10-Q

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, 2016

OR

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

For the transition period from __________________ to _________________

Commission file number: 001-35902

AMERICANN, INC

(Exact name of registrant as specified in its charter)

Delaware	27-4336843
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
3200 Brighton Blvd. Unit 114, Denver, CO	80216
(Address of principal executive offices)	(Zip Code)
(303) 862-9000
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)

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.   YesþNo ¨

Indicate by a checkmark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).YesþNo ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “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	þ
(Do not check if a smaller reporting company)

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

As of April 30, 2016, the registrant had 16,631,000shares of common stock ($0.0001 par value) outstanding.

AMERICANN, INC.

FORM 10-Q

TABLE OF CONTENTS

			PAGE NO.
PART I	FINANCIAL INFORMATION
	Item 1.	Unaudited Financial Statements:
		Condensed Balance Sheets as of March 31, 2016 and September 30, 2015	1
		Condensed Statements of Operations for the Three and Six Months Ended March 31, 2016 and 2015	2
		Condensed Statements of Cash Flows for the Six Months Ended March 31, 2016 and 2015	3
		Notes to Unaudited Condensed Financial Statements	4
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
	Item 4.	Controls and Procedures	16
PART II	OTHER INFORMATION
	Item 6.	Exhibits	17
	SIGNATURES		18

PART I  FINANCIAL INFORMATION

ITEM 1. UNAUDITED FINANCIAL STATEMENTS

AMERICANN, INC.
CONDENSED BALANCE SHEETS
	March 31, 2016 (unaudited)			September 30, 2015
Assets
Current Assets:
Cash and cash equivalents	$	64,738		$	201,353
Interest receivable		4,024			5,975
Prepaid expenses		10,736			35,758
Land held for resale		2,250,809			2,250,809
Total current assets		2,330,307			2,493,895
Furniture and equipment (net of depreciation of $2,019 and $1,458)		10,165			6,399
Note receivable - 4900 Jackson LLC		402,071			586,305
Amounts due from WGP (net of allowance of $463,084 and $456,470)		722,557			664,800
Website development costs (net of amortization of $8,070 and $1,153)		33,430			40,347
Deposits on land		450,000			200,000
Security deposit		3,110			3,110
Total assets	$	3,951,640		$	3,994,856
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued expenses	$	213,154		$	85,298
Interest payable (including $45,452 and $0 to related parties)		70,919			-
Other payables		3,698			11,716
Deferred revenue		5,000			-
Note payable		1,016,185			900,000
Note payable - related party		1,910,349			-
Total current liabilities		3,219,305			997,014
Note payable - related party		-			1,682,849
Total liabilities		3,219,305			2,679,863
Commitments and contingencies
Stockholders' Equity:
Preferred stock, $0.0001 par value; 20,000,000 shares authorized;
no shares issued and outstanding		-			-
Common stock, $0.0001 par value; 100,000,000 shares authorized;
16,631,000 and 16,631,000 shares issued and outstanding
as of March 31, 2016 and September 30, 2015, respectively		1,663			1,663
Additional paid in capital		5,110,296			5,007,497
Accumulated deficit		(4,379,624	)		(3,694,167	)
Total stockholders' equity		732,335			1,314,993
Total liabilities and stockholders' equity	$	3,951,640		$	3,994,856

See accompanying notes to unaudited condensed consolidated financial statements.

1

AMERICANN, INC.
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
	Three Months Ended March 31,						Six Months Ended March 31,
	2016			2015			2016			2015
Revenues:
Consulting fees	$	15,000		$	50,000		$	30,000		$	80,000
Total revenues		15,000			50,000			30,000			80,000
Operating expenses:
Advertising and marketing		250			3,200			2,348			6,075
Professional fees		134,751			190,727			353,080			273,466
General and administrative expenses		162,400			273,948			337,545			495,680
Provision for doubtful accounts		3,289			-			6,614			-
Total operating expenses		300,690			467,875			699,587			775,221
Loss from operations		(285,690	)		(417,875	)		(669,587	)		(695,221	)
Other income (expense):
Interest income		45,492			54,595			93,787			99,801
Interest expense		(32,249	)		(3,111	)		(64,205	)		(3,111	)
Interest expense - related party		(23,594	)		(11,199	)		(45,452	)		(21,061	)
Total other income (expense)		(10,351	)		40,285			(15,870	)		75,629
Net loss	$	(296,041	)	$	(377,590	)	$	(685,457	)	$	(619,592	)
Basic and diluted loss per common share	$	(0.02	)	$	(0.02	)	$	(0.04	)	$	(0.04	)
Weighted average common shares outstanding		16,631,000			16,603,222			16,631,000			16,591,989

See accompanying notes to unaudited condensed financial statements.

2

AMERICANN, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
	Six Months Ended March 31,
	2016			2015
Cash flows from operating activities:
Net loss	$	(685,457	)	$	(619,592	)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization		7,478			502
Provision for doubtful accounts		6,614
Stock based compensation and option expense		102,799			272,306
Changes in operating assets and liabilties:
Interest receivable		1,951			(16,386	)
Amounts due from WGP		(64,371	)		11,259
Prepaid expenses		25,022			(20,000	)
Accounts payable and accrued expenses		127,856			41,055
Related party payables		-			(10,857	)
Interest payable		25,467			3,033
Interest payable - related party		45,452			3,377
Other payables		(8,018	)		6,422
Deferred revenue		5,000			(11,740	)
Net cash flows used in operations		(410,207	)		(340,621	)
Cash flows from investing activities:
Purchase of fixed assets		(4,327	)		(25,000	)
Deposit on land		(250,000	)		(100,000	)
Payments received on note receivable - 4900 Jackson LLC		184,234			35,000
Advances made on note receivable		-			(937,341	)
Net cash flows used in investing activities		(70,093	)		(1,027,341	)
Cash flows from financing activities:
Proceeds from note payable		116,185			611,006
Proceeds from note payable - related party		227,500			790,000
Payments on note payable - related party		-			(207,000	)
Net cash flows provided by financing activities		343,685			1,194,006
Net decrease in cash and cash equivalents		(136,615	)		(173,956	)
Cash and cash equivalents at beginning of period		201,353			173,956
Cash and cash equivalents at end of period	$	64,738		$	-
Supplementary Disclosure of Cash Flow Information:
Cash paid for interest	$	15,932		$	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 unaudited condensed financial statements.

