Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|X| Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange
Act Of 1934
For the quarterly period ended December 31, 2014
| | Transition Report Under Section 13 or 15(d) of the Securities Exchange Act
Of 1934
For the transition period from __________ to __________
Commission File Number: 000-54231
AMERICANN, INC
-------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 27-4336843
------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3200 Brighton Blvd. Unit 114
Denver, CO 80216
---------------------------------------------------
(Address of principal executive offices, including Zip Code)
(303) 862-9000
-----------------------------------
(Issuer's telephone number, including area code)
---------------------------------------------
(Former name or former address if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [x] No [ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a small reporting company. See
the definitions of "large accelerated filer," "accelerated filer,"
"non-accelerated filer," and "smaller reporting company" in Rule 12b-2 of the
Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [x]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 16,684,334 common stock as of January
31, 2015.
1
Americann, Inc.
(fka Nevada Health Scan, Inc.)
Condensed Balance Sheet
Unaudited
December 31, 2014 September 30, 2014
ASSETS
Current Assets:
Cash $73,269 $ 173,956
Deposits 100,000 100,000
Interest receivable 16,908 -
Prepaid expenses 11,953 5,000
---------- -------
Total Current Assets 202,130 278,956
---------- -------
Plant, property, and equipment:
Furniture and equipment (net of $615
and $394- depreciation) 7,242 7,463
Land 2,250,809 2,250,809
---------- ---------
Total property, plant and equipment 2,258,051 2,258,272
---------- ---------
Other assets:
Notes receivable 965,000 1,000,000
Security deposit 3,110 3,110
---------- ----------
Total other assets 968,110 1,003,110
---------- ----------
TOTAL ASSETS $3,428,291 $3,540,338
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 10,134 $ 25,515
Related party payables 43,220 16,357
Interest payable - related
party 15,053 5,192
Other payables 38,810 12,981
Deferred revenue 1,740 11,7400
------- -------
Total current liabilities 108,957 71,785
------- -------
Long-term liabilities - note payable related
party 805,000 825,000
------- -------
TOTAL LIABILITIES 913,957 896,785
------- -------
2
Americann, Inc.
(fka Nevada Health Scan, Inc.)
Condensed Balance Sheet (Continued)
SHAREHOLDERS' EQUITY
Preferred stock, $0.0001 par value per share;
Authorized 20,000,000 Shares; Issued
and outstanding -0- shares. -- --
Common Stock, $0.0001 per share;
Authorized 100,000,000 Shares; Issued and
outstanding 16,581,000 and 16,581,000 at
December 31, 2014 and September 30, 2014,
Respectively 1,658 1,658
Capital paid in excess of par value 4,829,578 4,716,794
Accumulated (Deficit) (2,316,902) (2,074,899)
------------ -----------
TOTAL SHAREHOLDERS' EQUITY 2,514,334 2,643,553
--------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $3,428,291 $3,540,338
========== ==========
See Accompanying Notes To These Unaudited Condensed Financial Statements.
3
Americann, Inc.
(fka Nevada Health Scan, Inc.)
Condensed Statement Of Operations
Three Three
Months Ended Months Ended
December 31, 2014 December 31, 2013
Revenue: $ 30,000 $ -
----------- --------
General & Administrative Expenses
Accounting 10,000 4,900
Advertising 2,875
Contract and consulting 63,184 -
Depreciation 221
Other G & A 45,429 200
Legal 18,380 -
Rent 8,310
Salaries 30,518
Stock based compensation 112,784
Stock Transfer Fee 677 600
Taxes 9,464
Travel 5,505 -
----------- -----------
Total G & A 307,347 5,700
----------- -----------
(Loss) from operations (277,347) (5,700)
----------- -----------
Other income (expense)
Interest expense - related party (9,862)
Interest income 45,206 -
----------- -----------
Total other income 35,344
-----------
Net (loss) $ (242,003) $ (5,700)
=========== ===========
Basic and diluted (Loss) per
common share $ (0.02) $ 0.00
=========== ===========
Weighted Average Common Shares
Outstanding 16,581,000 16,100,000
========== ==========
See Accompanying Notes To These Unaudited Condensed Financial Statements.
4
Americann, Inc.
(fka Nevada Health Scan, Inc.)
