014 Stock Incentive Plan. The options were fully vested at the time of grant and give the option holder the right to purchase shares of our common stock at $0.20 per share during the ten year term of the option.

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

Stock price	$	0.20
Exercise price	$	0.20
Risk free interest rate		1.98	%
Expected term (years)		10.0
Expected volatility		173	%
Expected dividends		0	%

At December 31, 2015 the fair value of these 3,080,000 options totaling $612,512, which was included in accrued expenses on our consolidated balance sheets, and on January 15, 2016, the option grant date, we increased common stock and decreased accrued expenses by this amount to account for the issuance of these options on that date.

The following table summarizes our stock options outstanding as of both December 31, 2016 and 2015, respectively:

	Number of Shares	Weighted Average Remaining Life (Years)	Weighted Average Exercise Price
Stock options outstanding at December 31, 2014	—		—
Issued	600,000	9.8	$0.70
Exercised	—	—	—
Expired	—	—	—
Stock options outstanding at December 31, 2015	600,000	9.8	$0.70
Stock options exercisable at December 31, 2015	600,000		$0.70
Stock options outstanding at December 31, 2015	600,000	9.8
Issued	3,080,000	10.0	$0.20
Exercised	—	—	—
Expired	—	—	—
Stock options outstanding at December 31, 2016	3,680,000	8.9	$0.28
Stock options exercisable at December 31, 2016	3,680,000	8.9	$0.28

The weighted-average remaining contractual life for stock options outstanding and exercisable at December 31, 2016, is 8.9 years, and the aggregate intrinsic value of options outstanding and exercisable at December 31, 2016 is $0.

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SHARE-BASED COMPENSATION

12 Months Ended

Dec. 31, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

SHARE-BASED COMPENSATION

NOTE 15 – SHARE-BASED COMPENSATION

Share-based Compensation

We recognize share-based compensation expense in cost of revenues, sales and marketing expenses, R&D expenses and general and administrative expenses based on the fair value of common shares issued for services. In addition, we accrue share-based compensation expense for estimated share-based awards earned during the years ended December 31, 2016 and 2015, under our 2014 Equity Incentive Plan. Share-based compensation expense for the years ended December 31, 2016 and 2015 is, as follows:

	December 31,
	2016		2015
Warrants issued for consulting services	$	319,419	$	47,880
Warrants issued for accrual of share-based awards to officers and directors		—		612,512
Common stock issued for accounts payable and accrued expenses		223,484		—
Common stock issued for services		271,097		67,500
Amortization of common stock issued for prepaid services		—		302,789
	$	814,000	$	1,030,681

Of the $814,000 of share-based compensation, $191,550 was reported as a reduction of accounts payable and accrued expenses pertaining to amounts owed as of the beginning of the year ended December 31, 2016, and $31,934 was recognized as a loss on the extinguishment of debt during the year ended December 31, 2016.

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INCOME TAXES

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 16 – INCOME TAXES

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

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

We have not taken a tax position that, if challenged, would have a material effect on our consolidated financial statements for the years ended December 31, 2016 and 2015, as defined under ASC 740. We did not recognize any adjustment to our liability for uncertain tax positions and therefore did not record any adjustment to the beginning balance of our accumulated deficit on our consolidated balance sheets.

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

	Years Ended December 31,
	2016			2015
Statutory U.S. federal tax rate		39	%		39	%
Effect of increase in valuation allowance		(39	%)		(39	%)
		—	%		—	%

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

	December 31,
	2016			2015
Net loss carry forward	$	3,648,316		$	2,148,248
Valuation allowance		(3,648,316	)		(2,148,248	)
	$	—		$	—

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

	Years Ended December 31,
	2016			2015
Tax benefit at statutory rate	$	1,500,068		$	1,124,511
Valuation allowance		(1,500,068	)		(1,124,511	)
	$	—		$	—

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RELATED PARTY TRANSACTIONS

12 Months Ended

Dec. 31, 2016

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

NOTE 17 – RELATED PARTY TRANSACTIONS

Affiliate Customer

During 2010, Messrs. Blackmon and Verzura, who are officers and directors of our Company, made loans to, or equity investments in, one of our customers. Effective June 30, 2015, Messrs. Blackmon and Verzura completely divested themselves of those interests. As Messrs. Blackmon and Verzura may have had significant influence on management or operating polices of the customer until June 30, 2015, we classified professional fees in the amount of $4,425 to this customer as revenues - affiliate, in our consolidated statements of operations and accounts receivable from this customer, as due from related parties on our consolidated balance sheets.

Lone Mountain

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

CRD

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

Blue River Inc.

In February 2015, Messrs. Blackmon and Verzura, who are officers and directors of our Company, formed Blue River Inc. (“Blue River”), a Colorado corporation in the cannabis industry that plans to manufacture and wholesale medicinal and recreational cannabis including our Prana medicinals products. On January 1, 2016, our wholly owned subsidiary, UCANN California Corporation (“UCANN CA”), entered into a five year consulting and intellectual property licensing arrangement with Blue River whereby UCANN CA will provide consulting services to Blue River at hourly rates and a non-exclusive license to our intellectual property for $5,000 per month. The arrangement can be terminated by either party by written agreement. During the year ended December 31, 2015, we advanced Blue River $3,284 and included this amount in due from related parties. For the year ended December 31, 2016 and 2015, we recognized consulting fee revenue in the amounts of $71,680 and $4,425, respectively, which amounts are included as Revenue, affiliate in our consolidated statements of operations. At December 31, 2016 and 2015, we owed Blue River $4,293 and $0, respectively, in trade payables and included this amount in accounts payable.

Advesa Corporation

Advesa Corporation (“Advesa”), a California corporation, was formed in September 2016, and is 100% owned by Messer Verzura. The Company entered into a memo of understanding in November 2016, under which we provide consulting services to Advesa, and Advesa assists our largest customer, who is located in California, produce our Prana biomedical line of products under a licensing agreement with that California customer. During the year ended December 31, 2016 we advance Advesa approximately $20,499 and included this amount in Due from related parties in our consolidated balance sheet.

Amounts due from related parties consist of:

	December 31,
	2016		2015
Blue River	$	—	$	3,284
Advesa		21,755		—
CRD		5,000		5,000
Total due from related parties	$	26,755	$	8,284

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COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2016

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 18 – COMMITMENTS AND CONTINGENCIES

Contractual Obligations and Commercial Commitments

Consulting Agreement for GAAP Reporting Services

On February 20, 2016, we entered into a consulting agreement with a third party that has a twelve month term, and which can be extended by mutual agreement. The agreement provides for the issuance of a five (5) year warrant to the consultant, upon the execution of the agreement, to purchase 250,000 shares of our common stock at a price of $0.18 per share, plus the payment of $7,500 on the first day of each month, beginning March 1, 2016, coupled with the monthly issuance of five (5) year warrants to purchase our common stock in an amount of shares determined by dividing $7,500 by $0.18 per share. These warrants are exercisable at a price of $0.18 per share. During the year ended 31, 2016, we recognized in our consolidated statements of operations expenses in the total amount of $394,215 related to this contract, as follows:

	Year Ended December 31, 2016
Cash paid to consultant	$	15,000
Shares of common stock issued to consultant		62,781
Fair value of warrants issued to consultant		319,419
	$	397,200

Financing Commitment

On December 28, 2016, we entered into an equity line of credit agreement with Tangiers Global, LLC (“Tangiers”). Under the equity line agreement, Tangiers has agreed to provide the Company with up to $10,000,000 of funding through the purchase of shares of the Company’s common stock. During the term of the agreement, the Company may deliver a put notice to Tangiers, which will specify the number of shares which the Company will sell to Tangiers. The minimum amount the Company can draw down at any one time is $5,000, and the maximum amount the Company can draw down at any one time is $350,000 as determined by the formula contained in the equity line agreement.