3

AMERICANN, INC.

NOTES TO UNAUDITED CONDENSED 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.

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 business plan is to offer a comprehensive, turnkey package of services that includes consulting, design, construction and financing to approved and licensed marijuana operators throughout the United States. The Company's business plan is based on the anticipated growth of the regulated marijuana market in the United States.

The Company's activities are subject to significant risks and uncertainties including failure to secure funding to properly expand its operations.

Basis of Presentation

The (a) condensed balance sheet as of September 30, 2015, which has been derived from audited financial statements, and (b) the unaudited condensed financial statements as of and for the three and six months ended March 31, 2016 and 2015, 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 January 13, 2016. 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 2015 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 loss.

Recent Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, to reduce complexity in accounting standards involving several aspects of the accounting for employee share-based payment transactions, including (1) the income tax consequences,  (2) classification of awards as either equity or liabilities, and (3) classification on the statement of cash flows. The amendments will be effective for financial statements issued for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, and early adoption is permitted.  Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value should be applied using a modified retrospective transition method, amendments related to the presentation of employee taxes paid on the statement of cash flows when an employer withholds shares to meet the minimum statutory withholding requirement should be applied retrospectively, amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement and the practical expedient for estimating expected term should be applied prospectively, and amendments related to the presentation of excess tax benefits on the statement of cash flows can be applied using either a prospective transition method or a retrospective transition method. An entity that elects early adoption must adopt all of the amendments in the same period. The Company is currently evaluating the impact of these amendments on its financial statements.

In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations, to clarify the implementation guidance on principal versus agent considerations and address how an entity should assess whether it is the principal or the agent in contracts that include three or more parties.  The effective date and transition requirements for these amendments are the same as the effective date and transition requirements of ASU 2014-09. The Company is currently evaluating the impact of these amendments on its financial statements.

4

In February 2016, the FASB issued ASU No. 2016-02, Leases: (Topic 842), to provide guidance on recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements, specifically differentiating between different types of leases.  The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from all leases. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous GAAP. There continues to be a differentiation between finance leases and operating leases. However, the principal difference from previous guidance is that the lease assets and lease liabilities arising from operating leases should be recognized in the balance sheet.   The accounting applied by a lessor is largely unchanged from that applied under previous GAAP.  The amendments will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early adoption is permitted.  In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that entities may elect to apply. These practical expedients relate to the identification and classification of leases that commenced before the effective date, initial direct costs for leases that commenced before the effective date, and the ability to use hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset. An entity that elects to apply the practical expedients will, in effect, continue to account for leases that commence before the effective date in accordance with previous GAAP unless the lease is modified, except that lessees are required to recognize a right-of-use asset and a lease liability for all operating leases at each reporting date based on the present value of the remaining minimum rental payments that were tracked and disclosed under previous GAAP.  The Company is currently evaluating the impact of these amendments on its financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which will supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. As amended by the FASB in July 2015, the standard is effective for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). The Company is currently evaluating the impact of its pending adoption of ASU 2014-09 on its consolidated financial statements and has not yet determined the method by which it will adopt the standard in 2018.

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 $4,379,624 and $3,694,167 at March 31, 2016 and September 30, 2015, respectively, and had a net loss of $685,457 for the six months ended March 31, 2016. These matters, among others, raise substantial doubt about the Company’s 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 through the sale of its securities. Further, the amount due from WGP of $1,185,641 (before an allowance of $463,084) may not be collectible and the agreement for the sale of land for $2,500,000 has been terminated.

Management believes that the actions presently being taken to further implement its business plan and generate additional revenues provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to generate additional revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company's ability to further implement its business plan and generate additional revenues. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

NOTE 3. NOTES RECEIVABLE

4900 Jackson, LLC (Previously Nature’s Own).On June 23, 2014 the Company entered into a secured financing and consulting agreement with Nature's Own Wellness Center, Inc. ("Nature's Own"). Financing was provided in a series of tranches for the renovation of a 15,000 square foot warehouse into a cannabis growing and processing facility. The total amount of financing was $1,000,000, and accrued interest at 18% per annum. Monthly interest only payments were $15,000 due July 1 through December 1, 2014.  Monthly principal and interest payments of approximately $50,000 began on December 1, 2014 through maturity. The note receivable was collateralized by substantially all of the assets of Nature's Own and was personally guaranteed by one of the majority owners of Nature's Own.  Under the consulting agreement, the Company was to provide consulting services in exchange for fees of $10,000 per month through maturity.

5

Effective January 1, 2015 the Company and Nature’s Own modified the loan and consulting agreements 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. In addition, the Company considered ASC Subtopic 470-50, Debt Modifications and Extinguishments, and determined that the modification was not an extinguishment and therefore, no gain or loss was recognized. The modification to the consulting agreement extended the term to May 31, 2017.

In early May 2015, Nature's Own's interest in the growing and processing facility was purchased by 4900 Jackson, LLC, which assumed Nature's Own obligations under the loan and consulting agreements. On May 20, 2015, the Company modified the loan and consulting agreements with 4900 Jackson, LLC. Pursuant to the modified loan agreement, 4900 Jackson, LLC made an accelerated principal payment to the Company of $300,000 in exchange for the Company reducing the interest rate from 18% to 12%, and the maturity date was extended to May 1, 2017.  In addition, the Company received a payment of $35,000 from Nature’s Own during 2015. The Company analyzed the modifications 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 as there was an exchange of an interest rate reduction for accelerated principal repayments. In addition, the Company considered ASC Subtopic 470-50, Debt Modifications and Extinguishments, and determined that the modification was not an extinguishment and therefore, no gain or loss was recognized. The proceeds of the loan will continue to be used to develop the cannabis growing and processing facility. On May 20, 2015, a modification was also made to the consulting agreement to reduce the monthly fee from $10,000 to $5,000 through May 31, 2017.