Statement Of Cash Flows
Three Three
Months Ended Months Ended
December 31, 2014 December 31, 2013
Cash Flows From Operating Activities:
Net (Loss) $ (242,003) $ (5,700)
Adjustments to reconcile net loss to net
cash used in
operating activities:
Depreciation 221 -
Stock based compensation and option expense 112,784 -
Increase in interest
receivable (16,908) -
Increase in deposit and prepaid expenses (6,953) -
Increase in accounts payable and
related party 11,482
Increase in interest payable 9,861
Increase in other payables 25,829
(Decrease) in deferred revenue (10,000) 200
-------- ---
Net Cash Flows (used) in
operations (115,687) (5,500)
--------- -------
Cash Flows From Investing Activities:
Net Cash Flows (used) in Investing
activities
Payment received on note receivable: 35,000 -
------- -
Cash Flows From Financing Activities: 35,000
Payment to related party (50,000) -
Proceed from related party debt 30,000 5,500
------- -----
Net Cash Flows provided by financing activities (20,000) 5,500
-------- -----
Net Increase (Decrease) In Cash and cash
equivalents (100,687) 0
Cash and cash equivalents at beginning of period 173,956 -
-------- ------
Cash and cash equivalents at end of period $ 73,269 $ 0
======== ======
Supplementary Disclosure Of Cash Flow
Information:
Cash paid for interest $ - $ -
====== ======
Cash paid for income taxes $ - $ -
====== ======
Expenses paid on behalf of Company $ 37,720 -
======== ======
See Accompanying Notes To These Unaudited Condensed Financial Statements.
5
AMERICANN, INC.
(fka NEVADA HEALTH SCAN, INC.)
Notes To Unaudited Condensed Financial Statements For the
three month period ended December 31, 2014 and 2013
NOTE 1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Americann, Inc. (fka Nevada Health Scan, Inc.) ("the Company" or "the Issuer")
was organized under the laws of the State of Delaware on June 25, 2010. The
Company was established as part of the Chapter 11 reorganization of AP Corporate
Services, Inc. ("AP"). Under AP's Plan of Reorganization, as confirmed by the
U.S. Bankruptcy Court for the Central District of California, the Company was
incorporated to: (1) receive and own any interest which AP had in the
development of an MRI scanning facility; and (2) issue shares of its common
stock to AP's general unsecured creditors, to its administrative creditors, and
to its shareholders.
Since the Company lacked the resources to effectively develop an MRI facility,
in June 2012 the Company decided to promote medical tourism by providing
information on a website for those seeking to travel abroad for healthcare
services. The Company planned to generate revenue by selling advertising to
healthcare providers and related businesses including hotels and travel
agencies.
In September 2013, the Company abandoned its business plan relating to promoting
medical tourism.
On January 17, 2014, a privately held limited liability company acquired
approximately 93% of the Company's outstanding shares of common stock from
several of the Company's shareholders which resulted in a change in control of
the Company.
The Company's new business plan is to offer a comprehensive, turnkey package of
services that includes consulting, design, construction and financing to
approved and licensed marijuana operators throughout the United States. The
Company's business plan is based on the anticipated growth of the regulated
marijuana market in the United States.
The Company's activities are subject to significant risks and uncertainties
including failure to secure funding to properly grow the operations.
Basis of Presentation
The following (a) condensed balance sheet as of September 30, 2014, which has
been derived from audited financial statements, and (b) the unaudited condensed
financial statements as of December 31, 2014 and 2013, have been prepared in
accordance with accounting principles generally accepted in the United States of
America and the rules of the Securities and Exchange Commission ("SEC"), and
should be read in conjunction with the audited financial statements and notes
thereto contained in the Company's Form 10-K filed with the SEC on February 18,
2015. In the opinion of management, all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of financial position
and the results of operations for the interim
6
AMERICANN, INC.
(fka NEVADA HEALTH SCAN, INC.)
Notes To Unaudited Condensed Financial Statements For the
three month period ended December 31, 2014 and 2013
NOTE 1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING
POLICIES (Continued)
periods presented have been reflected herein. The results of operations for
interim periods are not necessarily indicative of the results to be expected for
future quarters or for the full year. Notes to the condensed financial
statements which substantially duplicate the disclosure contained in the audited
financial statements for fiscal 2014 as reported in the Form 10-K have been
omitted.
Summary of Significant Accounting Policies
This summary of significant accounting policies is presented to assist the
reader in understanding and evaluating the Company's financial statements. The
condensed consolidated financial statements and notes are representations of the
Company's management, which is responsible for their integrity and objectivity.
These accounting policies conform to generally accepted accounting principles
and have been consistently applied in the preparation of the financial
statements.
a. USE OF ESTIMATES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. The more significant estimates and assumptions made by
management are valuation of equity instruments, depreciation of property and
equipment, and deferred tax asset valuation. Actual results could differ from
those estimates as the current economic environment has increased the degree of
uncertainty inherent in these estimates and assumptions.
b. CASH AND CASH EQUIVALENTS
For the balance sheet and statements of cash flows, all highly liquid
investments with maturity of 90 days or less are considered to be cash
equivalents. The Company had a cash balance of $73,269 as of December 31, 2014.
At times, such cash balances may be in excess of the FDIC limit of $250,000
7
AMERICANN, INC.
(fka NEVADA HEALTH SCAN, INC.)
