UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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Emerging growth company |
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As of August 8, 2024, the registrant had
AMERICANN, INC.
FORM 10-Q
TABLE OF CONTENTS
PAGE NO. |
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PART I FINANCIAL INFORMATION |
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Item 1. |
Unaudited Financial Statements: |
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Consolidated Balance Sheets as of June 30, 2024 and September 30, 2023 |
3 |
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Consolidated Statements of Operations for the Three and Nine Months Ended June 30, 2024 and 2023 |
4 |
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Consolidated Statements of Changes in Stockholders' Equity for the Nine Months Ended June 30, 2024 and 2023 |
5 |
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Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2024 and 2023 |
6 |
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Notes to Consolidated Financial Statements |
7 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
12 |
Item 4. |
Controls and Procedures |
14 |
PART II OTHER INFORMATION |
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Item 5. |
Other Information |
15 |
Item 6. |
Exhibits |
15 |
SIGNATURES |
16 |
PART I: FINANCIAL INFORMATION
ITEM 1. UNAUDITED FINANCIAL STATEMENTS
AMERICANN, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30, 2024 |
September 30, 2023 |
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Assets |
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Current Assets: |
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Cash and cash equivalents |
$ | $ | ||||||
Restricted cash |
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Tenant receivable |
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Prepaid expenses and other current assets |
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Current portion of note receivable |
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Total current assets |
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Note receivable |
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Construction in progress |
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Property and Equipment, net |
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Operating lease - right-of-use asset |
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Total assets |
$ | $ | ||||||
Liabilities and Stockholders' Equity |
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Current Liabilities: |
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Accounts payable and accrued expenses |
$ | $ | ||||||
Accounts payable - related party |
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Interest payable (including $ |
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Other payables |
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Operating lease liability, short term |
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Note payable - related party |
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Notes payable (net of unamortized discounts of $ |
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Total current liabilities |
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Operating lease liability, long term |
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Total liabilities |
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Commitments and contingencies - see Note 6 |
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Stockholders' Equity: |
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Preferred stock, $ |
- | - | ||||||
Common stock, $ |
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Additional paid in capital |
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Accumulated deficit |
( |
) | ( |
) | ||||
Total stockholders' equity |
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Total liabilities and stockholders' equity |
$ | $ |
See accompanying notes to unaudited consolidated financial statements.
AMERICANN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Nine Months Ended June 30, |
Three Months Ended June 30, |
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2024 |
2023 |
2024 |
2023 |
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Rental income |
$ | $ | ||||||||||||||
Cost of revenues |
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Gross profit |
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Operating expenses: |
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Advertising and marketing |
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Professional fees |
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General and administrative expenses |
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Total operating expenses |
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(Loss) income from operations |
( |
) | ( |
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Other income (expense): |
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Interest income |
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Interest expense |
( |
) | ( |
) | ( |
) | ( |
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Interest expense - related party |
( |
) | ( |
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Total other income (expense) |
( |
) | ( |
) | ( |
) | $ | ( |
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Net (loss)/income |
$ | ( |
) | $ | $ | ( |
) | $ | ( |
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Basic and diluted (loss)/income per common share |
$ | ( |
) | $ | $ | ( |
) | $ | ( |
) | ||||||
Weighted average common shares outstanding |
See accompanying notes to unaudited consolidated financial statements.
AMERICANN, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(unaudited)
Preferred Stock |
Common Stock |
Paid In |
Accumulated |
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Shares |
Amount |
Shares |
Amount |
Capital |
Deficit |
Total |
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Balances, September 30, 2022 |
$ | - | $ | $ | $ | ( |
) | $ | ||||||||||||||||||||
Net income |
- | - | ||||||||||||||||||||||||||
Balances, December 31, 2022 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||
Net income |
- | - | ||||||||||||||||||||||||||
Balances, March 31, 2023 |
- | $ | - | $ | $ | $ | ( |
) | $ | |||||||||||||||||||
Net loss |
- | - | ( |
) | ( |
) | ||||||||||||||||||||||
Balances, June 30, 2023 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||
Balances, September 30, 2023 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||
Net loss |
- | - | ( |
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Balances, December 31, 2023 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||
Net loss |
- | - | ( |
) | ( |
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Balances, March 31, 2024 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||
Net loss |
( |
) | ( |
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Balances, June 30, 2024 |
$ | $ | $ | $ | ( |
) | $ |
See accompanying notes to unaudited consolidated financial statements.