At March 31, 2016 and September 30, 2015, the balance of the note receivable was $402,071 and $586,305, respectively. Interest income was $13,481 and $43,234 for the three months ended March 31, 2016 and 2015, respectively; and $29,414 and $88,440 for the six months ended March 31, 2016 and 2015, respectively.  Consulting fees earned were $15,000 and $50,000 for the three months ended March 31, 2016 and 2015, respectively; and $30,000 and $80,000 for the six months ended March 31, 2016 and 2015, respectively.

WGP.  Beginning September 21, 2014, we entered into a series of agreements with Wellness Group Pharms LLC (“WGP’), an entity that was pursuing licenses to operate marijuana cultivation facilities under the Illinois Compassionate Use of Medical Cannabis Pilot Program Act.  As amended on February 22, 2015, these agreements provided for the following:

● We were to replace WGP as the purchasing party under an existing contract to acquire a 16.1 acre parcel in Anna, Illinois as WGP was to take the necessary legal steps to assign the right to acquire ownership to the property starting February 23, 2015.  Subsequent to the amendment, WGP purchased the land.  To date we have not received title to the land.

● We were to construct on this parcel a marijuana cultivation facility (consisting of a 27,000 square foot warehouse and a total developable footprint of 285,000 square feet which would be built in future phases according to demand) in accordance with terms specified in WGP’s license application with the State of Illinois within six months of the award of the licenses on February 2, 2015.  To date, payments of $332,357 had been made.

● WGP was to lease and operate the facility from us at a base monthly rent of $6.00 per square foot plus 25% of gross monthly sales of cannabis and 20% of gross monthly sales of cannabis infused products. The term of the lease contract was 12 years commencing from the month in which both a final and enforceable occupancy certificate is issued for the facility, and WGP has been granted approval by the State of Illinois to commence production operations in the facility.

● We were to provide working capital advances up to a maximum borrowing amount of $2,772,724, with such advances accruing interest at a rate of 18% per annum.  No principal or interest payments were due until WGP had cash on hand of $250,000, but in any event all principal and interest is due December 31, 2017.  As of March 31, 2016, advances of $673,294 had been made.

● We were to receive consulting fees of $20,000 per month, with such unpaid amounts accruing interest at a rate of 18% per annum beginning on March 1, 2015 through the term of the 12 year lease.  In fiscal 2015, $40,000 had been earned and recognized. There are no similar revenues for fiscal 2016.

6

Between February 2015 and April 2015, both parties operated under this agreement.  We made working capital advances totaling $673,294 (inclusive of the deposit of $100,000 made under the Initial WGP Agreements) and we recognized consulting revenues of $40,000.  We also incurred construction costs totaling $332,357 to begin developing the facility in connection with its obligations under the amended agreement.  However, WGP did not assign its rights to acquire the 16.1 acre parcel to us as required under the amended agreement.  Instead, WGP acquired the property directly.  We have notified WGP that we have fulfilled our obligations pursuant to our agreements with WGP but due to WGP's breach of contract, and repeated lack of good faith and fair dealing, the agreement was terminated.  WGP has claimed that our construction costs were unauthorized.  We dispute WGP’s claim.  To date, there is no change in the dispute with WGP.

Included in Amounts due from WGP in our balance sheet at March 31, 2016 are working capital advances of $673,294, accrued consulting fees of $40,000, construction advances of $332,357 and accrued interest of $139,990 for a total of $1,185,641.  In addition, an allowance for doubtful accounts of $463,084 has been recognized.

We have a formal security agreement covering $600,000 of the advances made to WGP (and related interest), whereby the indebtedness is secured by all real and personal property of WGP.  We believe all other amounts owed by WGP are due and payable and that additional security interests are implied in the agreements.  However, given the current dispute with WGP, we have established a provision for all amounts owed by WGP (including related interest) that are not covered by a formal security agreement.  This provision is reflected as a separate component of operating expense within our accompanying statement of operations.

Interest income associated with the $673,294 advanced to WGP was $30,215 and $11,690 for the three months ended March 31, 2016 and 2015, respectively; and $60,762 and $11,690 for the six months ended March 31, 2016 and 2015, respectively.

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 at 4200 Monaco Street, 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 August 14, 2015 the Company signed an agreement to sell the five-acre parcel for a total purchase price of $2,500,000.  The closing of the transaction was to take place on or before September 14, 2015. If the prospective buyer did not purchase the property, then, on or before September 15, 2015 the buyer was obligated to loan the Company $900,000, which bears interest at 12% per year and will be due and payable in six months.

On September 15, 2015 the Company and the buyer agreed to extend the closing date of the property to November 1, 2015.  In connection with the extension of the closing date, the buyer and an unrelated third party loaned the Company $900,000.   The Company used $650,000 to repay a loan which was secured by the property.  (See Note 5).

On November 1, 2015, the buyer failed to close the purchase of the property and the agreement with the buyer was terminated.

NOTE 5. NOTE PAYABLE

On March 21, 2015, the Company closed on a $650,000 loan from a third party. The loan was due September 21, 2015 and was secured by the land held for sale the Company owns at 4200 Monaco Street, Denver, Colorado. The annual interest rate for the loan was 14%. The loan is interest only with the principal and any accrued interest due on September 21, 2015. Interest expense was $80,623 and $0 for the years ended September 30, 2015 and 2014, respectively. As part of the financing the Company incurred $27,772 of deferred financing costs that were recognized as interest expense in 2015. This note was repaid as described below.