Notes To Unaudited Condensed Financial Statements For the
three month period ended December 31, 2014 and 2013
c. PROPERTY AND EQUIPMENT
LONG-LIVED ASSETS
The Company's long-lived assets consisted of property and equipment and are
reviewed for impairment in accordance with the guidance of the FASB Topic ASC
360, Property, Plant, and Equipment, and FASB ASC Topic 205, Presentation of
Financial Statements. The Company tests for impairment losses on long-lived
assets used in operations whenever events or changes in circumstances indicate
that the carrying amount of the asset may not be recoverable. Recoverability of
an asset to be held and used is measured by a comparison of the carrying amount
of an asset to the future undiscounted cash flows expected to be generated by
the asset. If such asset is considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the asset
exceeds its fair value. Impairment evaluations involve management's estimates on
asset useful lives and future cash flows. Actual useful lives and cash flows
could be different from those estimated by management which could have a
material effect on our reporting results and financial positions. Fair value is
determined through various valuation techniques including discounted cash flow
models, quoted market values and third-party independent appraisals, as
considered necessary. Through December 31, 2014, the Company had not experienced
impairment losses on its long-lived assets. However, there can be no assurances
that demand for the Company's products or services will continue, which could
result in an impairment of long-lived assets in the future.
Office furniture and equipment 7 years
d. RELATED PARTIES
A party is considered to be related to the Company if the party directly or
indirectly or through one or more intermediaries, controls, is controlled by, or
is under common control with the Company. Related parties also include principal
owners of the Company, its management, members of the immediate families of
principal owners of the Company and its management and other parties with which
the Company may deal if one party controls or can significantly influence the
management or operating policies of the other to an extent that one of the
transacting parties might be prevented from fully pursuing its own separate
interests. A party which can significantly influence the management or operating
policies of the transacting parties or if it has an ownership interest in one of
the transacting parties and can significantly influence the other to an extent
that one or more of the transacting parties might be prevented from fully
pursuing its own separate interests is also a related party.
8
AMERICANN, INC.
(fka NEVADA HEALTH SCAN, INC.)
Notes To Unaudited Condensed Financial Statements For the
three month period ended December 31, 2014 and 2013
e. EQUITY INSTRUMENTS ISSUED TO NON-EMPLOYEES FOR ACQUIRING GOODS OR
SERVICES
Issuances of the Company's common stock or warrants for acquiring goods or
services are measured at the fair value of the consideration received or the
fair value of the equity instruments issued, whichever is more reliably
measurable. The measurement date for the fair value of the equity instruments
issued to consultants or vendors is determined at the earlier of (i) the date at
which a commitment for performance to earn the equity instruments is reached (a
"performance commitment" which would include a penalty considered to be of a
magnitude that is a sufficiently large disincentive for nonperformance) or (ii)
the date at which performance is complete. When it is appropriate for the
Company to recognize the cost of a transaction during financial reporting
periods prior to the measurement date, for purposes of recognition of costs
during those periods, the equity instrument is measured at the then-current fair
values at each of those interim financial reporting dates. As a result, stock
options granted to consultants are measured at the then current fair values at
each reporting date.
f. REVENUE RECOGNITION
The Company recognizes revenue on consulting at the time the service is
rendered.
g. ADVERTISING
Advertising, promotional and selling expenses consisted of sales and marketing
expenses, and promotional activity expenses. Expenses are recognized when
incurred.
h. LOSS PER SHARE
The Company computes net loss per share in accordance with the FASB Accounting
Standards Codification ("ASC"). The ASC specifies the computation, presentation
and disclosure requirements for loss per share for entities with publicly held
common stock.
Basic loss per share amounts is computed by dividing the net loss by the
weighted average number of common shares outstanding. The equity instruments
such as warrants and options were not included in the loss per share
calculations because the inclusion would have been anti-dilutive.
i. CONCENTRATION OF CREDIT RISKS
Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of cash, notes receivables, deposits, and
prepaid expenses. The Company places its cash with high credit quality financial
institutions. As of December 31, 2014 there were no trade receivables.
9
AMERICANN, INC.
(fka NEVADA HEALTH SCAN, INC.)
Notes To Unaudited Condensed Financial Statements For the
three month period ended December 31, 2014 and 2013
NOTE 2. GOING CONCERN
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern, which contemplates, among other things, the
realization of assets and satisfaction of liabilities in the normal course of
business. The Company had an accumulated deficit of approximately $2,317,000 and
$2,075,000 at December 31, 2014 and September 30, 2014, respectively, had a net
loss of approximately, $242,000 for the period ended December 31, 2014, and
working capital of approximately $93,000 at December 31, 2014. These matters,
among others, raise substantial doubt about our ability to continue as a going
concern. While the Company is attempting to increase operations and generate
additional revenues, the Company's cash position may not be significant enough
to support the Company's daily operations. Management intends to raise
additional funds by way of a public offering.
Management believes that the actions presently being taken to further implement
its business plan and generate additional revenues provide the opportunity for
the Company to continue as a going concern. While the Company believes in the
viability of its strategy to generate additional revenues and in its ability to
raise additional funds, there can be no assurances to that effect. The ability
of the Company to continue as a going concern is dependent upon the Company's
ability to further implement its business plan and generate additional revenues.
The financial statements do not include any adjustments that might be necessary
if the Company is unable to continue as a going concern.