AMERICANN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended June 30, |
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2024 |
2023 |
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Cash flows from operating activities: |
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Net (loss)/income |
$ | ( |
) | $ | ||||
Adjustments to reconcile net (loss)/income to net cash provided by operating activities: | ||||||||
Depreciation and amortization |
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Amortization of right of use assets |
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Amortization of debt discount |
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Changes in operating assets and liabilities: |
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Tenant receivable |
( |
) | ||||||
Prepaid expenses |
( |
) | ||||||
Accounts payable and accrued expenses |
( |
) | ( |
) | ||||
Operating lease liability |
( |
) | ( |
) | ||||
Accounts payable - related party |
( |
) | ( |
) | ||||
Interest payable |
( |
) | ||||||
Other payables |
( |
) | ( |
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Net cash flows (used in)/provided by operations |
( |
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Cash flows from investing activities: |
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Additions to construction in progress |
( |
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Additions to property and equipment |
( |
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Payments received on notes receivable |
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Net cash flows provided by/(used in) investing activities |
( |
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Cash flows from financing activities: |
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Principal payments on notes payable |
( |
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Net cash flows (used in) financing activities |
( |
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Net change in cash, cash equivalents, and restricted cash |
( |
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Cash, cash equivalents, and restricted cash at beginning of period |
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Cash, cash equivalents, and restricted cash at end of period |
$ | $ | ||||||
Supplementary Disclosure of Cash Flow Information: |
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Cash paid for interest |
$ | $ | ||||||
Cash paid for income taxes |
$ | $ |
See accompanying notes to unaudited consolidated financial statements.
AMERICANN, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND BASIS OF PRESENTATION
AmeriCann, Inc. ("the Company", “we”, “our” or "the Issuer") was organized under the laws of the State of Delaware on June 25, 2010. The Company changed its corporate domicile to Colorado in 2022.
The Company designs, develops, leases and operates state-of-the-art cannabis cultivation, processing and manufacturing facilities.
The Company's activities are subject to significant risks and uncertainties including the potential failure to secure funding to continue its operations.
Basis of Presentation
The (a) consolidated balance sheet as of September 30, 2023, which has been derived from audited financial statements, and (b) the unaudited financial statements as of and for the three and nine months ended June 30, 2024 and 2023, 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 December 22, 2023. In the opinion of management, all adjustments, all of which are of a normal recurring nature, 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 the full year. Notes to the financial statements which substantially duplicate the disclosure contained in the audited financial statements for fiscal 2023 as reported in the Form 10-K have been omitted.
Certain prior period amounts have been reclassified to conform with current period presentation. These reclassifications have no impact on net income or loss.
Significant Accounting Policies
Restricted Cash
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts in the consolidated statements of cash flows:
June 30, 2024 |
September 30, 2023 |
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Cash and cash equivalents |
$ | $ | ||||||
Restricted cash |
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Total cash, cash equivalents, and restricted cash shown in the cash flow statement |
$ | $ |
Amounts included in restricted cash represent those required to be set aside by the Cannabis Control Commission in Massachusetts.
Property and Equipment, net
Property and equipment are stated at cost. Depreciation of property and equipment begins in the month following the month when the asset is placed into service and is provided using the straight-line method for financial reporting purposes at rates based on the estimated useful lives of the assets. Estimated useful lives range from
to years. Property and equipment consist of:
June 30, 2024 |
September 30, 2023 |
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Buildings and improvements |
$ | $ | ||||||
Computer equipment |
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Furniture and equipment |
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Total |
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Accumulated depreciation |
( |
) | ( |
) | ||||
Property and equipment, net |
$ | $ |
Depreciation expense for the nine months ended June 30, 2024 and June 30, 2023 amounted to $
Leases
Effective October 1, 2019, we adopted Topic 842, Lease Accounting using the effective date method. Under this method, periods prior to adoption remain unchanged. We determine if an arrangement is a lease at inception.