As indicated in Note 4, on September 15, 2015 the potential buyer loaned the Company $900,000. The loan bears interest at 12% per year and was due and payable on March 16, 2016. The Company used $650,000 of the proceeds to repay the existing loan that was secured by the property.  At March 31, 2016, accrued interest on this note payable was $25,000.  As of March 31, 2016, the Company was in default on the loan.  On April 6, 2016, the loan was modified as follows:

● The principal balance of the loan was increased to $990,000;

● The interest rate was increased to 18% per year; and

● The maturity date of the loan was extended to March 15, 2017.

7

As this modification was incurred subsequent to March 31, 2016, the financial statements included herein do not reflect the financial impacts of this debt modification.

We may repay the loan at any time without penalty. The loan is secured by a first lien on the five-acre parcel of land in Denver.

On February 1, 2016, the Company entered into an agreement with an unrelated party which provides the Company with borrowing capacity of $200,000.  As of March 31, 2016, we had borrowed $116,185 against this credit line.  The loan bears interest at 8% per year, and all unpaid principal and interest is due on December 31, 2016.  The Company may repay the loan at any time without penalty.  As of March 31, 2016, accrued interest on this loan was $467.

NOTE 6. RELATED PARTY TRANSACTIONS AND RELATED PARTY NOTES PAYABLE

At March 31, 2016, we had an outstanding note payable of $1,910,349 to Strategic Capital Partners, an entity controlled by our Chief Financial Officer. Under the note payable, as amended, outstanding amounts accrue interest at 5% per year payable on March 31st and September 30th, with all outstanding principal and interest due on December 31, 2016, and can be repaid at any time prior to maturity. Interest expense was $23,594 and $11,199 for the three months ended March 31, 2016 and 2015, respectively; and $45,452 and $21,061 for the six months ended March 31, 2016 and 2015, respectively.  Interest payable – related party of $45,452 and $0 was included in the accompanying balance sheets at March 31, 2016 and September 30, 2015, respectively. In September 2015, the Company agreed to include $49,849 of accrued and unpaid interest in the principal balance of the loan. During the six months ended March 31, 2016 the Company received advances of $227,500 and no payments were made.

NOTE 7. LOSS PER SHARE

The following table sets forth the computation of basic and diluted net loss per share:

	Three Months Ended						Six Months Ended
	March 31,						March 31,
	2016			2015			2016			2015
Net loss attributable to common stockholders	$	(296,041	)	$	(377,590	)	$	(685,457	)	$	(619,592	)
Basic weighted average outstanding shares of common stock		16,631,000			16,603,222			16,631,000			16,591,989
Dilutive effects of common share equivalents		-			-			-			-
Dilutive weighted average outstanding shares of common stock		16,631,000			16,603,222			16,631,000			16,591,989
Basic and diluted net loss per share of common stock	$	(0.02	)	$	(0.02	)	$	(0.04	)	$	(0.04	)

The Company has excluded 1,205,000 of stock options from the computation of diluted net loss per share because the effects are anti-dilutive.

NOTE 8.  INCOME TAXES

The Company did not record any income tax expense or benefit for the three or six months ended March 31, 2016. 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, 2016.

As of March 31, 2016, the Company did not have any unrecognized tax benefits. There were no significant changes to the calculation since September 30, 2015.

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NOTE 9. STOCK BASED COMPENSATION

Restricted Stock Awards.  The Company uses restricted stock awards to compensate certain key executives and other individuals.  At March 31, 2016, the Company had 300,000 of outstanding unvested restricted stock awards which vest on March 20, 2017.  Stock-based compensation expense associated with restricted stock awards was $46,813 and $102,989 for the three months ended March 31, 2016 and 2015, respectively, and $93,626 and $205,976 for the six months ended March 31, 2016 and 2015, respectively.  As of March 31, 2016, unrecognized stock-based compensation associated with restricted stock awards totaled $74,900, which is to be recognized over a weighted average period of 0.5 years.

Stock Options.Stock option activity as of and for the six months ended March 31, 2016 is as follows:

					Weighted
			Weighted		Average
			Average		Contractual		Aggregate
	Number of		Exercise		Term		Intrinsic
	Shares		Price		(Years)		Value
Outstanding at September 30, 2015		1,205,000	$	8.70
Granted		-	$	-
Cancelled		-	$	-
Exercised		-	$	-
Outstanding as of March 31, 2016		1,205,000	$	8.70		1.9	$	-
Vested and expected to vest at after March 31, 2016		1,205,000	$	8.70		1.9	$	-
Exercisable at March 31, 2016		1,205,000	$	8.70		1.9	$	-

Stock-based compensation associated with stock options totaled $4,264 and $39,867 for the three months ended March 31, 2016 and 2015, respectively, and $9,173 and $49,662 for the six months ended March 31, 2016 and 2015, respectively.  At March 31, 2016, there is no remaining unrecognized stock-based compensation associated with stock options.

NOTE 10. COMMITMENTS AND CONTIGENCIES

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. 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 $100,000 deposit upon the signing of the agreement which will be applied toward the purchase price of $4,000,000 at the closing or returned at the option of the Company. On August 27, 2015, after addressing the site considerations, the agreement was amended to extend the closing date to October 30, 2015 to provide additional time for permitting. In connection with the amendment, the Company paid the seller an additional $100,000 which will be applied to the purchase price.

On October 23, 2015, the Company extended the closing date to December 29, 2015 with a payment to the seller of $100,000.  The $100,000 paid to the seller will be applied to the purchase price of the property if the closing takes place.

