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 March 31, 2015
|_| 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 (I.R.S. Employer Identification No.)
of 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: 16,631,000 shares of common stock as
of June 10, 2015.
Part II
Item 1. Financial Statements
Interim Financial Statements
for the period ended March 31, 2015
(Unaudited)
2
AmeriCann, Inc.
(fka Nevada Health Scan, Inc.)
Condensed Balance Sheet
Unaudited Audited
March 31, September 30,
ASSETS 2015 2014
Current Assets:
Cash $ - $ 173,956
Interest receivable 16,386 -
Deposits 100,000 100,000
Prepaid expenses 58,333 5,000
Land held for resale 2,250,809 2,250,809
------------- ------------
Total Current Assets 2,425,528 2,529,765
----------------- ----------
Plant, property, and equipment:
Furniture and equipment (net of
$896 and $394- depreciation) 6,961 7,463
Other assets:
Notes receivable - Natures Own 965,000 1,000,000
Note and accounts receivable WGP 1,037,341 -
Deposit on web site development 25,000 -
Deferred financing costs 27,772 -
Security deposit 3,110 3,110
--------------- --------------
Total other assets 2,058,223 1,003,110
------------ ------------
TOTAL ASSETS $ 4,490,712 $ 3,540,338
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 66,570 $ 25,515
Bank overdraft 11,259 -
Related party payables 5,500 16,357
Interest payable - related party 8,569 5,192
Interest payable 3,033 -
Other payables 8,181 12,981
Deferred revenue - 11,740
-
Note payable 650,000 -
-------- --------
Total current liabilities 753,112 71,785
------- --------
Long-term liabilities
Note payable related party 1,408,000 825,000
--------- --------
Total long-term liabilities 1,408,000 825,000
--------- --------
TOTAL LIABILITIES 2,161,112 896,785
--------- --------
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 16,631,000
and 16,581,000 at March 31, 2015
and September 30, 2014 respectively 1,663 1,658
Capital paid in excess of par value 4,912,352 4,606,718
Accumulated (Deficit) (2,584,415) (1,964,823)
------------ -----------
TOTAL SHAREHOLDERS' EQUITY 2,329,600 2,643,553
------------- ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,490,712 $3,540,338
========== ==========
See Accompanying Notes To These Unaudited Condensed Financial Statements.
3
AmeriCann, Inc.
(fka Nevada Health Scan, Inc.)
Unaudited Condensed Statement Of Operations
Unaudited Unaudited Unaudited Unaudited
3 Months 3 Months 6 Months 6 Months
Ended Ended Ended Ended
March 31, March 31, March 31, March 31,
2015 2014 2015 2014
--------- -------- --------- ---------
Revenue:
Consulting $ 50,000 $ - $ 80,000 $ -
Interest 54,595 - 99,801 -
------ - ------ -
Total revenue 104,595 - 179,801 -
General & Administrative Expenses
Accounting 5,250 3,750 15,250 8,650
Advertising 3,200 - 6,075 -
Contract and consulting 115,590 34,140 178,774 34,140
Depreciation 281 - 502 -
Other G & A 43,604 21,463 89,032 21,663
Legal 82,988 71,950 101,368 71,950
Rent 8,560 - 16,870 -
Salaries 39,000 - 69,518 -
Stock based compensation 159,522 - 272,306 -
Stock Transfer Fee 1,869 799 2,546 1,399
Taxes 3,474 - 12,938 -
Travel 4,615 5,347 10,120 5,347
-------- -------- -------- --------
Total G & A 467,953 137,449 775,299 143,149
-------- -------- -------- --------
(Loss) from operations (363,358) (137,449) (595,498) (143,149)
--------- --------- --------- ---------
Other (expense)
Interest expense (3,033) - (3,033) -
Interest expense - related party (11,199) - (21,061) -
--------- --------- --------- --------
Total other income (14,232) - (24,094) -
--------- --------- -------- --------
Net (loss) $ (377,590) $ (137,449) $ (619,592) $ (143,149)
============ =========== =========== ===========
Basic and diluted (Loss) per
common share $ (0.02) $ (0.01) $ (0.04) $ (0.01)
============ =========== =========== ===========
Weighted Average Common Shares
Outstanding 16,603,222 15,625,222 16,591,989 15,865,220
============ =========== =========== ===========
See Accompanying Notes To These Unaudited Condensed Financial Statements.