Right-of-Use (ROU) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Variable lease payments are not included in the calculation of the right-of-use asset and lease liability due to uncertainty of the payment amount and are recorded as lease expense in the period incurred. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
Under the available practical expedient, we account for the lease and non-lease components as a single lease component for all classes of underlying assets as both a lessee and lessor. Further, we elected a short-term lease exception policy on all classes of underlying assets, permitting us to not apply the recognition requirements of this standard to short-term leases (i.e. leases with terms of 12 months or less).
Recently Adopted Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. This may result in the earlier recognition of allowances for losses. The guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. The Company adopted the new guidance under ASU 2016-13 in the first quarter of fiscal year 2024, and determined that the impact of the adoption on its financial statements is immaterial.
NOTE 2. GOING CONCERN
The accompanying unaudited consolidated 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 $
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 consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 3. NOTE RECEIVABLE
Notes and other receivables as of June 30, 2024 and September 30, 2023, consisted of the following:
June 30, 2024 |
September 30, 2023 |
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Note receivable from BASK, interest rate of |
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Less: Current portion |
( |
) | ( |
) | ||||
$ | $ |
NOTE 4. NOTES PAYABLE
Unrelated
On August 2, 2019 the Company secured a $
The note holder also received a warrant which allows the holder to purchase
The broker for the loan received a cash commission of $
The Company allocated the proceeds between the note and the warrants based on their relative fair values. The relative fair value of the
On December 4, 2020, the loan was modified and increased by $
In July 2023, the maturity date was further extended to December 1, 2023. On November 30, 2023, the maturity of the loan was extended to January 31, 2024. All other provisions of the previously modified loan remain the same. The debt modification was deemed not substantial and was accounted for as a debt modification. The broker for the loan received a cash commission of $
At June 30, 2024, the outstanding principal on this note was $
The modified note is secured by a first lien on Building 1 at the Company’s Massachusetts Cannabis Center (“MCC”).
BASK. On April 7, 2016, we signed agreements with BASK. BASK is one of a limited number of organizations that has received a provisional or final registration to cultivate, process and sell medical and adult use cannabis by the Massachusetts Cannabis Control Commission.
Pursuant to the agreements, we agreed to provide BASK with financing for construction and working capital required for BASK’s approved dispensary and cultivation center in Fairhaven, MA.
On July 26, 2019, the Company entered into a 15-Year Triple Net lease of Building 1 of the MCC with BASK. The lease commenced on September 1, 2019 and includes an annual base rent of $
On May 13, 2024, the Company and BASK mutually agreed to modify the lease effective August 31, 2024. During the last five months of the lease effective April 1, 2024 the new monthly payment by BASK will be $
Related Party
SCP. On September 30, 2019, we entered into an amended note with Strategic Capital Partners, LLC (“SCP”), an entity controlled by Benjamin J. Barton, one of our officers and directors and principal shareholders, in the principal amount of $
Accrued interest on the note was $
At June 30, 2024 and September 30, 2023, the outstanding principal on this note was $
During the year ended September 30, 2023, the Company also incurred $
NOTE 5. INCOME/LOSS PER SHARE
The following table sets forth the computation of basic and diluted net income (loss) per share:
Three months ended |
Nine months ended |
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June 30, |
June 30, |
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2024 |
2023 |
2024 |
2023 |
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Net income (loss) attributable to common stockholders |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||
Basic weighted average outstanding shares of common stock |
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Dilutive effects of common share equivalents |
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Dilutive weighted average outstanding shares of common stock |
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Basic and diluted net income (loss) per share of common stock |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ |
As of June 30, 2024 we excluded
As of June 30, 2023 we excluded
NOTE 6. COMMITMENTS AND CONTINGENCIES
Operating Leases
Office space
The Company leases its office space located at 1555 Blake St., Unit 502, Denver, CO 80202 for $
Lease expense for office space was $
Land
On October 17, 2016, the Company closed the acquisition of the
As part of a simultaneous transaction, the Company assigned the property rights to Massachusetts Medical Properties (“MMP”) for a nominal fee and entered a lease agreement pursuant to which MMP agreed to lease the property to the Company for an initial term of fifty (
The lease payments will be the greater of (a) $
Effective October 1, 2019, the Company adopted Topic 842 and recorded ROU assets and lease liabilities of $
The Company completed the construction of Building I on the leased land and on September 1, 2019, BASK commenced its
On May 13, 2024, the Company and BASK mutually agreed to terminate the lease effective August 31, 2024. AmeriCann and BASK have agreed that, for the last five months of the lease effective April 1 2024, the new monthly payment by BASK will be $
As of June 30, 2024, the Company’s right-of-use assets were $
The table below presents lease related terms and discount rates as of June 30, 2024.