On December 8, 2015, The Town of Freetown Planning Board unanimously approved the Company’s site plan application for the MMCC.  The site plan application requested 977,000 square feet of infrastructure for medical marijuana cultivation, processing, testing and associated administration in Freetown's Industrial Park.  On March 24, 2016, the Department of Public Health (the “DPH”) for the Commonwealth of Massachusetts approved the Company’s consulting and development agreements relating to the MMCC.  Although the DPH has approved these agreements, the actual lease agreement with the first tenant for the MMCC has not been finalized or approved by the DPH.

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On December 22, 2015 the Company and the seller amended the agreement to extend the closing date to the earlier of 5 business days following the Company’s receipt of certain approval, or February 29, 2016. As consideration for the extension of the closing date, the Company agreed to increase the purchase price for the property to $4,100,000 and paid the seller a non-refundable fee of $100,000 which will be applied to the purchase price if the closing occurs.

On February 29, 2016, the Company and the seller amended the agreement to extend the closing date. As consideration for the extension of the closing date, the Company agreed to increase the purchase price for the property to $4,150,000 and paid the seller $50,000, which will be applied to the purchase price if the closing occurs.

On March 31, 2016, the Company and the seller amended the agreement to extend the closing date to May 16, 2016. On April 1, 2016, as consideration for the extension of the closing date, the Company paid the seller $75,000, which will be applied to the purchase price if the closing occurs.

The Company has paid $525,000 that will be applied to the purchase price if the closing occurs.

Operating Leases. The Company leases its office space located at 3200 Brighton Boulevard, Denver, Colorado for $2,870 per month under a month-to-month lease.

The Company leases an automobile under an operating lease commencing October 4, 2014 for 39 months at $611 per month. At March 31, 2016, the future rental payments required under this lease are $3,668 for the remainder of fiscal 2016, $7,332 for fiscal 2017 and $1,834 for fiscal 2018.

Except as described above, the Company has no other non-cancelable lease commitments.

NOTE 11. SUBSEQUENT EVENTS

On April 7, 2016, we signed agreements with Coastal Compassion Inc. (“CCI”).  CCI is one of a limited number of non-profit organizations that has received a provisional or final registration to cultivate, process and sell medical cannabis by the Massachusetts   Department of Public Health.  CCI has agreed to become the initial tenant in our planned MMCC.  Tim Keogh, our Chief Executive Officer, is a Board Member of CCI.

Pursuant to the agreements, we agreed to provide CCI with financing of up to $2.5 million for a five-year term at 18% interest per year for construction and working capital required for CCI’s approved dispensary and cultivation center in Fairhaven, MA.  For a three- year period beginning April 1, 2016, we have agreed to consult with CCI in the design, construction and operation of the Fairhaven facility.  CCI will pay us $10,000 each month for these consulting services.  Although the DPH has approved our agreement with CCI relating to the development and lease terms of the MMCC, the actual lease agreement with CCI has not been finalized or approved by the DPH.  We will need to secure significant capital to provide the financing to CCI.

On April 12, 2016, we signed agreements with AQUSCAN Delaware Corp. (“AQUSCAN”).  AQUSCAN is one of eleven applicants for a vertically-integrated license to cultivate, process and sell medical cannabis in Delaware.  The Delaware Division of Public Health is scheduled announce the application results in August of 2016 and award licenses for up to two new Registered Compassion Centers (“RCC”).  AQUSCAN has agreed to become the sole tenant in our planned Delaware Medical Cannabis Center (“DMCC”) if a RCC license is awarded.  We will build and own the facility.

The DMCC project is designed on 10 acres of unimproved land located in Garrison Oak Technology Park in Dover, DE.  We have signed a Purchase and Sale Agreement for the property with the City of Dover that is contingent upon the award of a license.

In addition to building a state-of-the-art cultivation facility at the DMCC, we will purchase and renovate an existing 3,200 square foot building located in Dover as a secure, medical cannabis dispensary.

Additionally, we may provide AQUSCAN with financing of up to $750,000 for a five-year term at 18% interest per year for working capital associated with establishing and maintaining the RCC.

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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 condensed 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, 2015 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, Inc. develops, owns and supports advanced medical cannabis cultivation and processing facilities nationwide.  Currently, we have a multi-market portfolio of over 1,000,000 square feet of sustainable cannabis production infrastructure in various stages of development which consists of 125,000 square feet of approved cultivation and processing infrastructure on the 5 acres located at 5280 Monaco St. in Denver, and site approval for 977,000 square feet of cultivation, processing and administration infrastructure at the Massachusetts Medical Cannabis Center (“MMCC”).

AmeriCann’s team includes board members, consultants, engineers and architects who specialize in traditional horticulture, lean manufacturing, medical research, facility construction, regulatory compliance, security, marijuana cultivation and genetics, extraction processes, and infused product development.

To support local businesses that seek to serve cannabis patients in their communities we initiated the AmeriCann Preferred Partner Program.  The initial step in becoming a Preferred Partner involves an application on our website.  Based on the initial inquiry, we determine if the location, market, type of project and economics support additional due diligence. Currently, we have one Preferred Partner in Colorado, which is 4900 Jackson, LLC. Through this program we provide an essential set of resources including advance cultivation facilities, access to a team of experts and in certain cases, capital for our partner’s businesses.   This support is designed to assist our Preferred Partners in newly regulated markets.  In addition, AmeriCann’s team actively participated in winning cannabis licenses in competitive application processes throughout the country including Massachusetts and Illinois.

AmeriCann plans to lease facilities to its Preferred Partners that will be designed with AmeriCann’s propriety cultivation and processing system called “Cannopy.” Cannopy uniquely combines experience from traditional horticulture, lean manufacturing, regulatory compliance and cannabis cultivation to create facilities and procedures. Cannopy includes automation throughout the production life-cycle, customized workflow processes, monitoring and controls, and top-line security systems. Cannopy empowers Preferred Partners to consistently produce medical marijuana for patients at a lower cost in an efficient, compliant manner. AmeriCann provides initial and on-going training, policies, practices and procedures to operate the state-of-the-art facilities.