4
AmeriCann, Inc.
(fka Nevada Health Scan, Inc.)
Unaudited Statement of Cash Flows
Unaudited Unaudited
6 Months 6 Months
Ended Ended
March 31, March 31,
2015 2014
--------- ----------
Cash Flows From Operating Activities:
Net (Loss) $ (619,592) $ (143,149)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 502 -
Stock based compensation & option expense 272,306 -
Increase in interest receivable (16,386) -
Increase in deposit and prepaid expenses (20,000) (30,000)
Increase in Accounts Payable 41,055 5,849
Increase in bank overdraft 11,259
(Decrease) in related party payables (10,857)
Increase in interest payable 3,033
Increase in interest payable - related party 3,377
Increase in other payables 6,422
(Decrease) in deferred revenue (11,740) -
---------- ----------
Net Cash Flows (used) in operations (-340,621) (167,300)
---------- ----------
Cash Flows from Investing Activities:
Website development (25,000) -
Deposit on land (100,000)
Advances made for note receivable - WGP (937,341) -
Payment on note receivable 35,000 -
---------- ----------
Net Cash Flows (used) in Investing
activities (1,027,341) -
Cash Flows from Financing Activities:
Common stock issued for cash - 734,000
Proceeds from note payable 611,006 -
Proceeds from note payable - related party 790,000 5,600
Payments on note payable - related party (207,000) -
---------- ----------
Net Cash Flows provided by
financing activities 1,194,006 739,600
----------- ----------
Net Increase (Decrease) In Cash and
cash equivalents (173,956) 572,300
Cash and cash equivalents at beginning
of period 173,956 -
----------- ----------
Cash and cash equivalents at end of period $ 0 $ 572,300
=========== ===========
Supplementary Disclosure of Cash Flow
Information:
Cash paid for interest $ 17,684 $ -
=========== ===========
Cash paid for income taxes $ - $ -
=========== ===========
Expenses paid on behalf of Company $ 37,720 $ -
=========== ===========
Deposit used for loan advances $ 100,000 $ -
=========== ===========
Deferred financing costs $ 27,772 $ -
=========== ===========
Accrued liabilities paid directly to lender $ 11,222 $ -
=========== ===========
Shares issued for prepaid services $ 50,000 $ -
=========== ===========
See Accompanying Notes To These Unaudited Condensed Financial Statements.
5
AMERICANN, INC.
(fka NEVADA HEALTH SCAN, INC.)
Notes To Unaudited Financial Statements for the three and
six month period ended March 31, 2015
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.
6
AMERICANN, INC.
(fka NEVADA HEALTH SCAN, INC.)
Notes To Unaudited Financial Statements for the three and
six month period ended March 31, 2015
NOTE 1. DISCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
(Continued)
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 March 31, 2015 and 2014, 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 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.
7
AMERICANN, INC.
(fka NEVADA HEALTH SCAN, INC.)
Notes To Unaudited Financial Statements for the three and
six month period ended March 31, 2015
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
Cash and cash equivalents includes cash on hand, demand deposit accounts and
temporary cash investments with maturities of ninety days or less at the date of
purchase.
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.
8
AMERICANN, INC.
(fka NEVADA HEALTH SCAN, INC.)
Notes To Unaudited Financial Statements for the three and
six month period ended March 31, 2015
NOTE 1. DISCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
(Continued)
D. DEPOSIT ON WEBSITE DEVELOPMENT
The Company recognized the costs associated with developing a website in
accordance with ASC 350-50 "Website Development Cost". The website development
costs are divided into three stages, planning, development and production. The
development stage can further be classified as application and infrastructure
development, graphics development and content development. In short, website
development cost for internal use should be capitalized except content input and
data conversion costs in content development stage. Costs associated with the
website consist of website development costs paid to third parties. As of March
31, 2015 $33,000 was advanced as a deposit to the website development Company.
The company completed phase one and two which is the planning phase and $8,000
was written off as expense.
E. DEFERRED FINANCING COSTS
Deferred financing costs represent costs incurred in the connection with
obtaining debt financing. These costs are amortized ratably and charged to
financing expenses over the term of the related debt.