As of June 30, 2024 |
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Weighted average remaining lease term |
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Operating leases |
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Weighted average discount rate |
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Operating leases |
% |
The reconciliation of the maturities of the operating leases to the lease liabilities recorded in the Consolidated Balance Sheet as of June 30, 2024 are as follows:
2024 |
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2025 |
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2026 |
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2027 |
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2028 |
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Thereafter |
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Total lease payments |
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Less: Interest |
( |
) | ||
$ | ||||
Less: operating lease liability, current portion |
( |
) | ||
Operating lease liability, long term |
$ |
Aggregate rental expense under all leases totaled $
NOTE 7. STOCKHOLDERS’ EQUITY
Common Stock. There was no common stock activity during the nine months ended June 30, 2024.
Stock Options. There was no stock option activity during the nine months ended June 30, 2024.
Stock option details are as follows:
Weighted |
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Weighted |
Average |
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Average |
Contractual |
Aggregate |
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Number of |
Exercise |
Term |
Intrinsic |
|||||||||||||
Shares |
Price |
(Years) |
Value |
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Exercisable at September 30, 2023 |
$ | $ | - | |||||||||||||
Outstanding as of June 30, 2024 |
$ | $ | - | |||||||||||||
Vested and expected to vest at June 30, 2024 |
$ | $ | - | |||||||||||||
Exercisable at June 30, 2024 |
$ | $ | - |
Stock option-based compensation expense associated with stock options was $
Warrants. Warrant activity as of and for the nine months ended June 30, 2024 is as follows:
Weighted |
||||||||||||||||
Weighted |
Average |
|||||||||||||||
Average |
Contractual |
Aggregate |
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Number of |
Exercise |
Term |
Intrinsic |
|||||||||||||
Shares |
Price |
(Years) |
Value |
|||||||||||||
Outstanding as of September 30, 2023 |
$ | - | ||||||||||||||
Outstanding as of June 30, 2024 |
$ | - | ||||||||||||||
Exercisable at June 30, 2024 |
$ | - |
NOTE 8. INCOME TAXES
We did
record any income tax expense or benefit for the nine months ended June 30, 2024 or 2023. 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 tax assets as of June 30, 2024 and September 30, 2023.
As of June 30, 2024, we did not have any unrecognized tax benefits. There were no significant changes to the calculation since September 30, 2023.
NOTE 9. SUBSEQUENT EVENTS
None
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto as of and for the year ended September 30, 2023 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K
Forward-Looking Statements
The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, (“the Exchange Act”), which are subject to the “safe harbor” created by those sections. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “should,” “could,” “predicts,” “potential,” “continue,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements. All forward-looking statements in this Form 10-Q are made based on our current expectations, forecasts, estimates and assumptions, and involve risks, uncertainties and other factors that could cause results or events to differ materially from those expressed in the forward-looking statements. In evaluating these statements, you should specifically consider various factors, uncertainties and risks that could affect our future results or operations. These factors, uncertainties and risks may cause our actual results to differ materially from any forward-looking statement set forth in this Form 10-Q. You should carefully consider these risk and uncertainties described and other information contained in the reports we file with or furnish to the SEC before making any investment decision with respect to our securities. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this cautionary statement.