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The expanding cannabis industry requires extensive real estate to meet the growing needs of medical marijuana patients.  AmeriCann utilizes a proven strategy for identifying, acquiring and developing real estate specifically suited for cannabis operations.  AmeriCann assists its Preferred Partners with the identification, design, permitting, acquisition, development and operation of scalable infrastructure to cultivate and to dispense medical marijuana in regulated markets.

As an early market participant, we leverage our leadership and competitive strengths in a formative industry to increase market share as the cannabis industry expands.

We currently have one financing and consulting agreement with a licensed Colorado cannabis dispensary owner and grower (“4900 Jackson, LLC”).  Under this agreement, we are earning consulting fees and interest income. We recently terminated our agreement with WGP – see Recent Developments below.   We are also the owner of a five-acre parcel of land located in north central Denver, Colorado, which is currently zoned for cannabis cultivation and processing by the City and County of Denver.

RECENT DEVELOPMENTS

Monaco Street Property.  See Note 5 to the financial statements included as part of this report for information concerning the modification of the loan secured by our property in Denver, Colorado.

WGP.  Beginning September 21, 2014, we entered into a series of agreements with Wellness Group Pharms LLC (“WGP’), an entity that was pursuing licenses to operate marijuana cultivation facilities under the Illinois Compassionate Use of Medical Cannabis Pilot Program Act.  As amended on February 22, 2015, these agreements provided for the following:

● We were to replace WGP as the purchasing party under an existing contract to acquire a 16.1 acre parcel in Anna, Illinois as WGP was to take the necessary legal steps to assign the right to acquire ownership to the property starting February 23, 2015.  Subsequent to the amendment, WGP purchased the land.  To date we have not received title to the land.

● We were to construct on this parcel a marijuana cultivation facility (consisting of a 27,000 square foot warehouse and a total developable footprint of 285,000 square feet which would be built in future phases according to demand) in accordance with terms specified in WGP’s license application with the State of Illinois within six months of the award of the licenses on February 2, 2015.  To date, payments of $332,357 had been made.

● WGP was to lease and operate the facility from us at a base monthly rent of $6.00 per square foot plus 25% of gross monthly sales of cannabis and 20% of gross monthly sales of cannabis infused products. The term of the lease contract was 12 years commencing from the month in which both a final and enforceable occupancy certificate is issued for the facility, and WGP has been granted approval by the State of Illinois to commence production operations in the facility.

● We were to provide working capital advances up to a maximum borrowing amount of $2,772,724, with such advances accruing interest at a rate of 18% per annum.  No principal or interest payments were due until WGP had cash on hand of $250,000, but in any event all principal and interest is due December 31, 2017.  As of September 30, 2015, advances of $673,294 had been made.

● We were to receive consulting fees of $20,000 per month, with such unpaid amounts accruing interest at a rate of 18% per annum beginning on March 1, 2015 through the term of the 12 year lease.  In fiscal 2015, $40,000 was earned and recognized.  There are no similar revenues for fiscal 2016.

Between February 2015 and April 2015, both parties operated under this agreement.  We made working capital advances totaling $673,294 (inclusive of the deposit of $100,000 made under the Initial WGP Agreements) and we recognized consulting revenues of $40,000.  We also incurred construction costs totaling $332,357 to begin developing the facility in connection with its obligations under the amended agreement.  However, WGP did not assign its rights to acquire the 16.1 acre parcel to us as required under the amended agreement.  Instead, WGP acquired the property directly.  We have notified WGP that we have fulfilled our obligations pursuant to our agreements with WGP but due to WGP's breach of contract, and repeated lack of good faith and fair dealing, the agreement was terminated.  WGP has claimed that our construction costs were unauthorized.  We dispute WGP’s claim.  To date, there is no change in the dispute with WGP.

Included in Amounts due from WGP in our balance sheet at March 31, 2016 are working capital advances of $673,294, accrued consulting fees of $40,000, construction advances of $332,357 and accrued interest of $139,990 for a total of $1,185,641. 

We have a formal security agreement covering $600,000 of the advances made to WGP (and related interest), whereby the indebtedness is secured by all real and personal property of WGP.  We believe all other amounts owed by WGP are due and payable and that additional security interests are implied in the agreements.  However, given the current dispute with WGP, we have established a provision for all amounts owed by WGP (including related interest) that are not covered by a formal security agreement.  As of March 31, 2016, the allowance for doubtful accounts was $463,084. This provision is reflected as a separate component of operating expense within our accompanying statement of operations.

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We have not filed any formal litigation but have provided legal notice that our loans to WGP are immediately due and payable.  By contract, our process for resolving any disputes with WGP is to be resolved via binding arbitration. 

MMCC. 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. On May 6, 2015, to address site considerations before finalizing the planned development, the agreement was amended to extend the closing date to September 1, 2015.  On August 27, 2015, after addressing the site considerations, the agreement was amended to extend the closing date to October 30, 2015 to provide additional time for permitting with a payment of $100,000.

On October 23, 2015, we made an additional payment to the seller of $100,000, which will be applied to the purchase price if the closing occurs.

On December 8, 2015, The Town of Freetown Planning Board unanimously approved our site plan application for the MMCC.  The site plan application requested 977,000 square feet of infrastructure for medical marijuana cultivation, processing, testing and associated administration in Freetown's Industrial Park.  On March 24, 2016, the Department of Public Health (the “DPH”) for the Commonwealth of Massachusetts approved our consulting and development agreements relating to the MMCC. Although the DPH has approved these agreements, the actual lease agreement with Coastal Compassion, Inc., the first tenant for the MMCC, has not been finalized or approved by the DPH.  We will need to secure significant capital to acquire the property and to develop the first phase of the MMCC.