F. 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.
9
AMERICANN, INC.
(fka NEVADA HEALTH SCAN, INC.)
Notes To Unaudited Financial Statements for the three and
six month period ended March 31, 2015
NOTE 1. DISCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
(Continued)
G. REVENUE RECOGNITION
The Company recognizes revenue on consulting at the time the service is
rendered.
H. 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.
I. 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.
10
AMERICANN, INC.
(fka NEVADA HEALTH SCAN, INC.)
Notes To Unaudited Financial Statements for the three and
six month period ended March 31, 2015
J. CONCENTRATION OF CREDIT RISKS
Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of cash, notes receivables, deposits, and
accounts receivables. The Company places its cash with high credit quality
financial institutions. As of March 31, 2015 and September 30, 2014 there were
$20,000 and $-0- in trade receivables, which is included in notes and accounts
receivable WGP in the accompanying balance sheet.
K. RECENT ACCOUNTING PRONOUNCEMENTS
The Company has reviewed all recently issued, but not yet effective, accounting
pronouncements and does not believe the future adoption of any such
pronouncements may be expected to cause a material impact on our financial
condition or the results of its operations
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 $2,584,000 and
$1,965,000 at March 31, 2015 and September 30, 2014, respectively, had a net
loss of approximately, $620,000 for the six months period ended March 31, 2015.
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.
11
AMERICANN, INC.
(fka NEVADA HEALTH SCAN, INC.)
Notes To Unaudited Financial Statements for the three and
six month period ended March 31, 2015
NOTE 3. NOTES RECEIVABLE
Natures Own
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 $15,000 due July 1
through December 1, 2014. Monthly principal and interest payments of
approximately $50,000 begin on December 1, 2014 through maturity. The note
receivable is collateralized by substantially all of the assets of Nature's Own
and is personally guaranteed by one of the majority owners of Nature's Own.
Effective January 1, 2015 the Company and Natures Own Wellness Center modified
the loan agreement and consulting agreement 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 Company analyzed the modification to determine
if the change in terms was a troubled debt restructuring. Based on ASC Subtopic
310-40, Receivables - Troubled Debt Restructuring by Creditors, the Company
determined that a concession was not made. Therefore the modification was not a
troubled debt restructuring. 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. Consulting fees earned for the three and six months
period ended March 31, 2015 were $30,000 and $60,000 respectively.
The balance of the note receivable as of March 31, 2015 and earned September 30,
2014 was $965,000 and $1,000,000 respectively. Accrued interest receivable as of
March 31, 2015 was approximately $16,000. Interest income for the three month
period and six month period ended March 31, 2015 $43,234 and $88,440
respectively.
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 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.
12
AMERICANN, INC.
(fka NEVADA HEALTH SCAN, INC.)
Notes To Unaudited Financial Statements for the three and
six month period ended March 31, 2015
NOTE 3. NOTES RECEIVABLE (Continued)
WGP
On September 21, 2014 AmeriCann 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 under 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.
On February 2, 2015 WGP was notified that it was awarded one of the two licenses
for which it applied under the Illinois act.
On February 23, 2015 AmeriCann and WGP amended their agreement and expanded the
scope of the agreement.
The amended agreement calls for AmeriCann to serve as the developer of a new
facility to be called the Illinois Medical Cannabis Center ("IMCC"). WGP plans
to use the IMCC to cultivate, process and distribute medical cannabis to many of
the state's 52 newly licensed medical dispensaries.
AmeriCann will serve as the project developer and will own the IMCC, plus
provide working capital funding and horticultural assistance to WGP. AmeriCann
will receive, over a 12-year period, a 25% fee on all cannabis produced at the
IMCC, $240,000 annually in consulting fees and $6.00 per square foot in monthly
lease payments.
The working capital loan carries an annual interest rate of 18%. Interest on the
loan initially accrues and is added to the loan as principal until the first
calendar month in which WGP commences operations in the Facility. The term of
the loan ends December 31, 2017.
13
AMERICANN, INC.
(fka NEVADA HEALTH SCAN, INC.)
