American Heritage International Inc.

Notes to Financial Statements

(Unaudited)

1.

Nature of Business

American Heritage International Inc. manufactures and distributes disposable electronic cigarettes. We offer our products through retail stores, distributors, independent retailers, and grocery and convenience store operators, as well as online in the United States. Our primary operations are based in Las Vegas, Nevada. We intend to take advantage of the rapid growth of the electronic cigarette industry and become one of the market leaders.

2.

Summary of Significant Accounting Policies

Unaudited Interim Financial InformationBasis of Presentation

TheseThe condensed interim financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles generally acceptedhave been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.

These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments consideredare necessary for a fair presentation have been included. Operating resultsof the information contained therein. It is suggested that these interim financial statements be read in conjunction with the financial statements of the Company for the period ended December 31, 2013 and notes thereto included in the Company's Form 10-K. The Company follows the same accounting policies in the preparation of interim reports.

Results of operations for the interim period ended June 30, 2014periods are not necessarily indicative of theannual results that can be expected for the full year.

Use of Estimates

The preparation of financial statements in accordance with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses in the reporting period. We regularly evaluate estimates and assumptions related to the useful life and recoverability of long-lived assets and deferred income tax asset valuation allowances. We base our estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by us may differ materially and adversely from our estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

Long-Lived Assets

We account for our long-lived assets in accordance with ASC Topic 360-10-05, “Accounting for the Impairment or Disposal of Long-Lived Assets.” ASC Topic 360-10-05 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost carrying value of an asset may no longer be appropriate. We assess recoverability of the carrying value of an asset by estimating the future net cash flows expected to result from the asset, including eventual disposition. If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset’s carrying value and fair value or disposable value.

Intangible Assets

Intangible assets are comprised primarily of the cost of certain intellectual property related to the electronic cigarette business including certain trademarks, product design and website. We evaluate our trademarks annually for impairment or earlier if there is an indication of impairment. If there is an indication of impairment of identified intangible assets not subject to amortization, we compare the estimated fair value with the carrying amount of the asset. An impairment loss is recognized to write-down the intangible asset to its fair value if it is less than the carrying amount. The fair value is calculated using the income approach. However, preparation of estimated expected future cash flows is inherently subjective and is based on our best estimate of assumptions concerning expected future conditions. As of JuneSeptember 30, 2014, the estimated fair values of trademarks and other

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intangible assets exceeded their respective carrying values. We amortize intangible assets on a straight-line basis over a period of three years.

Revenue Recognition

Revenue is recognized in accordance with Staff Accounting Bulletin (“SAB”) No. 101, Revenue Recognition in Financial Statements, as revised by SAB No. 104. Revenue is derived from product sales and is recognized upon shipment to the customer, the sales price is fixed or determinable and collectability is reasonably assured. Ownership and title of our products pass to customers upon delivery of the products to customers. Returns are accepted, but are not significant to our overall operations. Net sales have been determined after deduction of discounts, slotting fees and other promotional allowances in accordance with ASC 605-50.

Recent Pronouncements

We continually assess any new accounting pronouncements to determine their applicability to us. Where it is determined that a new accounting pronouncement affects our financial reporting, we undertake a study to determine the consequence of the change to our financial statements and assure that there are proper controls in place to ascertain that our financial statements properly reflect the change.

On June 10, 2014, the FASB published Accounting Standards Update No. 2014-10 “ASU No. 2014-10”, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation. ASU No. 2014-10 removes the definition of a development stage entity from the Master Glossary of the Accounting Standards Codification, thereby removing the financial reporting distinction between development stage entities and other reporting entities from U.S. GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. The amendments also clarify that the guidance in Topic 275, Risks and Uncertainties, is applicable to entities that have not commenced planned principal operations. ASU No. 2014-10 will be applied retrospectively and will be effective for public business entities in interim and annual periods beginning after December 15, 2014. The requirements will be effective for non-public business entities for annual periods beginning after December 15, 2014, and interim and annual periods thereafter. However, both public and non-public entities will have additional time to adopt the amendments to ASC 810. Early adoption is permitted in all cases. We have applied ASU No. 2014-10 retrospectively by eliminating the inception to date column in our statements of operations and cash flows.

3.

Going Concern

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We have begun operations but have not generated significant revenue to date. These conditions give rise to doubt about our ability to continue as a going concern. These financial statements do not include adjustments relating to the recoverability and classification of reported asset amounts or the amount and classification of liabilities that might be necessary should we be unable to continue as a going concern. Our continuation as a going concern is dependent upon our ability to obtain additional financing and to generate profits and positive cash flow. We will require a cash injection of $1,000,000 over the remainder of 2014 to achieve our business goals for fiscal 2014. We need these funds to purchase inventory and support accounts receivable and sustain planned operating losses.

4.

Intangible Assets

On August 28, 2013, we entered into an Asset Purchase Agreement (the “Purchase Agreement”) with American Heritage LLC and its principals. Under the Purchase Agreement, we acquired certain intellectual property related to the electronic cigarette business in exchange for 15,300 shares of our Series “A” Convertible

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Preferred Stock valued at $25,000. In addition, we capitalized an additional $5,500 related to our website development and package design. As of JuneSeptember 30, 2014 our intellectual property totaled $22,875,$20,333, which is net of accumulated amortization of $7,625.$10,167.

5.

Related Party Debt and Transactions

We were charged management fees by our former officer/director of $5,000 per month on a month-to-month basis. Total management fees are $nil and $30,000 for the six months ended June 30, 2014 and 2013, respectively.

During the year ended December 31, 2013 our current officers/directors loaned us $61,964. During the three months ended JuneSeptember 30, 2014 we received further loans of $2,259$17,734 and we repaid $910$18,173 of loans outstanding. As at JuneSeptember 30, 2014 we owe our officers/directors a total of $14,623.$14,184. These loans are unsecured, non-interest bearing and due on demand.

Pursuant to two Executive Services Agreements effective October 1, 2013 with our current officers/directors we have accrued management fees of $5,000 per month for each of our two senior officers. As at JuneSeptember 30, 2014 we owe these senior officers a total of $90,000.$120,000.

6.

Common Stock

a)

On January 31, 2014 we closed our $0.25 Unit non-brokered private placement and on March 20, 2014 we issued a total of 443,000 Units at $0.25 per Unit for total proceeds of $110,750. Each Unit contained one common share and one common share purchase warrant to acquire one additional common share at $0.40 per share expiring March 20, 2016.

b)

On February 1, 2014 we opened a non-brokered private placement offering of 2,000,000 Units at $1.00 per Unit. On March 20, 2014, having received $403,250 towards this offering, we issued a total of 403,250 Units at $1.00 per Unit. Each Unit contained one common share and one common share purchase warrant to acquire one additional common share at $1.50 per share expiring March 20, 2016. This offering closed on March 31, 2014.

c)

On March 20, 2014 we issued 20,000 common shares having a fair value of $30,000 pursuant to an Advisory Board Agreement. This amount is included in prepaid expense. This advisory board member is due advisory fees of $5,000 per month to be paid through issuance of common shares. As atof June 30, 2014 a total of $15,000 was owed to an advisory board member to be paid by issuing 51,886 common shares. As of September 30, 2014 a total of $15,000 was owed to an advisory board member to be paid by issuing 182,056 common shares. These shares have not yet been issued.

7.

Subsequent Events

We have evaluated all subsequent events through the date these financial statements were issued and determined that there were no subsequent events to disclose.