NOTE 3. NOTES RECEIVABLE
On June 23, 2014 the Company entered into a secured financing agreement with
Nature's Own Wellness Center, Inc. ("Nature's Own"). Financing was provided in a
series of tranches for the construction progresses to renovate a 15,000 square
foot warehouse into a cannabis growing and processing facility. The total amount
of financing was $1,000,000, and accrues interest at 18% per annum, and matures
on November 1, 2016. Monthly interest only payments are of $15,000 due July 1
through December 31, 2014. Monthly principal and interest payments of
approximately $50,000 begin on December 1, 2014 through maturity. The note
receivable is collaterized by substantially all of the assets of Nature's Own
and is personally guaranteed by one of the majority owners of Nature's Own.
Nature's Own is a licensed Colorado cannabis dispensary owner and grower with
separate and distinct operations. Nature's Own has its own revenue generating
activities and is not financially dependent upon the Company. The Company has
not guaranteed any debtor or obligation of Nature's Own. The Company has no
control of Nature's Own operations and does not perform any management
functions. However, a majority shareholder of Nature's Own owns 100,000
10
AMERICANN, INC.
(fka NEVADA HEALTH SCAN, INC.)
Notes To Unaudited Condensed Financial Statements For the
three month period ended December 31, 2014 and 2013
NOTE 3. NOTES RECEIVABLE (Continued)
shares of common stock of the Company. The Company performed analysis to
determine if Nature's Own is required to be consolidated under ASC 810,
Consolidations, and determined that the Company is not the primary beneficiary.
As a result, consolidation was not required.
The balance of the note receivable as of December 31, 2014, was $965,000.
Accrued interest receivable for the period ended December 31, 2014 was $16,909.
Interest income for the three month period ended December 31, 2014 was $45,206.
Effective January 1, 2015 the Company and Natures' Own Wellness Center modified
the loan agreement and consulting agreement (Note 10) between the parties. The
modification to the loan agreement eliminated required principal payments for
January through May 2015 and increased the final principal payment due on
December 1, 2016 to $182,531. The consulting agreement was modified to extend
the term of the consulting agreement to May 31, 2017. Monthly consulting
payments of $10,000 remain the same.
NOTE 4. DEPOSITS
The Company has entered into Letters of Intent with two groups that are applying
for cannabis cultivation licenses as a part of the Illinois Compassionate Use of
Medical Cannabis Pilot Program Act.
As part of this agreement, Americann, Inc. deposited $100,000 into a Trust
Account held by its corporate attorneys as deposits for two Loan Agreements for
applications in the Illinois medical marijuana program. As per the Loan
Agreements, AmeriCann, Inc. deposited $50,000 into a trust account for each of
the applications. The loan agreements will only become effective when the
applications are approved and if the applications are not approved the funds
will be returned to Americann.
Under the terms of the agreements, in addition to consulting, AmeriCann, Inc.
may provide capital for the acquisition of land, working capital and
construction for new cannabis cultivation facilities in the state of Illinois.
If all licenses are granted to these applicants in Illinois, the total
investment could exceed $9,000,000.
If neither of the licenses are granted, none of the parties to the agreement
will have any financial obligation to one another. Additionally, in the event
that one or two licenses are granted by the State of Illinois to these
applicants, AmeriCann, Inc. will have no financial obligation to provide capital
or any other obligations. However, in the event that either of the applicants
are granted licenses and these license recipients then refuse to accept the
loans and consulting services of AmeriCann, the agreements call for the license
recipients to pay a breakup fee to AmeriCann,
11
AMERICANN, INC.
(fka NEVADA HEALTH SCAN, INC.)
Notes To Unaudited Condensed Financial Statements For the
three month period ended December 31, 2014 and 2013
NOTE 4. DEPOSITS (Continued)
Inc. The agreements call for breakup fees to be paid to AmeriCann in the amounts
of $1,292,400 and $1,230,000 for the various agreements respectively, or
$2,522,4000 in aggregate for both agreements to be paid over 24 months.
On February 2, 2015 WGP was notified that it was awarded one of the licenses for
which it had applied. It was not awarded a second license. Under the terms of
the loan agreement pertaining to the license awarded to WGP, the Company agreed
to loan WGP up to $4,700,000, subject to certain conditions. Proceeds from the
loan would be used to construct the marijuana cultivation facility and for
start-up costs.
The loan agreement also provided that, within seven days of receiving
notification that a license application has been accepted, WGP was required to
notify the Company of its election to proceed to close the loan. If WGP did not
notify the Company of its election to proceed to close the loan within the seven
day period, WGP agreed to pay the Company a breakup fee of $150,000, payable
upon the expiration of the seven day period, plus $47,600 per month for
twenty-four months.
On February 9, 2015 WGP notified the Company that it would not close the loan.
Accordingly, the Company intends to notify WGP of its obligation to pay the
breakup fee.
The $100,000 deposited into a trust account will be returned to the Company.