Notes To Unaudited Financial Statements for the three and
six month period ended March 31, 2015
NOTE 3. NOTES RECEIVABLE (Continued)
WGP (continued)
AmeriCann commenced construction of the IMCC in March with a first phase of
approximately 27,000 square feet. WPG's initial harvest is projected for late
Fall 2015. AmeriCann plans to add additional cultivation capacity as the
Illinois Medical Cannabis Program develops.
Additionally, AmeriCann has commenced development of comprehensive cannabis
infused product line. As a part of the amended agreement, AmeriCann will license
this proprietary product brand to WGP. WGP, in turn, will process, package and
distribute infused cannabis products to licensed medical dispensaries in
Illinois. AmeriCann will receive a 20% royalty from the sale of all cannabis
extractions and infused products.
On February 23rd, 2015 AmeriCann provided initial funding of $600,000 to WGP
under the Working Capital Loan Draw #1. Funds were used for the premium
($400,000) for a $2 million performance bond and for the payment of a $200,000
state license fee. The $100,000 deposited into the trust account on September
21, 2014 was used as part of the $600,000 payment made on February 23rd, 2015.
As part of the second draw of the Working Capital Loan from the Company,
AmeriCann provided an additional $73,924 during March to WGP for working capital
to pay consultants, lobbyists, and legal fees.
On April 7, 2015, WGP sent notice to AmeriCann claiming that the $214,522
payment that AmeriCann made for the building was not authorized by WGP and that
AmeriCann's payment for building was made "...at its own election." WGP further
claimed that AmeirCann failed to provide funding pursuant to the original plan
and as a result the agreements between AmeriCann and WGP were void.
On April 10, 2015, WGP notified AmeriCann that the relationship between
AmeriCann and WGP could continue only if AmeriCann agreed to accept significant
changes to the original agreements. In this correspondence, WGP made eight
demands including the following:
(1) That AmeriCann provide an extra $2,000,000 in working capital to WGP,
(2) That AmeriCann agree to reduce the interest rate on the working capital loan
to WGP by 6%, and
(3) That AmeriCann would not pay vendors and suppliers directly, but rather that
all funds had to be provided to WGP for disbursements.
14
AMERICANN, INC.
(fka NEVADA HEALTH SCAN, INC.)
Notes To Unaudited Financial Statements for the three and
six month period ended March 31, 2015
NOTE 3. NOTES RECEIVABLE (Continued)
WGP (continued)
AmeriCann's management believed that WGP's notice to void the agreements was
without merit and that this was merely an attempt to renegotiate the terms of a
valid contract. AmeriCann rejected WGP's proposal outright.
The Company has notified WGP that the Company has fulfilled its obligations
pursuant to its agreements with WGP but due to WGP's anticipatory breach of
contract, and repeated lack of good faith and fair dealing, the Company's
agreements with WGP were terminated.
The Company has not filed any formal litigation but has provided legal notice
that AmeriCann's loan in the amount to WGP are immediately due and payable. The
funds deployed by AmeriCann are secured with a commercial promissory note and an
executed Security Agreement covering all funds loaned under the terms of the
agreements.As a result, AmeriCann's loan in the amount of $673,294 plus accrued
interest and consulting fees to WGP are immediately due and payable;
The balance of the note receivable as of March 31, 2015 was $673,924. Accrued
interest receivable for the year ended March 31, 2015 was approximately $12,000.
Both amounts were included in notes and accounts receivable WPG in the
accompanying, condensed balance sheet.Interest income for the three month period
and six month period ended March 31, 2015 was $11,690 and $11,690 respectively.
15
AMERICANN, INC.
(fka NEVADA HEALTH SCAN, INC.)
Notes To Unaudited Financial Statements for the three and
six month period ended March 31, 2015
NOTE 3. NOTES RECEIVABLE (Continued)
WGP (continued)
Property Improvements WGP
The Company funded $332,357 towards the construction of the Illinois Medical
Cannabis Center (IMCC). The improvements to the property include the purchase of
a $215,000 metal building, site work including excavation, asphalt road,
concrete foundations and soft costs for architectural drawings, engineering
survey, builder supervision, general contractor FEE and a contingency account.
Combined monies advanced, trade receivables, interest receivable and land
improvements paid on WGP's behalf totals $1,037,341, and was recognized as notes
and accounts receivable in the accompanying condensed balance sheet..