A closing will occur on the date which is no earlier than five trading days following, and no later than seven trading days following, the applicable put notice. On each closing date, the Company will sell, and Tangiers will purchase, the shares of the Company’s common stock specified in the put notice. The amount to be paid by Tangiers on a particular closing date will be determine by multiplying the purchase price by the number of shares specified in the put notice. The purchase price is 85% of the average of the two lowest trading prices of the Company’s common stock during the pricing period applicable to the put notice. The pricing period, with respect to a particular put notice, is five consecutive trading days including, and immediately following, the delivery of a put notice to Tangiers. The Company may submit a put notice once every ten trading days provided the closing of the previous transaction has taken place. The Company is under no obligation to submit any put notices.

The equity line agreement has a term of 36 months, which will begin on the effective date of the registration statement, which the Company has agreed to file with the Securities and Exchange Commission so that the shares of common stock to be sold to Tangiers may be sold in the public market. The Company issued a promissory note to Tangiers for the principal sum of $35,000 as a commitment fee for the equity line. The note bears interest at 10% per year, is unsecured, and is due and payable on July 8, 2017. The note is recorded on our consolidated balance sheet at December 31, 2016 in the amount of $35,000, net of a discount of $34,453. At the option of Tangiers, all or any part of the unpaid principal amount of the note may be converted into shares of the Company’s common stock. The number of shares to be issued on any conversion will be determined by dividing the principal amount of the note to be converted by $1.00.

Legal Proceedings

We are involved in disputes and legal actions arising in the normal course of our business. There have been no material developments in legal proceedings in which we are involved during the year ended December 31, 2016.

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SUBSEQUENT EVENTS

12 Months Ended

Dec. 31, 2016

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 19 – SUBSEQUENT EVENTS

JSJ Convertible Note

On August 10, 2016, we borrowed $125,000 from JSJ Investments and used the proceeds for working capital purposes. The note, together with interest at 12% per year, was due and payable on May 10, 2017. We could prepay the loan at any time, and if we were to repay the note on or before October 16, 2016 through February 12, 2016, the principal amount which was being repaid would increase by 30%. On February 13, 2017, the note was repaid in the form of the issuance of 379,100 shares of our common stock to JSJ Investments.

In accordance with ASC 855-10 we have analyzed its operations subsequent to December 31, 2016, to the date these consolidated financial statements were issued, and has determined that, other that as disclosed above, we do not have any material subsequent events to disclose in these consolidated financial statements.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2016

Accounting Policies [Abstract]

Principles of Consolidation

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

Use of Estimates

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

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

Fair Value of Financial Instruments

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

Level 1: Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

Level 2: Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated with observable market data.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies, and similar techniques that use significant unobservable inputs.

The carrying amount of our cash and cash equivalents, accounts receivable, accounts payable, and other current assets and liabilities in our consolidated financial statements approximates fair value because of the short-term nature of the instruments. Investments in non-marketable equity securities are carried at cost less other-than-temporary impairments. The carrying amount of our notes payable and convertible debt at December 31, 2016, approximates their fair values based on our incremental borrowing rates.

There have been no changes in Level 1, Level 2, and Level 3 categorizations and no changes in valuation techniques for these assets or liabilities for the years ended December 31, 2016 and 2015.

Cash and Cash Equivalents

Cash and Cash Equivalents - We consider investments with original maturities of 90 days or less to be cash equivalents. Because of current banking regulations, marijuana centric entities are not afforded normal banking privileges, and thus, we have not able to consistently have access to the federal banking system. Thus, at the beginning of 2016, the Company entered into an agreement with our Chief Executive Officer to hold cash funds in his personal bank account, on an as-need basis, in trust for the Company. Under the terms of our trust agreement with our Chief Executive Officer, he agreed to hold our cash in his personal bank account, and to make payments of our funds only for our business purposes, and to allow daily access to the bank account for ongoing oversight of his fiduciary responsibility to the Company. Additionally, the trust agreement requires that the Chief Executive Officer make copies available to our accounting staff of all transactions applicable to our operations, on a weekly, or as requested basis.  At December 31, 2016 and 2015 there is cash deposits in the personal bank accounts of the Chief Executive Officer held in trust for us in the amount of $4,158 and $0, respectively.

Accounts Receivable

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

Our allowance for doubtful accounts was $30,000 and $4,340 as of December 31, 2016 and 2015, respectively. We recorded bad debt expense, included in general and administrative expenses, of $82,831 and $24,185 during the years ended December 31, 2016 and 2015, respectively.

Prepaid Expenses

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

Property and Equipment

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

Intangible Assets

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

Investments in Non-Marketable Equity Securities

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

Long-Lived Assets

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

We have not recorded any impairment charges related to long-lived assets as of December 31, 2016 or December 31, 2015.

Equity Method Investments

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

Deferred Revenue

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

Revenue Recognition

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

Revenue for services with a payment in the form of stock, warrants or other financial assets is recognized when the services are performed. The value of revenue paid for with warrants is measured using the Black-Scholes-Merton pricing model. Revenue from product sales, including delivery fees, is recognized when an order has been obtained, the price is fixed and determinable, the product is shipped, title has transferred and collectability is reasonably assured.

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

Cost of Revenues

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

Research and Development Expenses

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

Sales and Marketing Expenses

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

General and Administrative Expenses

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

Share-Based Compensation

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

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

Income Taxes

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

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

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

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

Commitments and Contingencies

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

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

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

Net Loss Per Share

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

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

	Years Ended December 31,
	2016		2015
Warrants to purchase common stock		666,667		3,000,000
Cashless warrants not converted to common stock		783,112		—
Stock options		3,680,000		600,000
Total potentially dilutive securities		5,129,779		3,600,000

Other Comprehensive Income (Loss)

Other Comprehensive Income (Loss) – We report as other comprehensive income (loss) those revenues, gains and losses not included in the determination of net income.  During the years ended December 31, 2016 and 2015, we did not have any gains and losses resulting from activities or transactions that resulted in other comprehensive income or loss.

Segment Reporting

Segment Reporting – UCANN operates as one segment.