NOTE 5. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted net income
per share:
For the three months
Ended December 31,
2014 2013
---- ----
Net (loss) income attributable to common
stockholders $(242,003) $(5,700)
Basic weighted average outstanding shares of
common stock 16,581,000 16,100,000
Dilutive effects of common share equivalents -- --
Dilutive weighted average outstanding shares of
common stock 16,581,000 16,100,000
=========== ==========
Net loss per share of voting and nonvoting
common stock
Basic and Diluted $ (0.01) $ (0.00)
========== ==========
12
AMERICANN, INC.
(fka NEVADA HEALTH SCAN, INC.)
Notes To Unaudited Condensed Financial Statements For the
three month period ended December 31, 2014 and 2013
NOTE 6. INCOME TAXES
We recorded no income tax expense or benefit for the three month period ended
December 31, 2014. We increased our valuation allowance and reduced our net
deferred tax assets to zero. Our assessment of the realization of our deferred
tax assets has not changed, and as a result we continue to maintain a full
valuation allowance for our net deferred assets as of December 31, 2014.
As of December 31, 2014, we have no unrecognized tax benefits. There were no
significant changes to the calculation since December 31, 2013.
NOTE 7. STOCK BASED COMPENSATION
On March 25, 2014, the Company entered into an employment agreement with Mr.
Keogh. The agreement: (i) has an initial term of three years; (ii) requires that
Mr. Keogh devote at least 50% of his time to the Company and; (iii) provides
that the Company will pay Mr. Keogh $12,000 per month during the term of the
agreement. Pursuant to the employment agreement, Strategic Capital Partners,
LLC, the Company's largest shareholder, sold 1,200,000 shares of the Company's
common stock to Mr. Keogh at a price of $0.001 per share. The estimated fair
market value of the stock was $.75 per share based the then current Private
Placement Memorandum in place resulting in an aggregate stock based compensation
of approximately $900,000 for the difference between the estimated fair market
value of $.75 and the purchase price of $.001 per share. As the Company expects
the shares to be earned over the vesting period, the Company will amortize the
entire amount to stock based compensation in the Company's statement of
operations over the vesting period. For the three month period ended December
31, 2014, the Company has amortized approximately $102,000 to stock based
compensation. Through December 31, 2014, the Company has amortized approximately
$533,000.
NOTE 8. RELATED PARTY TRANSACTIONS AND RELATED PARTY NOTES PAYABLE
During year ended September 30, 2014, the President of the Company advanced
approximately $16,000 to cover certain expenses. Of this amount, $10,500 was
repaid prior to September 30, 2014. This cash advance is evidenced by a
non-interest bearing note, is due on demand and is recorded under related party
payables in the accompanying balance sheet. The outstanding balance was $5,500
as of September 30 and December 31, 2014, respectively.
On October 6, 2014, the Company made a payment of $50,000 on the outstanding
balance of the loan to Strategic Capital Partners. On December 16, 2014, the
13
AMERICANN, INC.
(fka NEVADA HEALTH SCAN, INC.)
Notes To Unaudited Condensed Financial Statements For the
three month period ended December 31, 2014 and 2013
NOTE 8. RELATED PARTY TRANSACTIONS AND RELATED PARTY NOTES
PAYABLE (Continued)
Company received an additional $30,000 from Strategic Capital Partners. The
total outstanding loan balance was $805,000 at December 31, 2014, which is
recorded under note payable related party in the accompanying balance sheet. The
loan accrues interest at a rate of 5% per annum. The loan is due December 31,
2015. Interest only payments and principal can be prepaid at the discretion of
the Company's management. The balance of accrued interest at December 31, 2014
and September 30, 2014, respectively was $15,053 and $5,192. Interest payments
were $0 for the three month period ended December 31, 2014.
Interest expense related to the related party note payable was $9,862 and $-0-
for the three month period ended December 31, 2014 and 2013, respectively.
At times Strategic Capital Partners will pay expenses on behalf of the Company.
During the three month period ended December 31, 2014, Strategic Capital
Partners paid expenses of $37,720 on behalf of the Company. Total amounts due to
Strategic Capital Partners related to these expenses was $37,720 at December 31,
2014.
NOTE 9. OPTIONS AND WARRANTS
Options
No options were issued during the three months ended December 31, 2014. The
Company recognized stock option expense of approximately $10,000 during the
three month period ended December 31, 2014.
Stock option activity is presented below.
Weighted
Weighted Average
Average Contractual Aggregate
Number of Expected Term Intrinsic
Shares Price (Years) Value
------------------------------------------------
Outstanding at September 30, 2014 1,105,000 $ 26.49 -- --
--------- --------- ---------
Outstanding at December 31, 2014 1,105,000 $ 26.49 2 --
========= ======= ========= =========
Expected to vest at after
December 31, 2014 1,080,000 $26.49 -- --
========= ====== ========= =========
Exercisable at December 31, 2014 25,000 0.75 -- --
========= ====== ========= ==========
Total remainder of stock compensation expense to be recognized through the
vesting date of the above options as of December 31, 2014 is approximately
$ 65,000.
14
AMERICANN, INC.