NOTE 4. LAND HELD FOR RESALE
On July 31, 2014 the Company 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 approximately $2,250,000. The property is currently
zoned for cannabis cultivation and processing by the City and County of Denver.
On May 5, 2015 the Company entered into an agreement to sell the property to an
unrelated party for $2,500,000. The sale is scheduled to close July 3, 2015.
NOTE 5. NOTES PAYABLE
On March 21, 2015 AmeriCann closed on a $650,000 loan from a third party. The
Note is due September 21, 2015 and secured by the land held for resale the
Company owns at 4200 Monaco Street, Denver, Colorado. The annual interest rate
for the loan is 14%. The loan is interest only until the principal and any
accrued interest is due on September 21, 2015. Interest expense for the three
and six month period ended March 31, 2015 was $3,033. As part of the financing
the Company incurred $27,772 in deferred financing costs that will be amortized
over the life of the loan.
16
AMERICANN, INC.
(fka NEVADA HEALTH SCAN, INC.)
Notes To Unaudited Financial Statements for the three and
six month period ended March 31, 2015
NOTE 6. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted net income
per share:
For the six months
Ended March 31,
------------------
2015 2014
---- ----
Net (loss) income attributable to common
stockholders $ (619,592) $ (143,149)
Basic weighted average outstanding shares of
common stock 16,591,989 15,865,220
Dilutive affects of common share equivalents -0- -0-
Dilutive weighted average outstanding shares
of common stock 16,591,989 15,865,220
========== ==========
Net loss per share of voting and nonvoting common stock
Basic and Diluted $ (0.04) $ (0.01)
For the three months
Ended March 31,
--------------------
2015 2014
---- ----
Net (loss) income attributable to common stockholders $ (377,590) $ (137,449)
Basic weighted average outstanding shares of
common stock 16,603,222 15,625,222
Dilutive affects of common share equivalents -0- -0-
Dilutive weighted average outstanding shares
of common stock 16,603,222 15,625,222
========== ==========
Net loss per share of voting and nonvoting
common stock
Basic and Diluted $ (0.02) $ (0.01)
=========== ===========
17
AMERICANN, INC.
(fka NEVADA HEALTH SCAN, INC.)
Notes To Unaudited Financial Statements for the three and
six month period ended March 31, 2015
NOTE 7. INCOME TAXES
The Company did not record any income tax expense or benefit for the three month
or six month period ended March 31, 2015. The Company increased its valuation
allowance and reduced its net deferred tax assets to zero. The Company's
assessment of the realization of its deferred tax assets has not changed, and as
a result the Company continues to maintain a full valuation allowance for its
net deferred assets as of March 31, 2015.
As of March 31, 2015, the Company did not have any unrecognized tax benefits.
There were no significant changes to the calculation since September 30, 2014.
NOTE 8. 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 March 31,
2015, the Company has amortized approximately $103,000 and $206,000 to stock
based compensation. Through March 31, 2015, the Company has amortized
approximately $753,000.
NOTE 9. EQUITY
On February 19, 2015 the Company issued 50,000 shares of common stock for
investment relation services valued at $1.00 per share or $50,000. 25,000 shares
vest immediately and 25,000 shares vest in a six month period. As of March 31,
2015 there is $33,333 in the prepaid asset account. For the three and six months
period ended March 31, 2015, $16,667 was amortized to stock based compensation
expense.
18
AMERICANN, INC.
(fka NEVADA HEALTH SCAN, INC.)
Notes To Unaudited Financial Statements for the three and
six month period ended March 31, 2015
NOTE 10. 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. 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
approximately $16,000 and $5,500 as of September 30, 2014 and March 31, 2015,
respectively.
During the six months period ended March 31, 2015, the Company received funds of
$790,000 and made payments of $207,000 to Strategic Capital Partners.
Outstanding amounts accrue interest at 5% per year, matures on December 31,
2014, and can be repaid at any time prior to maturity.
The balance is recognized as note payable related party in the accompanying
balance sheet and was $1,408,000 and $825,000 as of March 31, 2015 and September
30, 2014, respectively. Accrued interest was approximately $8,500 and $5,000 at
March 31, 2015 and September 30, 2014, respectively.
Interest expense related to the related party note payable was $11,199 and $-0-,
$21,061 and $-0-for the three month and six month period ended March 31, 2015
and 2014 respectively.