On December 22, 2015, we and the seller amended the agreement to extend the closing date to the earlier of 5 business days following our receipt of the DPH Approval, or February 29, 2016. As consideration for the extension of the closing date, we agreed to increase the purchase price for the property to $4,100,000 and paid the seller a non-refundable fee of $100,000 which will be applied to the purchase price if the closing occurs. On February 29, 2016, the Company and the seller amended the agreement to extend the closing date. As consideration for the extension of the closing date, the Company agreed to increase the purchase price for the property to $4,150,000 and paid the seller $50,000, which will be applied to the purchase price if the closing occurs.

On February 29, 2016, the Company and the seller amended the agreement to extend the closing date. As consideration for the extension of the closing date, the Company agreed to increase the purchase price for the property to $4,150,000 and paid the seller $50,000, which will be applied to the purchase price if the closing occurs.

On March 31, 2016, the Company and the seller amended the agreement to extend the closing date to May 16, 2016. On April 1, 2016, as consideration for the extension of the closing date, the Company paid the seller $75,000, which will be applied to the purchase price if the closing occurs.

The Company has paid $525,000 that will be applied to the purchase price if the closing occurs.

AGREEMENTS WITH COASTAL COMPASSION

On April 7, 2016, we signed agreements with Coastal Compassion Inc. (“CCI”).  CCI is one of a limited number of non-profit organizations that has received a provisional or final registration to cultivate, process and sell medical cannabis by the Massachusetts   Department of Public Health.  CCI has agreed to become the initial tenant in our planned MMCC.  Tim Keogh, our Chief Executive Officer, is a Board Member of CCI.

Pursuant to the agreements, we agreed to provide CCI with financing of up to $2.5 million for a five-year term at 18% interest per year for construction and working capital required for CCI’s approved dispensary and cultivation center in Fairhaven, MA.  For a three- year period beginning April 1, 2016, we have agreed to consult with CCI in the design, construction and operation of the Fairhaven facility.  CCI will pay us $10,000 each month for these consulting services.  Although the DPH has approved our agreement with CCI relating to the development and lease terms of the MMCC, the actual lease agreement with CCI has not been finalized or approved by the DPH.  We will need to secure significant capital to provide the financing to CCI.

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AGREEMENTS WITH AQUSCAN

On April 12, 2016, we signed agreements with AQUSCAN Delaware Corp. (“AQUSCAN”).  AQUSCAN is one of eleven applicants for a vertically-integrated license to cultivate, process and sell medical cannabis in Delaware.  The Delaware Division of Public Health is scheduled announce the application results in August of 2016 and award licenses for up to two new Registered Compassion Centers (“RCC”).  AQUSCAN has agreed to become the sole tenant in our planned Delaware Medical Cannabis Center (“DMCC”) if a RCC license is awarded.  We will build and own the facility.

The DMCC project is designed on 10 acres of unimproved land located in Garrison Oak Technology Park in Dover, DE.  We have signed a Purchase and Sale Agreement for the property with the City of Dover that is contingent upon the award of a license.

In addition to building a state-of-the-art cultivation facility at the DMCC, we will purchase and renovate an existing 3,200 square foot building located in Dover as a secure, medical cannabis dispensary.

Additionally, we may provide AQUSCAN with financing of up to $750,000 for a five-year term at 18% interest per year for working capital associated with establishing and maintaining the RCC.

SIGNIFICANT ACCOUNTING POLICIES

There were no changes in our significant accounting policies and estimates during the six months ended March 31, 2016 from those set forth in our Annual Report on Form 10-K for the year ended September 30, 2015 filed on January 13, 2016.

RESULTS OF OPERATIONS

Total Revenues

During the three and six months ended March 31, 2016 we generated $15,000 and $30,000 in revenue, respectively.  For the three and six months ended March 31, 2015, we generated $50,000 and $80,000 in revenue, respectively.  The reduction in revenues reflects our amendment to reduce our consulting fees for 4900 Jackson, LLC (and its predecessor) from $10,000 per month to $5,000 per month.

Advertising and Marketing Expenses

Advertising and marketing expenses were approximately $250 and $2,300 for the three and six months ended March 31, 2016, respectively, as compared to approximately $3,000 and $6,000 for the three and six months ended March 31, 2015, respectively. The decrease is commensurate with the decrease in consulting revenues.

Professional Fees

Professional fees were approximately $135,000 and $353,000 for the three and six months ended March 31, 2016, respectively, as compared to approximately $191,000 and $274,000 for the three and six months ended March 31, 2015, respectively.  The decrease in professional fees for the three months ended March 31, 2016, is attributable primarily to the decrease in legal expenses associated with our operations..  The increase in professional fees for the six months ended March 31, 2016, is primarily due to the planning, design, and permitting costs associated with the Massachusetts Medical Cannabis Center.

General and Administrative Expenses

General and administrative expenses were approximately $162,000 and $338,000 for the three and six months ended March 31, 2016, respectively, as compared to approximately $274,000 and $496,000 for the three and six months ended March 31, 2015, respectively.  The decrease is attributable primarily to a decrease in stock based compensation and option expense as many of our stock-based awards were granted in 2014 and were subject to short vesting periods.  This decrease is partially offset by and other general and administrative expenses as we continue to develop our business and expand our operations.

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Interest Income

Interest income was approximately $45,000 and $94,000 for the three and six months ended March 31, 2016, respectively, as compared to approximately $55,000 and $100,000 for the three and six months ended March 31, 2015, respectively.  The decrease is attributable to decreases in amounts owed from our clients.

Interest Expense

Interest expense was approximately $56,000 and $110,000 for the three and six months ended March 31, 2016, respectively, as compared to approximately $14,000 and $24,000 for the three and six months ended March 31, 2015, respectively.  The increase is attributable to the financing of our recent investing and operating activities primarily with debt.

Net Operating Loss

We had a net loss of approximately $(296,000) and $(685,000) for the three and six months ended March 31, 2016, respectively, as compared to a net loss of approximately $(378,000) and $(620,000) for the three and six months ended March 31, 2015, respectively.  The decrease in net loss is attributable to changes in revenues, operating expenses and interest income and expense, each of which is described above.