Concentration of Credit Risk

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

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

Percentage of Revenue:

	Years Ended December 31,
	2016			2015
Customer A		95	%		36	%
Customer B		3	%		32	%
Customer C		2	%		18	%

Percentage of Accounts Receivable:

	Years Ended December 31,
	2016			2015
Customer D		75	%		56	%
Customer E		25	%		41	%
Customer F			%		1	%

Recently Issued Accounting Pronouncements

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

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

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

In November 2015, the FASB issued guidance requiring entities to present deferred tax assets and liabilities as noncurrent in a classified balance sheet instead of separating into current and noncurrent amounts. This guidance is effective for us at the beginning of fiscal year 2017, on a prospective or retrospective basis, and thus, we will implement such guidance beginning in 2017.

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

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2016

Accounting Policies [Abstract]

Schedule of potentially dilutive securities that have been excluded from the computation of diluted net loss per share, because the effect of their inclusion would have been anti-dilutive

	Years Ended December 31,
	2016		2015
Warrants to purchase common stock		666,667		3,000,000
Cashless warrants not converted to common stock		783,112		—
Stock options		3,680,000		600,000
Total potentially dilutive securities		5,129,779		3,600,000

Schedule of significant concentrations in revenues and accounts receivable

Percentage of Revenue:

	Years Ended December 31,
	2016			2015
Customer A		95	%		36	%
Customer B		3	%		32	%
Customer C		2	%		18	%

Percentage of Accounts Receivable:

	Years Ended December 31,
	2016			2015
Customer D		75	%		56	%
Customer E		25	%		41	%
Customer F			%		1	%

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PREPAID EXPENSES (Tables)

12 Months Ended

Dec. 31, 2016

Prepaid Expense, Current [Abstract]

Schedule of prepaid expenses

	December 31,
	2016		2015
Prepaid investor relations services	$	—	$	1,667
Prepaid licensing fees		—		35,000
Other prepaid services and fees		—		19,674
	$	—	$	56,341

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ACCRUED EXPENSES (Tables)

12 Months Ended

Dec. 31, 2016

Accrued Liabilities, Current [Abstract]

Schedule of accrued expenses

	December 31,
	2016		2015
Accrued consulting fees	$	45,000	$	110,000
Accrued wages and related expenses		—		629,780
Accrued interest expense		10,264		101,185
Accrued other expenses		—		87,568
Total accrued expenses	$	55,264	$	928,533

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FAIR VALUE MEASUREMENTS AND DERIVATIVE LIABILITIES (Tables)

12 Months Ended

Dec. 31, 2016

Fair Value Disclosures [Abstract]

Schedule of liabilities carried at fair value measured on a recurring basis

	Level 1		Level 2		Level 3		Total
Derivative liabilities	$	—	$	—	$	383,581	$	383,581

Schedule of reconciliation of beginning and ending balances for financial instruments carried at fair value measured on a recurring basis

Derivative liabilities as of December 31, 2014	$	—
Additions to derivative liabilities for convertible debt conversion features and interest		359,988
Loss on revaluation of derivative liabilities during the year		23,593
Derivative liabilities as of December 31, 2015		383,581
Additions to derivative liabilities for convertible debt conversion features		557,000
Additions for modifications of note payable to Sláinte Ventures		686,612
Reductions due to conversions or repayments of convertible debt		(3,317,986	)
Loss on revaluation of derivative liabilities during the year		1,690,793
Derivative liabilities as of December 31, 2016	$	—

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DEFERRED REVENUE (Tables)

12 Months Ended

Dec. 31, 2016

Deferred Revenue Disclosure [Abstract]

Schedule of deferred revenue

	December 31,
	2016			2015
Deferred revenue – WeedMD	$	383,750		$	563,750
Deferred revenue - FoxBarry		—			200,000
		383,750			763,750
Less – current portion		(180,000	)		(380,000	)
Deferred revenue, net of current portion	$	203,750		$	383,750

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NOTES PAYABLE (Tables)

12 Months Ended

Dec. 31, 2016

Notes Payable [Abstract]

Schedule of notes payable

	December 31,
	2016		2015
Note payable - WeedMD	$	—	$	175,000
Note payable – Slainte		—		600,000
Total notes payable	$	—	$	775,000

Significant notes payable assumptions

	Warrants December 31, 2016	Conversion Feature December 31, 2016
Expected life (years)	4.29 - 5.0	1.09 - 1.13
Risk-free interest rate	1.01% - 1.90%	0.78% - 0.79%
Expected volatility	214% - 227%	200% - 203%

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CONVERTIBLE NOTE PAYABLE (Tables)

12 Months Ended

Dec. 31, 2016

CONVERTIBLE NOTE PAYABLE [Abstract]

Schedule of convertible promissory notes

			Maturity	Interest			Base	December 31,
Issue Date	Holder	Security	Date	Rate			Conversion Rate	2016			2015
12/28/2016	Tangiers Investment Group	Unsecured	7/8/2017		10	%	$1.00 through maturity; 55% of lowest closing price thereafter	$	35,000		$	—
8/10/2016	JSJ Investments	Unsecured	5/10/2017		12	%	$0.20 during first 180 days; 45% of lowest closing price thereafter		125,000			—
10/6/2015	Vis Vires Group	Unsecured	6/30/2016		8	%	58% of three lowest closing bids		—			59,000
10/12/2015	JSJ Investments	Unsecured	7/8/2016		12	%	55% of five lowest trades		—			102,000
12/9/2015	Tangiers Investment Group	Secured	12/8/2016		10	%	55% of three lowest closing bids		—			220,000
									160,000			381,000
							Less unamortized discount		(34,453	)		(272,793	)
								$	125,547		$	108,207

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NOTES PAYABLE TO AND ADVANCES FROM OFFICERS AND DIRECTORS (Tables) (USD $)

12 Months Ended

Dec. 31, 2016

Notes Payable To And Advances From Officers And Directors Tables Usd

Notes payable to and advance from officers and directors

	December 31,
	2016		2015
Note payable to Earnie Blackmon, an officer and director	$	28,750	$	—
Note payable to Tony Verzura, an officer and director		28,750		—
Advances from officers and directors		71,008		—
Accrued wages payable to officers and directors		42,695		612,512
	$	171,203	$	612,512

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STOCKHOLDERS' DEFICIT (Tables)

12 Months Ended

Dec. 31, 2016

Summary of share warrants outstanding

	Year Ended December 31,
	2016					2015
	Number of Shares			Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
Warrants outstanding, beginning of period		3,000,000		$	12.00	3,170,044		$	11.52
Warrants issued to consultant		666,667			0.18	—			—
Cashless issued upon conversion of Slainte note		1,746,674			—
Warrants exercised		(963,562	)		—	—			—
Repurchased and cancelled		—				(170,044	)		3.00
Expired		(3,000,000	)		—	—			—
Warrants outstanding, end of period		1,449,779		$	0.180	3,000,000		$	12.00
Warrants exercisable, end of period		1,449,779		$	0.180	3,000,000		$	12.00