During the six month period ended March 31, 2015 Strategic Capital Partners paid
expenses of $37,720 on behalf of the Company of which the Company repaid all
related amounts as of March 31, 2015.
19
AMERICANN, INC.
(fka NEVADA HEALTH SCAN, INC.)
Notes To Unaudited Financial Statements for the three and
six month period ended March 31, 2015
NOTE 11. WARRANTS & OPTIONS
Stock option activity is presented below.
Weighted
Weighted Average
Average Contractual Aggregate
Number of Exercised Term Intrinsic
Shares Price (Years) Value
----------- --------- ------------ ---------
Outstanding at September 30,
2014 1,105,000 9.12 2 -
----------- --------- ------------ ---------
Granted 100,000 4.00 3 -
----------- --------- ------------ ---------
Outstanding at March 31, 2015 1,205,000 6.47 2 -
=========== ========= ============ =========
Expected to vest at
March 31, 2015 1,205,000 6.47 -0- -0-
=========== ========= ============ =========
Exercisable at March 31, 2015 205,000 4.00 -0- -0-
=========== ========= ============ =========
As part of its amended agreement with WGP (see Note 3), the Company issued
options which allow WGP to purchase up to 100,000 shares of the Company's common
stock at a price of $4.00 per share. The options were valued at approximately
$19,000 using the Black Scholes option pricing model with the following
assumptions: $.02 value of stock on grant date; $4.00 exercise price immediate
vesting; .75 risk free interest rate; 100% volatility factor; and 0% dividend
yield and were recorded as stock based compensation expense. The options expire
in February 2018.
Total stock based compensation expense for the three and six month period ended
March 31, 2015 was $184,522 and $297,306.
NOTE 12. COMMITMENTS AND CONTIGENTCY
Massachusetts Land Purchase
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
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.
20
AMERICANN, INC.
(fka NEVADA HEALTH SCAN, INC.)
Notes To Unaudited Financial Statements for the three and
six month period ended March 31, 2015
NOTE 12. COMMITMENTS AND CONTIGENTCY (continued)
Massachusetts Land Purchase
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
date was moved from June 1, 2015 to September 1, 2015.
In March of 2015 the Company contracted with Campinelli Associates Management
Corp to a assist with the permitting and schematic design for the Massachusetts
Medical Cannabis Center. Campanelli Associates Management Corp. will provide
owner's representation and provide technical and planning support to manage the
schematic design and permitting process.
Campanelli's fee for this phase of the project will be $125,000 to be paid at
the rate of $15,000 per month (to be paid on the 1st of each month) with a lump
sum payment of the balance due at the end of this Permitting, Development and
Schematic Design Services phase. This phase of the project shall be deemed
complete when the land has been purchased and all permits necessary to commence
construction have been obtained and permit appeal periods have expired.
As part of the agreement, AmeriCann secured the right to option for purchase an
adjacent parcel of land owned by Campinelli Associates. After a preliminary
review, the site parcel was deemed unusable and the Company waived its right to
the option in April.
NOTE 13 LEASE COMMITMENTS
The Company leases its office space located at 3200 Brighton Boulevard, Denver,
Colorado for $2,870 per month commencing June 18, 2014 and ending June 30, 2015.
The Company paid a refundable deposit of $3,110. The lease expense at March 31,
2015 and 2014 was $8,560 and $-0- for three months and $16,870 and $-0- for the
six month periods 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 three and six months
March 31, 2015 and 2014 was $1,834 and $-0- and $4,286 and $-0- respectively. At
March 31, 2015 the future rental payments required under operating leases are
$20,163.
NOTE 14. SUBSEQUENT EVENTS
As discussed in Note 3, in 2014 the Company entered into a Loan and Consulting
Agreement with Nature's Own Wellness Center, LLC, and 4900 Jackson, LLC
("4900"), collectively "Nature's Own". Pursuant to the Loan Agreement, the
Company lent Nature's Own $1,000,000 on a secured basis. The proceeds of the
$1,000,000 were to be used to convert an existing 15,000 square foot warehouse
into a cannabis growing and processing facility.
21
AMERICANN, INC.
(fka NEVADA HEALTH SCAN, INC.)