(fka NEVADA HEALTH SCAN, INC.)
Notes To Unaudited Condensed Financial Statements For the
three month period ended December 31, 2014 and 2013
NOTE 9. OPTIONS AND WARRANTS (Continued)
Warrants
There were no grants of warrants during the three months ended December 31,
2014. There was no stock based compensation expense related to the warrants
during the three months ended December 31, 2014.
The following table shows the warrant activity for the three months ended
December 31, 2014:
Weighted
Shares Weighted Average Weighted
Issuable Average Remaining Average
Upon Exercise Contract Intrinsic
Exercise Price Term (yrs) Value
-------- ------------ ---------- ---------
Outstanding - September 30, 2014
2,591,000 $3.00 1.4 --
Granted --
Exercised -- -- --
Cancelled
Outstanding - December 31, 2014 2,591,000 $8.92 3.7 $ --
--------- ----- ------ ======
Exercisable - December 31, 2014 2,591,000 $8.92 3.7 $ --
========= ===== ====== =======
There was no stock based compensation expense during the three months ended
December 31, 2014.
There were no grants of warrants during the three months ended December 31,
2014.
NOTE 10. COMMITMENTS AND CONTIGENTCY
In connection with the note receivable from Nature's Own Wellness Center, Inc.,
on July 1, 2014, the Company entered into a consulting agreement with Nature's
Own Wellness Center, Inc. The Company will provide general advisory services for
business development, facilities design and construction, cultivation and retail
operations, marketing and the improvement and expansion of existing operations.
The Company receives monthly compensation of $10,000 plus pre-approved expenses.
The consulting agreement terminates on December 31, 2016. The Company may
terminate the agreement without cause with a 30 day notice. Nature's Own may
terminate the agreement if the Company does not provide funding as specified in
15
AMERICANN, INC.
(fka NEVADA HEALTH SCAN, INC.)
Notes To Unaudited Condensed Financial Statements For the
three month period ended December 31, 2014 and 2013
NOTE 10. COMMITMENTS AND CONTIGENTCY (Continued)
the agreement or if the Company does not or is unable to perform its duties. The
consulting agreement was modified to extend the term of the consulting agreement
to May 31, 2017. Monthly consulting payments of $10,000 remain the same.For the
three month period ended December 31, 2014, the Company earned and received
$30,000 for consulting services.
NOTE 11. LEASE COMMITMENTS
The Company leases its office space located at 3200 Brighton Boulevard, Denver,
Colorado for $2,710 per month commencing June 18, 2014 and ending June 30, 2015.
The Company paid a refundable deposit of $3,110. Rent expense for the three
month period ended December 31, 2014 and 2013 was approximately $8,310 and $-0-
respectively.
The Company leases an automobile under an operating lease commencing October 4,
2014 for 39 months at $611 per month. The lease expense for the three month
period ended December 31, 2014 and 2013 was $2,458 and $-0- respectively. At
December 31, 2014 the future rental payments required under operating leases are
$21,386
NOTE 12. SUBSEQUENT EVENTS
In January and February of 2015 the Company received $760,000 in principal
increasing the note payable to a related party to a balance of $1,565,000.
On January 14, 2015, the Company entered into an agreement to purchase a 52.6
acre parcel of undeveloped land in Freetown, Massachusetts. The property is
located approximately 47 miles southeast of Boston. The Company plans to develop
the property as the Massachusetts Medical Cannabis Center "MMCC". Plans for the
16
MMCC may include the construction of sustainable greenhouse cultivation and
processing facilities that will be leased or sold to Registered Marijuana
Dispensaries under the Massachusetts Medical Marijuana Program. Additional plans
for the MMCC may include a testing laboratory, a research facility, a training
center, an infused product production facility and corporate offices.
The Company paid the seller a refundable $100,000 deposit upon the signing of
the agreement which amount will be applied toward the purchase price of
$4,000,000 at the closing or returned at the option of the Company. The closing
must take place on or before June 1, 2015.
17
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
BUSINESS AND PLAN OF OPERATION
We were incorporated on June 25, 2010 under the laws of Delaware. We were
established as part of the Chapter 11 reorganization of AP Corporate Services,
Inc. ("AP"). Under AP's Plan of Reorganization, as confirmed by the U.S.
Bankruptcy Court for the Central District of California, we were incorporated
to: (i) hold any interest which AP retained in the development of an MRI
facility in Nevada; and (ii) issue shares of its common stock to AP's general
unsecured creditors, to its administrative creditors, and to its shareholders in
order to enhance their opportunity to recover from the bankruptcy estate.
Since we lacked the resources to effectively develop an MRI facility in June,
2012, we decided to promote medical tourism by providing information on a
website for those seeking to travel abroad for healthcare services. We planned
to generate revenue by selling advertising to healthcare providers and related
businesses including hotels and travel businesses.
In September 2013 we abandoned our business plan relating to promoting medical
tourism.