Summary of stock options outstanding

	Number of Shares	Weighted Average Remaining Life (Years)	Weighted Average Exercise Price
Stock options outstanding at December 31, 2014	—		—
Issued	600,000	9.8	$0.70
Exercised	—	—	—
Expired	—	—	—
Stock options outstanding at December 31, 2015	600,000	9.8	$0.70
Stock options exercisable at December 31, 2015	600,000		$0.70
Stock options outstanding at December 31, 2015	600,000	9.8
Issued	3,080,000	10.0	$0.20
Exercised	—	—	—
Expired	—	—	—
Stock options outstanding at December 31, 2016	3,680,000	8.9	$0.28
Stock options exercisable at December 31, 2016	3,680,000	8.9	$0.28

Stock Options [Member]

Schedule of assumptions used for valuation utilizing the Black Scholes option pricing model for fair value

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

Stock Options [Member] | Stock Incentive Plan 2014 [Member]

Schedule of assumptions used for valuation utilizing the Black Scholes option pricing model for fair value

Stock price	$	0.20
Exercise price	$	0.20
Risk free interest rate		1.98	%
Expected term (years)		10.0
Expected volatility		173	%
Expected dividends		0	%

Common Stock Issued for Warrant Outstanding [Member]

Schedule of assumptions used for valuation utilizing the Black Scholes option pricing model for fair value

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

Warrant [Member]

Schedule of assumptions used for valuation utilizing the Black Scholes option pricing model for fair value

Stock price	$0.16 - $2.18
Exercise price	$0.18
Risk free interest rate	1.01% - 1.37%
Expected term (years)	5
Expected volatility	322% - 504%
Expected dividends	0%

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SHARE-BASED COMPENSATION (Tables)

12 Months Ended

Dec. 31, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of share-based compensation expense

	December 31,
	2016		2015
Warrants issued for consulting services	$	319,419	$	47,880
Warrants issued for accrual of share-based awards to officers and directors		—		612,512
Common stock issued for accounts payable and accrued expenses		223,484		—
Common stock issued for services		271,097		67,500
Amortization of common stock issued for prepaid services		—		302,789
	$	814,000	$	1,030,681

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INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

Schedule of sources and tax effects of the differences for the periods

	Years Ended December 31,
	2016			2015
Statutory U.S. federal tax rate		39	%		39	%
Effect of increase in valuation allowance		(39	%)		(39	%)
		—	%		—	%

Schedule of changes in cumulative net deferred tax assets

	December 31,
	2016			2015
Net loss carry forward	$	3,648,316		$	2,148,248
Valuation allowance		(3,648,316	)		(2,148,248	)
	$	—		$	—

Schedule of reconciliation of income taxes computed at the statutory rate

	Years Ended December 31,
	2016			2015
Tax benefit at statutory rate	$	1,500,068		$	1,124,511
Valuation allowance		(1,500,068	)		(1,124,511	)
	$	—		$	—

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RELATED PARTY TRANSACTIONS (Tables)

12 Months Ended

Dec. 31, 2016

Related Party Transactions [Abstract]

Schedule of amounts due from related parties

	December 31,
	2016		2015
Blue River	$	—	$	3,284
Advesa		21,755		—
CRD		5,000		5,000
Total due from related parties	$	26,755	$	8,284

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COMMITMENTS AND CONTINGENCIES (Tables)

12 Months Ended

Dec. 31, 2016

Commitments And Contingencies Tables

Summary of Consolidated statements of operations expense

	Year Ended December 31, 2016
Cash paid to consultant	$	15,000
Shares of common stock issued to consultant		62,781
Fair value of warrants issued to consultant		319,419
	$	397,200

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BUSINESS ORGANIZATION AND NATURE OF OPERATIONS (Details) - USD ($)	1 Months Ended
	Mar. 31, 2014	Dec. 31, 2016	Dec. 31, 2015	Mar. 26, 2014
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Amount of payable owed to former officer and director, exchanged for assets sold	$ 15,000
Number of common shares issued in exchange for certain intellectual property	38,690,000
Total number of common shares previously outstanding, cancelled during period				41,690,000
Common stock, shares outstanding		50,650,994	44,988,500	43,620,000

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Narrative) (Details)	12 Months Ended
	Dec. 31, 2016 USD ($) Item	Dec. 31, 2015 USD ($)
Property, Plant and Equipment [Line Items]
Cash equivalents
Number of operating segment | Item	1
Allowance for doubtful accounts	$ 30,000	4,340
Bad debt expense	$ (4,619)	24,185
Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	5 years
Estimated useful life	20 years
Equity Method Investments, Percentage	50.00%
Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	3 years
Estimated useful life	10 years
Equity Method Investments, Percentage	20.00%
Chief Executive Officer [Member]
Property, Plant and Equipment [Line Items]
Cash equivalents	$ 4,158	$ 0

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Schedule of anti-dilutive securities) (Details) - shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of diluted net loss per share	5,129,779	3,600,000
Warrant [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of diluted net loss per share	666,667	3,000,000
Cashless warrants not converted to common stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of diluted net loss per share	783,112
Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of diluted net loss per share	3,680,000	600,000

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Schedule of concentration of credit risk) (Details)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Revenue [Member] | Customer A [Member]
Concentration Risk [Line Items]
Concentration risk percentage	95.00%	36.00%
Revenue [Member] | Customer B [Member]
Concentration Risk [Line Items]
Concentration risk percentage	3.00%	32.00%
Revenue [Member] | Customer C [Member]
Concentration Risk [Line Items]
Concentration risk percentage	2.00%	18.00%
Accounts Receivable [Member] | Customer D [Member]
Concentration Risk [Line Items]
Concentration risk percentage	75.00%	56.00%
Accounts Receivable [Member] | Customer E [Member]
Concentration Risk [Line Items]
Concentration risk percentage	25.00%	41.00%
Accounts Receivable [Member] | Customer F [Member]
Concentration Risk [Line Items]
Concentration risk percentage	0.00%	1.00%

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GOING CONCERN (Details) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
GOING CONCERN [Abstract]
Net loss (income)	$ 3,854,004	$ 2,883,362
Net cash used in operating activities	274,670	525,148
Working capital deficit	393,182
Accumulated deficit	$ 9,362,333	$ 5,508,329

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INVESTMENTS IN NON-MARKETABLE EQUITY SECURITIES (Narrative) (Details) - USD ($)			12 Months Ended
	Dec. 09, 2014	Jun. 09, 2014	Dec. 31, 2016	Dec. 31, 2015	Mar. 24, 2016	Dec. 31, 2014
Schedule of Cost-method Investments [Line Items]
Common shares, price per share				$ 0.17
Investments in non-marketable equity securities				$ 205,275		$ 593,750
Loss on investment in non-marketable equity securities				388,475
Notes payable				775,000
Loss on non-marketable equity securities			$ 15,125	$ 388,475
WeedMD RX Inc. (''WMD'') [Member]
Schedule of Cost-method Investments [Line Items]
Common shares received in exchange for future consulting services and use of our intellectual property		1,187,500
Warrants received in exchange for future consulting services and use of our intellectual property		3,000,000
Equity Method Investments, Percentage		4.29%
Common shares, price per share				$ 0.50
Investments in non-marketable equity securities					$ 15,125
Warrants expired	3,000,000
Sale of common stock			1,100,000
Notes payable				$ 175,000
Shares of investment owned					87,500
Loss on non-marketable equity securities			$ 15,125
CAD [Member]
Schedule of Cost-method Investments [Line Items]
Warrants, price per warrant			$ 0.50