Notes To Unaudited Financial Statements for the three and
six month period ended March 31, 2015
NOTE 14. SUBSEQUENT EVENTS (Continued)
The loan had a 30-month term and had an annual interest rate of 18% which was
payable monthly. Pursuant to the Consulting Agreement, Nature's Own was to pay
the Company $300,000 in consulting fees for its cannabis operations over a
30-month period.
On January 1, 2015 the Company modified the Loan and Consulting Agreement with
Nature's Own. The modification eliminated the required principal payments for
the months of January through May 2015 and increased the final principal payment
due December 1, 2016 to $182,531. The Consulting Agreement was modified to
extend the term under which consulting fees were due by five months to May 31,
2017.
In early May 2015, Nature's Own's interest in the growing and processing
facility was purchased by 4900 and, 4900 assumed Nature's Own obligations under
the Loan and Consulting agreements. On May 20, 2015, the Company modified the
Loan and Consulting Agreement with 4900. Pursuant to the modified Loan
Agreement, 4900 made a payment to the Company of $300,000 on the outstanding
loan balance of $965,000 and the interest rate on the loan decreased from 18% to
12%. The loan will mature on May 1, 2017. The Consulting Agreement was modified
such that 4900 will pay the Company $5,000 per month, rather than $10,000 per
month, until May 31, 2017. The proceeds of the loan will continue to be used to
develop the cannabis growing and processing facility.
On July 31, 2014 the Company 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. The property is currently zoned for
cannabis cultivation and processing by the City and County of Denver. On May 5,
2015 the Company entered into an agreement to sell the property to an unrelated
party for $2,500,000.
The Company has evaluated subsequent events through the date these financial
statements were issued and determined that no other disclosure of subsequent
events is required.
22
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.
23
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 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.
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.
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. The property is currently zoned for cannabis
cultivation and processing by the City and County of Denver. On May 5, 2015 we
entered into an agreement to sell the property to an unrelated party for
$2,500,000.
24
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 under the Illinois Compassionate Use of Medical Cannabis
Pilot Program Act.
On February 2, 2015 WGP was notified that it was awarded one of the two licenses
for which it applied under the Illinois Act. The State only issued a total of 18
cultivation and processing licenses.
Under the terms of the loan agreement pertaining to the license awarded to WGP,
we had 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.
On February 23, 2015 we amended our agreement with WGP.
The amended agreement called for us to serve as the project developer and owner
of the IMCC, and to provide working capital funding and horticultural assistance
to WGP. As part of the amended agreement, we issued options which allow WGP to
purchase up to 100,000 shares of our common stock at a price of $4.00 per share.
The options expire in February 2018.
The amended agreement included a Draw Schedule by which we were required to
provide construction capital to build the IMCC and provide working capital for
WGP.
We provided initial funding of $600,000 to WGP on February 23, 2015 in
accordance with Draw #1.
The budgeted amount for Draw #2 was $379,333. Prior to the funding of this
amount for Draw #2, WGP requested that we fund an additional $214,522, not
initially scheduled for Draw #2, for an essential metal building that was to be
delivered earlier than anticipated by WGP. The original Agreement scheduled this
item to be paid from Draw #4. With this request, WGP agreed to transfer certain
non-essential items for Draw #2 to future draws to accommodate the additional
expense for the building.
We provided in excess of $405,000 for Draw #2, which exceeded the Draw #2
requirements by approximately $26,000. The total capital we provided after Draw
#2 was in excess of $1,000,000.
On April 7, 2015, WGP sent us notice claiming that the $214,522 payment that we
made for the building was not authorized by WGP and that our payment for the
building was made "...at its own election." WGP further claimed that we failed
to provide funding pursuant to the amended agreement and as a result our
agreements with WGP were void.
On April 10, 2015, WGP notified us that our relationship with WGP could continue
only if we agreed to accept significant changes to the original agreements. In
this correspondence, WGP made eight demands including the following:
25
(1) That we provide an extra $2,000,000 in working capital to WGP, and
(2) That we agree to reduce the interest rate on the working capital loan
to WGP by 6%, and
(3) That we would not pay vendors and suppliers directly, but rather that
all funds had to be provided to WGP for disbursements.