OVERVIEW
AmeriCann designs, develops, leases and operates state-of-the-art cannabis cultivation, processing and manufacturing facilities. AmeriCann’s team includes board members, consultants, engineers and architects who specialize in real estate development, traditional horticulture, lean manufacturing, medical research, facility construction, regulatory compliance, security, marijuana cultivation and genetics, extraction processes, and infused product development.
AmeriCann’s flagship project is the Massachusetts Cannabis Center. The Massachusetts Cannabis Center (“MCC”) is being developed on a 52-acre parcel located in southeastern Massachusetts. AmeriCann’s MCC project is permitted for over 800,000 sq. ft. of cannabis cultivation and processing infrastructure which is being developed in phases to support both the existing medical cannabis and the newly emerging adult-use cannabis marketplace.
The first phase of the project, Building 1, a 30,000 square foot cultivation and processing facility, is fully-operational and has been 100% leased by a vertically-integrated Massachusetts cannabis company. The lease will expire on August 31, 2024, after which AmeriCann intends to operate the building as a regulated cannabis cultivation and manufacturing operator. AmeriCann has generated revenue through lease arrangements with the operators and expects to receive revenue from the sale of cannabis products produced in the building.
AmeriCann, through a 100% owned subsidiary, AmeriCann Brands, Inc., has received two licenses from the Massachusetts Cannabis Control Commission to cultivate cannabis and provide extraction and product manufacturing support to the entire MCC project, as well as to other licensed cannabis farmers throughout regulated markets. AmeriCann Brands plans to operate in Building 2 at the MCC. In addition to large-scale extraction of cannabis plant material, AmeriCann Brands plans to produce branded consumer packaged goods including cannabis beverages, vaporizer products, edible products, non-edible products and concentrates at the state-of-the-art facility.
AmeriCann may replicate the brands, technology and innovations developed at its MCC project to additional markets.
SIGNIFICANT ACCOUNTING POLICIES
Leases
Effective October 1, 2019, we adopted ASC 842, Lease Accounting using the effective date method. We determine if an arrangement is a lease at inception.
Right-of-Use (ROU) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Variable lease payments are not included in the calculation of the right-of-use asset and lease liability due to uncertainty of the payment amount and are recorded as lease expense in the period incurred. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
Under the available practical expedient, we account for the lease and non-lease components as a single lease component for all classes of underlying assets as both a lessee and lessor. Further, we elected a short-term lease exception policy on all classes of underlying assets, permitting us to not apply the recognition requirements of this standard to short-term leases (i.e. leases with terms of 12 months or less).
RESULTS OF OPERATIONS
Total Revenues
During the three months ended June 30, 2024 and 2023, we generated $172,763 and $582,881 in revenue, respectively. During the nine months ended June 30, 2024 and 2023, we generated $1,102,047 and $2,066,053 in revenue, respectively. The decrease in revenue is due to a lease modification with our tenant that resulted in us receiving less revenue than in prior quarters. The lease agreement with our tenant terminates in August 2024.
Cost of Revenues
During the three months ended June 30, 2024 and 2023, we incurred $390 and $0 costs of revenue, respectively. During the nine months ended June 30, 2024 and 2023, we incurred $1,170 and $13,615 of costs of revenue. The increase in cost during the three months ended June 30, 2024 is due to additional maintenance costs. The decrease in cost for the nine months ended June 30, 2024 is due to the end of a facilities maintenance agreement.
Advertising and Marketing Expenses
Advertising and marketing expenses were $482 and $646 for the three months ended June 30, 2024 and 2023, respectively. During the nine months ended June 30, 2024 and 2023, the advertising and marketing expenses were $5,238 and $6,017, respectively. The decrease is due to a decrease in marketing costs.
Professional Fees
Professional fees were $87,676 and $73,509 for the three months ended June 30, 2024 and 2023, respectively. During the nine months ended June 30, 2024 and 2023, the professional fees were $315,639 and $277,361, respectively. The increase is primarily due to an increase in accounting fees.