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PREPAID EXPENSES (Details) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Prepaid investor relations services		$ 1,667
Prepaid licensing fees		35,000
Other prepaid services and fees		19,674
Total prepaid expenses		$ 56,341

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INTANGIBLES (Details)	12 Months Ended
	Dec. 31, 2016
Patents [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated useful life	20 years
Design Marks and Trademarks [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated useful life	10 years

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EQUITY METHOD INVESTMENTS (Narrative) (Details) - USD ($)		12 Months Ended
	Aug. 15, 2014	Dec. 31, 2016	Dec. 31, 2015
Schedule of Equity Method Investments [Line Items]
Equity method investments		$ 88,000	$ 88,000
Equity in net loss of unconsolidated affiliate			$ (90,900)
CRD [Member]
Schedule of Equity Method Investments [Line Items]
Interest acquired (as a percentage)	50.00%
Equity method investments	$ 88,000
Shares of common stock issuable for acquisition of interest	40,000

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ACCRUED EXPENSES (Details) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Accrued Liabilities, Current [Abstract]
Accrued consulting fees	$ 45,000	$ 110,000
Accrued wages and related expenses		629,780
Accrued interest expense	10,264	101,185
Accrued other expenses		87,568
Total accrued expenses	$ 55,264	$ 928,533

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ACCRUED EXPENSES (Narrative) (Details) - USD ($)		12 Months Ended
	May 06, 2014	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Costs recognized		$ 643,913	$ 645,503
Accrued expenses		55,264	928,533
Loss on extinguishment of debt		$ 691,904	768,602
Research and Development Arrangement [Member]
Consultancy agreement, term	9 months
Consultancy agreement, initial payment	$ 50,000
Consultancy agreement, additional payments	50,000
Consultancy agreement, total payments	$ 200,000
Shares issued for consultancy agreement	100,000	100,000
Costs recognized				$ 160,000
Accrued expenses			$ 110,000
Percentage of completion			80.00%
Fair value of shares		$ 163,783
Loss on extinguishment of debt		$ 53,783

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FAIR VALUE MEASUREMENTS AND DERIVATIVE LIABILITIES (Schedule of fair value measured on a recurring basis) (Details) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative liabilities		$ 383,581
Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative liabilities
Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative liabilities
Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative liabilities		$ 383,581

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FAIR VALUE MEASUREMENTS AND DERIVATIVE LIABILITIES (Schedule of reconciliation of beginning and ending balances) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Reconciliation of beginning and ending balances for financial instruments carried at fair value measured on a recurring basis
Derivative liability at the beginning of the period	$ 383,581
Additions to derivative liabilities for convertible debt conversion features and interest	557,000	$ 359,988
Additions for modifications of note payable to Slainte Ventures	686,612
Reductions due to conversions or repayments of convertible debt	(3,317,986)
Loss on revaluation of derivative liabilities during the year	1,690,793	23,593
Derivative liability at the end of the period		383,581
Derivative Financial Instruments, Liabilities [Member]
Reconciliation of beginning and ending balances for financial instruments carried at fair value measured on a recurring basis
Derivative liability at the beginning of the period	383,581
Derivative liability at the end of the period		383,581
Derivative Financial Instruments, Liabilities [Member] | Notes payable [Member]
Reconciliation of beginning and ending balances for financial instruments carried at fair value measured on a recurring basis
Reductions due to conversions or repayments of convertible debt	(3,317,986)
Amortization of Debt Conversion Features and interest [Member] | Derivative Financial Instruments, Liabilities [Member]
Reconciliation of beginning and ending balances for financial instruments carried at fair value measured on a recurring basis
Additions to derivative liabilities for convertible debt conversion features and interest	557,000	359,988
Notes payable [Member] | Derivative Financial Instruments, Liabilities [Member]
Reconciliation of beginning and ending balances for financial instruments carried at fair value measured on a recurring basis
Additions for modifications of note payable to Slainte Ventures	686,612
Gain (Loss) on Derivative Instruments [Member] | Derivative Financial Instruments, Liabilities [Member]
Reconciliation of beginning and ending balances for financial instruments carried at fair value measured on a recurring basis
Loss on revaluation of derivative liabilities during the year	$ (1,690,793)	$ 23,593

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DEFERRED REVENUE (Details) - USD ($)		6 Months Ended	12 Months Ended
	Jun. 09, 2014	Dec. 31, 2014	Dec. 31, 2016	Dec. 31, 2015	Dec. 30, 2014
Deferred Revenue Arrangement [Line Items]
Deferred revenue			$ 383,750	$ 763,750
Less - current portion			(180,000)	(380,000)
Deferred revenue, net of current portion			203,750	383,750
WeedMD RX Inc. (''WMD'') [Member]
Deferred Revenue Arrangement [Line Items]
Deferred revenue			383,750	563,750
Common shares received in exchange for future consulting services and use of our intellectual property	1,187,500
Warrants received in exchange for future consulting services and use of our intellectual property	3,000,000
Fair value of securities recorded as deferred revenue	$ 893,750
Deferred revenue recognized per month			15,000
Total deferred revenue recognized		$ 150,000	180,000	180,000
Deffered income recognized other income			200,000
Fox Barry Farms Llc [Member]
Deferred Revenue Arrangement [Line Items]
Deferred revenue				$ 200,000	$ 200,000

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NOTES PAYABLE (Narrative) (Details) - USD ($)			1 Months Ended			12 Months Ended
	Nov. 14, 2016	Dec. 18, 2014	Dec. 17, 2016	Nov. 30, 2016	Mar. 24, 2016	Dec. 31, 2016	Dec. 31, 2015	Jul. 05, 2016	Mar. 18, 2016	Dec. 18, 2015	Jul. 07, 2014
Short-term Debt [Line Items]
Accrued interest payable						$ 10,264	$ 101,185
Maturity date						Jul. 08, 2017
Loss on extinguishment of debt						$ (691,904)	(768,602)
Loss on derivative liabilities						1,894,258	$ 23,593
Warrant [Member]
Short-term Debt [Line Items]
Loss on derivative liabilities						1,616,215
Conversion Feature [Member]
Short-term Debt [Line Items]
Loss on derivative liabilities						$ 13,947
SlainteVentures, LLC [Member]
Short-term Debt [Line Items]
Debt instrument, interest rate								12.00%		18.00%
Default rate of interest under the note	70.00%		80.00%
Number of shares of common stock issued				104,939
Number of shares called by warrants									416,667
Warrant exercise price						$ 0.18
Maturity date	Dec. 30, 2017
Value of shares of common stock issued			$ 100,000	$ 100,000
Number of trading days			30 days
Loss on extinguishment of debt			$ 674,666
Assumption of liabilities for stock, shares				594,540
Exercise warrants issuance of Common stock				1,330,007
Notes Payable Other Payables [Member] | WeedMD RX Inc. (''WMD'') [Member]
Short-term Debt [Line Items]
Debt instrument, face amount					$ 175,000						$ 175,000
Debt instrument, interest rate											5.00%
Assumption of liabilities for stock, shares					1,100,000
Notes Payable Other Payables [Member] | Unrelated Third Party [Member]
Short-term Debt [Line Items]
Debt instrument, face amount		$ 600,000
Debt instrument, interest rate		12.00%
Debt issuance costs		$ 13,500