We believe that WGP's notice to void the agreements was without merit and that
this was merely an attempt to renegotiate the terms of a valid contract.
We rejected WGP's proposal outright.
We have notified WGP that we have fulfilled our obligations pursuant to our
agreements with WGP but due to WGP's anticipatory breach of contract, and
repeated lack of good faith and fair dealing, our agreements with WGP were
terminated.
We will take all necessary steps to recover our investment and pursue our claims
against WGP.
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 September 1, 2015.
We plan to expand to other states that have approved and regulate the
cultivation and sale of cannabis.
On March 3, 2015 we closed on a $650,000 loan from a third party. The Note is
due September 21, 2015 and secured by our Monaco Street property in Denver,
Colorado. The annual interest rate for the loan is 14%. The loan, including is
interest, is due on September 21, 2015.
As of March 31, 2015 we had borrowed $1,408,000 from Strategic Capital Partners,
LLC, a Company controlled by Benjamin J. Barton, one of our officers and
directors. 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.
RESULTS OF OPERATIONS
During the three month period ended March 31, 2015 we generated $50,000 in
revenue and $54,595 in interest income. During the six month period ended March
31, 2015 we generated $80,000 in revenue and $100,134 in interest income.
However, for the three and six month periods ended March 31, 2014, we did not
generate any revenue. As a result we have little operating history upon which to
evaluate our business.
26
General and administrative expenses for the three month period ended March 31,
2015, were $467,943. This compares with General and Administrative expenses for
the three month period ended March 31, 2014 of $307,347. The increase in general
and administrative expenses during the current period was the result of
increases in contract and consulting, rent, salaries and stock based
compensation expenses associated with operating the company.
We had a net loss of $(377,590) for the three month period ended March 31, 2015.
This compares with a net loss for the three month period ended March 31, 2014 of
$(242,003). The increase in the net loss during the current period was primarily
the result of the increase in G&A expenses, partially offset by an increase in
Revenue and Other Income.
Since the Company was inactive prior to January 2014, any comparison of the
Company's operating results for the three and six months ended March 31, 2015
and its financial condition as of March 31, 2015 with any prior periods would
not be meaningful.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2015 we had borrowed $1,408,000 from Strategic Capital Partners,
LLC, a Company controlled by Benjamin J. Barton, one of our officers and
directors. 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.
Our sources and (uses) of funds for the six months ended March 31, 2015 are
shown below:
Net cash (used in) operations $(332,621)
Website development (33,000)
Deposit on land purchase (100,000)
Advances to WGP (937,341)
Payment received on note receivable 35,000
Loan from third party 611,006
Loan from related party 790,000
-
Payment on loan from related party (207,000)
We do not have any firm commitments from any person to provide us with any
capital.
See Note 1 to the financial statements included as part of this report for a
discussion of our significant accounting policies.
As of March 31, 2015 we did not have any off balance sheet arrangements.
27
Item 4. Controls and Procedures.
(a) The Company maintains a system of controls and procedures designed to
ensure 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 March 31, 2015, 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 at a
reasonable assurance level as a result of a material weakness primarily related
to a lack of a sufficient number of personnel with appropriate training and
experience in accounting principles generally accepted in the United States of
America, or GAAP. As a result, the Company did not adequately test whether its
disclosure controls and procedures were operating sufficiently to identify a
deficiency, or combination of deficiencies, that may result in a reasonable
possibility that a material misstatement of the financial statements would not
be prevented or detected on a timely basis. While the Company's management has
reviewed the financial statements and underlying information included in this
report on Form 10-Q in detail and believes the procedures performed are adequate
to fairly present, in all material respects, the Company's financial position,
results of operations and cash flows for the periods presented, the deficiency
in accounting personnel that existed during the three months ended March 31,
2015 could have led to errors in the financial statements.
(b) Changes in Internal Controls. There were no changes in the Company's
internal control over financial reporting during the quarter ended March 31,
2015, that materially affected, or are reasonably likely to materially affect,
its internal control over financial reporting.
28
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.
29
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.
June 15, 2015 By:/s/ Timothy Keogh
----------------------------------
Timothy Keogh, Principal Executive
Officer
June 15, 2015 By:/s/ Benjamin Barton
----------------------------------
Benjamin Barton, Principal
Financial and Accounting Office