Our new business plan involves providing an essential set of services to the
regulated cannabis industry. The market research firm ArcView Group estimates
the market for the regulated cannabis industry for 2013 was $1.53 billion,
expected to grow to $2.53 billion in 2014 and $10.2 billion in ten years. Based
on the ArcView analysis, the cannabis industry is projected to grow faster than
any other industry in the country over the next decade.
While the industry is growing rapidly, the cannabis industry faces two major
obstacles that challenge its growth and profitability. The cultivation of
cannabis is a very capital-intensive enterprise. Many cannabis entrepreneurs do
not have access to the capital that is necessary to build the infrastructure to
meet growing demand. Traditional sources of financing, such as banks, are not
available currently to cannabis producers and retailers. Also, there is a
significant shortage of knowledge related to virtually all areas of the cannabis
business. When new states are added to the list of regulated cannabis markets,
there will be a scarcity of experience and expertise to serve the needs of
growers and retailers in these states.
We believe that, since the industry is so new, there is significant potential to
transform the cannabis business through professionalism, innovation and the
application of technology.
We are based in Colorado, which by virtue of it being the first state to
implement cannabis access to adults for non-medical purposes, provides an ideal
environment for which to serve the growing cannabis industry as it expands
nationally.
We do not intend to cultivate, produce, distribute or sell cannabis, but plan to
provide a wide variety of essential services to licensed, regulated cannabis
growers and retailers. These services include financing, cultivation center
design, operational consulting, real estate development, and research.
18
We plan to generate revenue and profits from several sources including
developing and selling cannabis cultivation facilities, interest income from
loans to licensed cannabis operators, consulting and the licensing or sale of
intellectual property.
In January 2014, we began operating in accordance with our new business plan.
On January 17, 2014, Strategic Capital Partners, LLC ("SCP") a firm controlled
by Benjamin J. Barton, acquired 14,950,000 shares of our outstanding common
stock from a group of our shareholders.
On February 21, 2014 we changed our name from Nevada Health Scan, Inc. to
Americann, Inc. and declared a stock dividend in the amount of four shares of
common stock for each issued and outstanding share of common stock.
On February 24, 2014 SCP returned 65,750,000 of its shares to us.
During March and April 2014 we sold 1,000,000 shares of our common stock to
private investors at a price of $0.75 per share. Benjamin J. Barton, one of our
officers and directors, purchased 400,000 shares as an investment.
During the summer of 2014 we entered into a Financing and Consulting Agreement
with Nature's Own Wellness Centers, a licensed Colorado cannabis dispensary
owner and grower. Pursuant to the agreement, we loaned Nature's Own $1,000,000.
The proceeds of the secured loan will be used by Nature's Own to convert an
existing 15,000 square foot warehouse into a new cannabis growing and processing
facility.
During July 2014 we raised $2,373,000 through a private sale of 791,000 Units at
a price of $3.00 per Unit. Each Unit consisted of one share of common stock and
one warrant. Each warrant allows the holder to purchase one share of our common
stock at a price of $8.00 per share anytime on or before April 30, 2018.
Benjamin J. Barton purchased 666,667 Units for cash as an investment.
The loan has a 30-month term, bears interest at 18% annually, and requires
monthly payments to us. Nature's Own will also pay us $300,000 in consulting
fees for its cannabis operations over the 30-month period. Over the term of the
30-month loan, the agreement calls for us to receive average monthly payments of
principal, interest and consulting fees in excess of $56,000.
Effective January 1, 2015 we modified our loan and consulting agreement with
Natures Own. The modification to the loan agreement eliminated required
principal payments for January through May 2015 and increased the final
principal payment due on December 1, 2016 to $182,531. The consulting agreement
was modified to extend the term of the consulting agreement by five months to
May 31, 2017. Monthly consulting payments of $10,000 remain the same.
On July 31, 2014 we closed on an all cash purchase of a five-acre parcel of land
located in north central Denver, Colorado. The total purchase price for the
property was $2,250,000. We plan to develop the property as a facility called
the "Denver Cannabis Center." The property is currently zoned for cannabis
cultivation and processing by the City and County of Denver.
19
The Denver Cannabis Center will be designed to include 125,000 square feet of
greenhouse and indoor cultivation areas. We plan to sell these facilities to one
or more licensed cannabis entrepreneurs. Additional plans for the Denver
Cannabis Center include a dispensary, a research facility, a training center, an
infused product production facility and corporate offices.
In developing the Denver Cannabis Center, we plan to use the most innovative and
advanced cultivation methods available. We believe that through effective design
and optimal practices, its clients and partners can achieve greater efficiency,
product quality and the highest level of environmental standards.
We plan to build the Denver project as a prototype for development of comparable
facilities in other states that allow for and regulate cannabis. To complete the
project as planned, the Company will need to receive all necessary government
approvals as well as additional capital.
On September 21, 2014 we entered into two loan agreements with Wellness Group
Pharms, LLC ("WGP"). Subsequent to entering into the loan agreements WGP,
applied to the state of Illinois for licenses to operate two marijuana
cultivation facilities.