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NOTES PAYABLE (Schedule of Notes Payable) (Details) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Short-term Debt [Line Items]
Notes payable		$ 775,000
WeedMD RX Inc. (''WMD'') [Member]
Short-term Debt [Line Items]
Notes payable		175,000
WeedMD RX Inc. (''WMD'') [Member] | Notes Payable Other Payables [Member]
Short-term Debt [Line Items]
Notes payable		175,000
SlainteVentures, LLC [Member] | Notes Payable Other Payables [Member]
Short-term Debt [Line Items]
Notes payable		$ 600,000

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NOTES PAYABLE (Schedule of key inputs in valuation) (Details)	12 Months Ended
	Dec. 31, 2016
Minimum [Member] | Warrant [Member]
Expected life (years)	4 years 3 months 15 days
Risk-free interest rate	1.01%
Expected volatility	214.00%
Minimum [Member] | Conversion Feature [Member]
Expected life (years)	1 year 1 month 2 days
Risk-free interest rate	0.78%
Expected volatility	20000.00%
Maximum [Member] | Warrant [Member]
Expected life (years)	5 years
Risk-free interest rate	1.90%
Expected volatility	227.00%
Maximum [Member] | Conversion Feature [Member]
Expected life (years)	1 year 1 month 17 days
Risk-free interest rate	0.79%
Expected volatility	203.00%

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CONVERTIBLE NOTES PAYABLE (Narrative) (Details) - USD ($)				1 Months Ended		12 Months Ended
	Aug. 10, 2016	Jul. 05, 2016	Apr. 06, 2016	Mar. 31, 2016	Mar. 30, 2016	Dec. 31, 2016	Dec. 31, 2015	Dec. 18, 2015	Feb. 10, 2015
Debt Instrument [Line Items]
Convertible note payable						$ 160,000	$ 381,000
Convertible notes payable-current portion, net						125,547	108,207
Original issue discount						34,453	272,793
Exercise price (in dollars per share)									$ 1.29
Net cash proceeds received from initial borrowing						316,478	339,900
Loss on origination of derivative liability						(1,894,258)	(23,593)
Components of convertible debt, net
Debt discount amortization and interest expense						267,258	82,500
Deferred financing costs, net							32,400
Amortization of deferred financing costs						32,400	8,700
Proceeds from debt, net						50,000
Advances from officers and directors						71,008
Convertible Note [Member] | Typenex Co Investment Llc [Member]
Debt Instrument [Line Items]
Debt instrument initial borrowing							381,000
Components of convertible debt, net
Accrued interest payable						$ 5,876	$ 5,121
Convertible Note [Member] | Tangiers Investment Group, LLC [Member]
Components of convertible debt, net
Number of Common shares converted						2,843,698
2016 Convertible Notes [Member]
Components of convertible debt, net
Debt discount amortization and interest expense						$ 267,258
Interest expense						35,719
Deferred financing costs, net						0
Amortization of deferred financing costs						32,400
Aggregate fair value of the derivative liabilities						$ 557,000
Accured interest converted in common stock						497,296
2015 Convertible Notes [Member]
Debt Instrument [Line Items]
Number of trading days immediately preceding the applicable conversion							180 days
Components of convertible debt, net
Debt discount amortization and interest expense							$ 82,500
Interest expense							$ 5,121
Holding rate of issued and outstanding common stock							9.99%
Deferred financing costs, net							$ 41,100
Amortization of deferred financing costs							8,700
Aggregate fair value of the derivative liabilities							$ 355,293
2015 Convertible Notes [Member] | Minimum [Member]
Components of convertible debt, net
Prepayment premiums							10.00%
Minimum default penalty amount, rate							25.00%
2015 Convertible Notes [Member] | Maximum [Member]
Components of convertible debt, net
Prepayment premiums							40.00%
Minimum default penalty amount, rate							50.00%
SlainteVentures, LLC [Member]
Debt Instrument [Line Items]
Debt instrument, interest rate		12.00%						18.00%
Components of convertible debt, net
Accrued interest payable			$ 102,000
Proceeds from debt, net		$ 50,000	75,000		$ 81,978
Advances from officers and directors			$ 52,500
Tangiers Convertible Note [Member]
Debt Instrument [Line Items]
Debt instrument, interest rate						10.00%
Expiration date						Jul. 08, 2017
Components of convertible debt, net
Proceeds from debt, net						$ 35,000
JSJ Investments [Member]
Debt Instrument [Line Items]
Debt instrument, interest rate	12.00%
Components of convertible debt, net
Proceeds from debt, net	$ 125,000
Average closing price of common stock	$ 0.20
Conversions rate on issue and outstandng common stock	4.99%
Vis Vires Group, Inc. [Member] | SlainteVentures, LLC [Member]
Debt Instrument [Line Items]
Expiration date						Jan. 10, 2017
Components of convertible debt, net
Minimum default penalty amount, rate						15.00%
Repayment of principal and accrued interest				$ 59,000
Average closing price of common stock						$ 0.45

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CONVERTIBLE NOTES PAYABLE (Schedule of summarizes our convertible promissory notes issued) (Details) - USD ($)

12 Months Ended

Dec. 31, 2016

Dec. 31, 2015

Maturity Date

Jul. 08, 2017

Total principal outstanding

$ 160,000

$ 381,000

Less unamortized discount

(34,453)

(272,793)

Total of outstanding amount

$ 125,547

108,207

Tangiers Investment Group, LLC [Member] | 2016 Convertible Notes [Member]

Issue Date

Dec. 28, 2016

Holder

Tangiers Investment Group

Security

Unsecured

Maturity Date

Jul. 08, 2017

Interest Rate

10.00%

Base Conversion Rate

1.00 through maturity; 55% of lowest closing price thereafter

Total principal outstanding

$ 35,000

Tangiers Investment Group, LLC [Member] | 2015 Convertible Notes [Member]

Issue Date

Dec. 09, 2015

Holder

Tangiers Investment Group

Security

Secured

Maturity Date

Dec. 08, 2016

Interest Rate

10.00%

Base Conversion Rate

55% of three lowest closing bids

Total principal outstanding

220,000

JSJ Investments Inc. [Member] | 2016 Convertible Notes [Member]