General and Administrative Expenses
General and administrative expenses were $416,899 and $380,060 for the three months ended June 30, 2024 and 2023, respectively. During the nine months ended June 30, 2024 and 2023, general and administrative fees were $1,198,508 and $1,163,323, respectively. The increase is primarily due to an increase in licenses and fees expenses.
Interest Income
Interest income was $10,940 and $578 for the three months ended June 30, 2024 and 2023, respectively. During the nine months ended June 30, 2024 and 2023, interest income was $34,194 and $3,374, respectively. The increase is a result of a new note receivable entered into in September 2023.
Interest Expense
Interest expense was $136,462 and $185,169 for the three months ended June 30, 2024 and 2023, respectively. During the nine months ended June 30, 2024 and 2023, interest expense was $411,982 and $555,669, respectively. The decrease is primarily attributable to decrease in amortization of debt discounts.
Net Operating Income/Loss
We had a net loss of $(458,206) and $(55,925) for the three months ended June 30, 2024 and 2023, respectively. We had a net loss of $(796,296) and net income of $53,442 for the nine months ended June 30, 2024 and 2023, respectively. The net loss is attributed primarily to a reduction in revenue attributed to a lease modification with our tenant that resulted in us receiving less revenue than in prior quarters. The lease with our tenant terminates in August 2024.
LIQUIDITY AND CAPITAL RESOURCES
The accompanying unaudited consolidated 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 $20,649,740 and $19,853,444 at June 30, 2024 and September 30, 2023, respectively.
The Company is continuing to support the optimization of operations and generate additional revenues from its Massachusetts Cannabis Center (MCC). The Company will need to raise additional funds for the expansion of the MCC. When Management determines expansion opportunities exist the Company may finance construction with cash from operations, a sale-lease-back, refinancing and expanding existing debt, issuance of new debt, or sales of equity.
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 consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Notes Payable
See Note 4 of the unaudited consolidated financial statements filed with this report for information concerning our notes payable.
Analysis of Cash Flows
During the nine months ended June 30, 2024, our net cash flows used in operations were $(970,251) as compared to net cash flows provided by operations of $445,595 for the nine months ended June 30, 2023. The decrease is primarily due to a decrease in our net income during the nine months ended June 30, 2024 and timing of working capital payments.
Cash flows provided by (used in) investing activities were $45,885 and $(244,760) for the nine months ended June 30, 2024 and 2023, respectively, consisting of payments received on notes receivable.
Cash flows used in financing activities were $0 and $(150,000) for the nine months ended June 30, 2024 and 2023, respectively, consisting of principal payments on notes payable in 2023.
We do not have any firm commitments from any person to provide us with any additional capital.
OFF-BALANCE SHEET ARRANGEMENTS
As of June 30, 2024, we did not have any off-balance sheet arrangements.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our President and Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were not effective for the same reasons that our internal control over financial reporting was not effective.
Internal Control over Financial Reporting
As indicated in our Form 10-K filed on December 22, 2023, our Principal Executive Officer and Principal Financial Officer concluded that our internal control over financial reporting was not effective as of September 30, 2023 at the reasonable assurance level, as a result of a material weaknesses 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, limited or no segregation of duties, and lack of independent directors.
We are currently in the process of evaluating the steps necessary to remediate these material weaknesses.
Change in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the quarterly period ended June 30, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within any company have been detected.
PART II OTHER INFORMATION
ITEM 5. OTHER INFORMATION
of our directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the quarterly period ending June 30, 2024.
ITEM 6. EXHIBITS
Exhibit |
Description of Document |
31.1 |
|
31.2 |
|
32 |
|
101.INS |
Inline XBRL Instance Document. |
101.SCH |
Inline XBRL Taxonomy Extension Schema Document. |
101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
104 |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
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. |
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Dated: August 12, 2024 |
By: |
/s/ Timothy Keogh |
|
Timothy Keogh |
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Principal Executive Officer |
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By: |
/s/ Benjamin Barton |
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Benjamin Barton |
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Principal Financial and Accounting Officer |