On February 2, 2015 WGP was notified that it was awarded one of the licenses for
which it had applied. It was not awarded a second license. Under the terms of
the loan agreement pertaining to the license awarded to WGP, we agreed to loan
WGP up to $4,700,000, subject to certain conditions. Proceeds from the loan
would be used to construct the marijuana cultivation facility and for start-up
costs.
The loan agreement also provided that, within seven days of receiving
notification that a license application has been accepted, WGP was required to
notify us of its election to proceed to close the loan. If WGP did not notify us
of its election to proceed to close the loan within the seven day period, WGP
agreed to pay us a breakup fee of $150,000, payable upon the expiration of the
seven day period, plus $47,600 per month for twenty-four months.
On February 9, 2015, WGP notified us that it would not close the loan.
Accordingly, we notified WGP of its obligation to pay us the breakup fee.
On January 14, 2015, we entered into an agreement to purchase a 52.6 acre parcel
of undeveloped land in Freetown, Massachusetts. The property is located
approximately 47 miles southeast of Boston. We plan to develop the property as
the Massachusetts Medical Cannabis Center "MMCC". Plans for the MMCC may include
the construction of sustainable greenhouse cultivation and processing facilities
that will be leased or sold to Registered Marijuana Dispensaries under the
Massachusetts Medical Marijuana Program. Additional plans for the MMCC may
include a testing laboratory, a research facility, a training center, an infused
product production facility and corporate offices.
We paid the seller $100,000 upon the signing of the agreement which amount will
be applied toward the purchase price of $4,000,000 at the closing. The closing
must take place on or before June 1, 2015.
We plan to expand to other states that have approved and regulate the
cultivation and sale of cannabis.
20
RESULTS OF OPERATIONS
During the three month period ended December 31, 2014 we generated $30,000 in
revenue and $45,206 in interest income, however for December 31, 2013, we have
generated no revenue. As a result we have no operating history upon which to
evaluate our intended business.
Operating expenses, which consisted solely of general and administrative
expenses for the three month period ended December 31, 2014, were $307,347. This
compares with operating expenses for the three month period ended December 31,
2013 of $5,700. The major components of general and administrative expenses
include accounting fees, contract and consulting fees, legal, salaries, and
stock based compensation.
As a result of the foregoing, we had a net loss of $242,003 for the three month
period ended December 31, 2014. This compares with a net loss for the three
month period ended December 31, 2013 of $5,700.
Salaries were $30,518 for the three month period ended December 31, 2014.
Since the Company was inactive prior to January 2014, any comparison of the
Company's operating results for the three months ended December 31, 2014 and its
financial condition as of December 31, 2014 with any prior periods would not be
meaningful.
LIQUIDITY AND CAPITAL RESOURCES
As of February 10, 2015 we had borrowed $1,565,000 from Strategic Capital
Partners, LLC, a Company controlled by Benjamin J. Barton. The loan is unsecured
and bears interest at 5% per year. Interest is payable on March 31 and September
30 of each year. The loan, plus all unpaid principal interest, is due on
December 31, 2015.
The Company's sources and (uses) of funds for the three months ended December
31, 2014 are shown below:
Net cash provided by (used in) operations $(115,687)
Loan payments from third party $35,000
Stock based compensation and option expense $112,784
Loan from related party $30,000
Payments to related party $(50,000)
The Company does not have any firm commitments from any person to provide it
with any capital.
See Item 7 of our 10-K report for the year ended September 30, 2014 for a
discussion of the Company's critical accounting policies.
As of December 31, 2014 the Company did not have any off balance sheet
arrangements.
Item 4. Controls and Procedures.
(a) The Company maintains a system of controls and procedures designed to ensure
21
that information required to be disclosed in reports filed or submitted under
the Securities Exchange Act of 1934, as amended ("1934 Act"), is recorded,
processed, summarized and reported, within time periods specified in the SEC's
rules and forms and to ensure that information required to be disclosed by the
Company in the reports that it files or submits under the 1934 Act, is
accumulated and communicated to the Company's management, including its
Principal Executive and Financial Officers, as appropriate to allow timely
decisions regarding required disclosure. As of December 31, 2014, the Company's
Principal Executive and Financial Officers evaluated the effectiveness of the
design and operation of the Company's disclosure controls and procedures. Based
on that evaluation, the Principal Executive and Financial Officers concluded
that the Company's disclosure controls and procedures were not effective.
(b) Changes in Internal Controls. There were no changes in the Company's
internal control over financial reporting during the quarter ended December 31,
2014, that materially affected, or are reasonably likely to materially affect,
its internal control over financial reporting.
PART II. OTHER INFORMATION
Item 6. Exhibits
Exhibits
31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32 Certification pursuant to Section 906 of the Sarbanes-Oxley Act.
22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICANN, INC.
February 23, 2015 By:/s/ Timothy Keogh
------------------------------
Timothy Keogh, Principal Executive
Officer
February 23, 2015 By:/s/ Benjamin J. Barton
------------------------------
Benjamin Barton, Principal Financial
and Accounting Officer
23