Issue Date

Aug. 10, 2016

Holder

JSJ Investments

Security

Unsecured

Maturity Date

May 10, 2017

Interest Rate

12.00%

Base Conversion Rate

$0.20 during first 180 days; 45% of lowest closing price thereafter

Total principal outstanding

$ 125,000

JSJ Investments Inc. [Member] | 2015 Convertible Notes [Member]

Issue Date

Oct. 12, 2015

Holder

JSJ Investments

Security

Unsecured

Maturity Date

Jul. 08, 2016

Interest Rate

12.00%

Base Conversion Rate

55% of five lowest trades

Total principal outstanding

102,000

Vis Viers Group, Inc. [Member] | 2015 Convertible Notes [Member]

Issue Date

Oct. 06, 2015

Holder

Vis Vires Group

Security

Unsecured

Maturity Date

Jun. 30, 2016

Interest Rate

8.00%

Base Conversion Rate

58% of three lowest closing bids

Total principal outstanding

$ 59,000

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NOTES PAYABLE TO AND ADVANCES FROM OFFICERS AND DIRECTORS (Narrative) (Details) - USD ($)	Dec. 31, 2016	Dec. 30, 2016	Apr. 06, 2016	Dec. 31, 2015	Oct. 12, 2015
Related Party Transaction [Line Items]
Principal balance increase		$ 57,500
Notes Payable Other Payables [Member]
Related Party Transaction [Line Items]
Convertible note payable, related party	$ 171,203			$ 612,512
Earnie Blackmon [Member] | Notes Payable Other Payables [Member]
Related Party Transaction [Line Items]
Convertible note payable, related party	28,750
Tony Verzura [Member]
Related Party Transaction [Line Items]
Debt instrument, face amount			$ 25,000
Tony Verzura [Member] | Notes Payable Other Payables [Member]
Related Party Transaction [Line Items]
Convertible note payable, related party	28,750
Advances from officers and directors [Member] | Notes Payable Other Payables [Member]
Related Party Transaction [Line Items]
Convertible note payable, related party	71,008
Accrued wages payable to officers and directors [Member] | Notes Payable Other Payables [Member]
Related Party Transaction [Line Items]
Convertible note payable, related party	$ 42,695			$ 612,512
Ernest Blackmon [Member]
Related Party Transaction [Line Items]
Debt instrument, face amount			$ 25,000
JSJ Investments Inc. [Member]
Related Party Transaction [Line Items]
Convertible note payable, related party					$ 102,000
Debt instrument, interest rate		12.00%

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STOCKHOLDERS' DEFICIT (Narrative) (Details) - USD ($)	1 Months Ended
	Mar. 31, 2014	Dec. 31, 2016	Dec. 31, 2015	May 03, 2014	May 02, 2014
Stockholders' Equity Note [Abstract]
Number of units sold through equity offering	600,000
Proceeds from sale of units	$ 900,000
Per share price A Warrant holders can purchase each share of the Company's common stock during the two year period commencing April 1, 2014	$ 7.50
Per share price B Warrant holders can purchase each share of the Company's common stock during the three year period commencing April 1, 2014	$ 15.00
Preferred stock, shares authorized		10,000,000	10,000,000	5,000,000	10,000,000
Preferred stock, par value per share				$ 0.001
Preferred stock, no par value
Common stock, shares authorized		100,000,000	100,000,000	50,000,000	100,000,000
Common stock, par value per share				$ 0.001
Common stock, no par value

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STOCKHOLDERS' DEFICIT (Schedule of Assumptions on Date of Valuation Utilizing for Fair Value of Warrants) (Details) - $ / shares		12 Months Ended
	Feb. 10, 2015	Dec. 31, 2016	Dec. 31, 2015
Warrants price (on dollars per shares)	$ 1.29
Stock price (in dollars per share)	1.59
Exercise price (in dollars per share)	$ 3.00
Risk free interest rate (as a percent)	1.05%
Expected term (years)	2 years 7 months 6 days
Expected volatility (as a percent)	183.00%
Expected dividends (as a percent)	0.00%
Warrant [Member]
Warrants price (on dollars per shares)			$ 0.70
Stock price (in dollars per share)			1.03
Exercise price (in dollars per share)		$ 0.18	3.00
Expected dividends (as a percent)		0.00%
Warrant [Member] | Minimum [Member]
Stock price (in dollars per share)		$ 0.16
Risk free interest rate (as a percent)		1.01%
Expected term (years)		5 years
Expected volatility (as a percent)		322.00%
Warrant [Member] | Maximum [Member]
Stock price (in dollars per share)		$ 2.18
Risk free interest rate (as a percent)		1.37%
Expected volatility (as a percent)		504.00%
Stock Options [Member]
Warrants price (on dollars per shares)			0.70
Stock price (in dollars per share)			0.70
Exercise price (in dollars per share)			$ 0.70

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STOCKHOLDERS' DEFICIT (Common Stock Issued For Services, Warrants and 2004 Equity Incentive Plan) (Details) - USD ($)		12 Months Ended
	Feb. 10, 2015	Dec. 31, 2016	Dec. 31, 2015	Nov. 20, 2014
Value of shares of common stock issued for services			$ 226,215
Equity method investments		$ 88,000	88,000
Issuance of Stock and Warrants for Services or Claims		$ 319,419	$ 47,880
Stock Incentive Plan 2014 [Member]
Maximum number of shares to be issued				4,000,000
Common share availabe for issue			3,400,000
Typenex Co Investment Llc [Member] | Warrant [Member]
Number of shares of common stock issued for services	621,000
Value of shares of common stock issued for services	$ 987,390
Number of warrants issued to purchase shares of common stock	170,044
Fair value of Warrant	$ 218,788
Loss on extinguishment of debt and repurchase of warrants	$ 768,602

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STOCKHOLDERS' DEFICIT (Common Stock Issued For Services, Warrants) (Details) - $ / shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Number of Shares
Warrants outstanding, beginning of period	3,000,000	3,170,044
Warrants issued to consultant	666,667
Cashless issued upon conversion of Slainte note	1,746,674
Warrants exercised	(963,562)
Repurchased and cancelled (shares)		(170,044)
Expired (in shares)	(3,000,000)
Warrants outstanding, end of period	1,449,779	3,000,000
Warrants exercisable at the end of the period (in shares)	1,449,779	3,000,000
Weighted Average Remaining Life (years)
Warrants exercisable at the end of the period	4 years 6 months
Weighted Average Exercise Price
Warrants outstanding, beginning of period (in dollars per share)	$ 12.00	$ 11.52
Issued (in dollars per share)	0.18
Exercised (in dollars per share)
Repurchased and cancelled (in dollars per share)		3.00
Expired (in dollars per share)
Warrants outstanding, end of period (in dollars per share)	0.180	12.00
Warrants exercisable at the end of the period (in dollars per share)	$ 0.180	$ 12.00

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STOCKHOLDERS' DEFICIT (Schedule of stock option activity) (Details) - Stock Options [Member] - $ / shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Number of Shares
Stock options outstanding, beginning of period	600,000
Issued	3,080,000	600,000
Exercised
Expired
Stock options outstanding, end of period	3,680,000	600,000
Stock options exercisable, end of period	3,680,000	600,000
Weighted Average Exercise Price
Stock options outstanding, beginning of period	$ 0.70
Issued	0.20	0.70
Exercised
Expired
Stock options outstanding, end of period	0.28	0.70
Stock options exercisable, end of period	$ 0.28	$ 0.70
Weighted Average Remaining Life (Years)
Stock options outstanding, beginning of period	8 years 10 months 24 days	9 years 9 months 18 days	9 years 9 months 18 days
Stock options Issued, end of period		10 years
Stock options exercisable, end of period	8 years 10 months 24 days

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STOCKHOLDERS' DEFICIT (Stock Option Activity) (Narrative) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2016	Jan. 12, 2016	Dec. 31, 2015	Jan. 12, 2015	Jan. 09, 2015	Dec. 31, 2014	May 03, 2014
Common stock, per share value							$ 0.001
Stock Options [Member]
Awarded stock options		$ 1,050,000
Stock options	3,680,000		600,000
Fair value of options		612,512				417,664
Weighted-average remaining contractual life for stock options outstanding and exercisable	8 years 10 months 24 days
Aggregate intrinsic value of options outstanding and exercisable	$ 0		$ 0
2014 Stock Incentive Plan [Member]
Awarded stock options					$ 200,000
2014 Stock Incentive Plan [Member] | Mr. Ruby [Member]
Awarded stock options				$ 980,000
Common stock, per share value				$ 0.20

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SHARE-BASED COMPENSATION (Details) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Warrants issued for consulting services	$ 319,419	$ 47,880
Warrants issued for accrual of share-based awards to officers and directors		612,512
Common stock issued for accounts payable and accrued expenses	223,484
Warrants issued for accrual of share-based awards to officers and directors	271,097	67,500
Amortization of common stock issued for prepaid services		302,789
Share-based compensation	$ 814,000	$ 1,030,681

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SHARE-BASED COMPENSATION (Narrative) (Details)	12 Months Ended
	Dec. 31, 2016 USD ($)
Share-based Compensation Narrative Details
Share-based compensation reported as a reduction of accounts payable and accrued expenses	$ 191,550
Share-based compensation reported as a loss on extinguishment of debt	$ 31,934

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INCOME TAXES (Schedule of Sources and Tax Effects of Differences for Periods) (Details)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Sources and tax effects of the differences
Statutory U.S. federal tax rate	39.00%	39.00%
Effect of increase in valuation allowance	(39.00%)	(39.00%)
Effective income tax rate (as a percent)

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INCOME TAXES (Schedule of Changes in Cumulative Net Deferred Tax Assets) (Details) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Net deferred tax assets
Net loss carry forward	$ 3,648,316	$ 2,148,248
Valuation allowance	(3,648,316)	(2,148,248)
Net deferred tax assets

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INCOME TAXES (Schedule of Reconciliation of Income Taxes Computed at Statutory Rate) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Reconciliation of income taxes computed at statutory rate
Tax benefit at statutory rate	$ 1,500,068	$ 1,124,511
Valuation allowance	(1,500,068)	(1,124,511)
Income tax expense (benefit)

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RELATED PARTY TRANSACTIONS (Narrative) (Details) - USD ($)	1 Months Ended	12 Months Ended
	Jun. 30, 2016	Dec. 31, 2016	Dec. 31, 2015	Apr. 30, 2015	Dec. 31, 2014
Total due from related parties		$ 26,775	$ 8,284
Professional fees		643,913	645,503
Lone Mountain [Member]
Total due from related parties					$ 40,900
CRD [Member]
Total due from related parties		5,000	5,000	$ 5,000
Affiliated customer [Member]
Professional fees	$ 4,425
Blue River [Member]
Total due from related parties			3,284
Consulting term		5 years
Non-exclusive license to our intellectual property		$ 5,000
Consulting fee revenue		71,680	4,425
Accounts payable		4,293	0
Advesa [Member]
Total due from related parties		21,755
Advances to related party during period		$ 20,499

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RELATED PARTY TRANSACTIONS (Schedule of Amounts Due from Related Parties) (Details) - USD ($)	Dec. 31, 2016	Dec. 31, 2015	Apr. 30, 2015
Related Party Transaction [Line Items]
Total due from related parties	$ 26,775	$ 8,284
Blue River [Member]
Related Party Transaction [Line Items]
Total due from related parties		3,284
Advesa [Member]
Related Party Transaction [Line Items]
Total due from related parties	21,755
CRD [Member]
Related Party Transaction [Line Items]
Total due from related parties	$ 5,000	$ 5,000	$ 5,000

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COMMITMENTS AND CONTINGENCIES (Narrative) (Details) - USD ($)	1 Months Ended	12 Months Ended
	Feb. 20, 2016	Dec. 31, 2016	Dec. 31, 2015	Dec. 28, 2016	May 03, 2014
Long-term Purchase Commitment [Line Items]
Common stock, price per share					$ 0.001
Research and development		$ 23,124	$ 329
Minimum amount draw down at one time		5,000
Maximum amount draw down at one time		$ 350,000
Percentage of trading price		85.00%
Commitment fee		$ 35,000
Bear Note interest per year		10.00%
Maturity Date		Jul. 08, 2017
Note payable		$ 35,000
Net discount		34,453	$ 272,793
Tangiers Global, LLC [Member]
Long-term Purchase Commitment [Line Items]
Line of Credit agreement				$ 10,000,000
Consulting Agreement [Member]
Long-term Purchase Commitment [Line Items]
Agreement, term	12 months
Warrant term	5 years
Initial payment	$ 7,500
Shares issued for agreement	250,000
Common stock, price per share	$ 0.18
Consultancy Agreement [Member]
Long-term Purchase Commitment [Line Items]
Expenses recognized		$ 394,215

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COMMITMENTS AND CONTINGENCIES (Summary of Consolidated statements of operations expense) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Professional fees	$ 643,913	$ 645,503
Consultant [Member]
Professional fees	15,000
Shares of common stock issued to consultant	62,781
Fair value of warrants issued to consultant	319,419
Total contract expenses	$ 397,200

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SUBSEQUENT EVENTS (Details) - USD ($)		1 Months Ended	12 Months Ended
	Aug. 10, 2016	Feb. 13, 2017	Dec. 31, 2016	Dec. 31, 2015
Subsequent Event [Line Items]
Proceeds from issuance of convertible debt			$ 316,478	$ 339,900
Maturity date			Jul. 08, 2017
JSJ Investments Inc. [Member]
Subsequent Event [Line Items]
Proceeds from issuance of convertible debt	$ 125,000
Interest rate (as a percent)	12.00%
Maturity date	May 10, 2017
Minimum term to be hold for conversion	Aug. 16, 2016
Percentage of repaid amount increase	30.00%
JSJ Investments Inc. [Member] | Subsequent Event [Member]
Subsequent Event [Line Items]
Repaid of note issuance of common stock		379,100