LIQUIDITY AND CAPITAL RESOURCES

Sources of Liquidity

As of March 31, 2016, we had borrowed $1,910,349 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 and interest, is due on December 31, 2016.

As of March 31, 2016, we had borrowed $900,000 from a third party. The loan bears interest at 12% and was due March 15, 2016.  As of March 31, 2016, the Company was in default on the loan.  On April 6, 2016, the loan was modified as discussed in Note 5 and Note 11 of the Notes to our Condensed Financial Statements.

On February 1, 2016, we entered into an agreement with an unrelated third party which provides us with borrowing capacity of $200,000.  As of March 31, 2016, we had borrowed $116,185 against this credit line.  The loan bears interest at 8% per year, and all unpaid principal and interest is due on December 31, 2016.  We may repay the loan at any time without penalty.  As of March 31, 2016, accrued interest on this loan was $467.

Analysis of Cash Flows

During the six months ended March 31, 2016, our net cash flows used in operations were approximately $410,000 as compared to net cash flows used in operations of approximately $341,000 for the six months ended March 31, 2015.  This was primarily due to an increase in our net loss and a reduction in stock based compensation during the six months ended March 31, 2016.

Cash flows used in investing activities were approximately $70,000 for the six months ended March 31, 2016, consisting of a $250,000 deposit on land and minor purchases of fixed assets, offset by approximately $184,000 of payments received from notes receivable. Cash flows used in investing activities were approximately $1,027,000 for the six months ended March 31, 2015, consisting of advances made on notes receivables.

Cash flows provided by financing activities were $344,000 for the six months ended March 31, 2016, consisting of proceeds from notes payable and notes payable - related parties.  Cash flows provided by financing activities were approximately $1,200,000 for the six months ended March 31, 2015, consisting of proceeds from notes payable, partially offset by payments on notes payable.

We do not have any firm commitments from any person to provide us with any capital.

OFF-BALANCE SHEET ARRANGEMENTS

As of March 31, 2016, we did not have any off balance sheet arrangements.

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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 have 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 were not adequate.

Internal Control over Financial Reporting

As indicated in our Form 10-K filed on January 13, 2016, our Principal Executive Officer and Principal Financial Officer concluded that our internal control over financial reporting was not effective during the 2015 fiscal year at the 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.

We are currently in the process of evaluating the steps necessary to remediate this material weakness.

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 March 31, 2016 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.

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PART II OTHER INFORMATION

ITEM 6. EXHIBITS

Exhibit Number	Description of Document
31.1	Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, (filed herewith)
31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, (filed herewith)
32	Certifications of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

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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.
Dated:  May 10, 2016	By:	/s/ Timothy Keogh
		Timothy Keogh
		Principal Executive Officer
	By:	/s/ Benjamin Barton
		Benjamin Barton
		Principal Financial and Accounting Officer

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EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO RULES 13a-14(a)AND 15a-14(a)

OF THE SECURITIES EXCHANGE ACT OF 1934

I, Timothy Keogh, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2016 of AmeriCann, Inc.;

 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

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

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

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

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

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

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

          (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

          (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  May 10, 2016

/s/ Timothy Keogh

Timothy Keogh

Principal Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO RULES 13a-14(a) AND 15a-14(a)

OF THE SECURITIES EXCHANGE ACT OF 1934

I, Benjamin Barton, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2016 of AmeriCann, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

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

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

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

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

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

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

          (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

          (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  May 10, 2016

/s/ Benjamin Barton

Benjamin Barton

Principal Financial Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of AmeriCann, Inc. (the “Company”), for the quarter ended March 31, 2016, as filed with the Securities and Exchange Commission (the “Report”), each of the undersigned, Timothy Keogh, principal executive officer of the Company, and Benjamin Barton, principal financial officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of their knowledge:

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

(2)  The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

By:	/s/ Timothy Keogh
	Timothy Keogh
	Principal Executive Officer
Dated  May 10, 2016
By:	/s/ Benjamin Barton
	Benjamin Barton
	Principal Financial Officer

Dated  May 10, 2016

XML

Document and Entity Information	6 Months Ended
	Mar. 31, 2016 USD ($) shares
Document and Entity Information:
Entity Registrant Name	Americann, Inc.
Document Type	10-Q
Document Period End Date	Mar. 31, 2016
Trading Symbol	amci
Amendment Flag	false
Entity Central Index Key	0001508348
Current Fiscal Year End Date	--09-30
Entity Common Stock, Shares Outstanding | shares	16,631,000
Entity Public Float | $	$ 16,631
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q2

XML

CONDENSED BALANCE SHEETS (Unaudited for March 31, 2016) - USD ($)		Mar. 31, 2016		Sep. 30, 2015
Current Assets:
Cash and cash equivalents		$ 64,738		$ 201,353
Interest receivable		4,024		5,975
Prepaid expenses		10,736		35,758
Land held for resale		2,250,809		2,250,809
Total current assets		2,330,307		2,493,895
Furniture and equipment		10,165	[1]	6,399	[2]
Note receivable	[3]	402,071		586,305
Amounts due		722,557	[4]	664,800	[5]
Website development costs		33,430	[6]	40,347	[7]
Deposits on land		450,000		200,000
Security deposit		3,110		3,110
Total assets		3,951,640		3,994,856
Current Liabilities:
Accounts payable and accrued expenses		213,154		85,298
Interest payable		70,919	[8]	0	[9]
Other payables		3,698		11,716
Deferred revenue		5,000		0
Note payable		1,016,185		900,000
Note payable - related party		1,910,349		0
Total current liabilities		3,219,305		997,014
Note payable - related party (noncurrent)		0		1,682,849
Total liabilities		$ 3,219,305		$ 2,679,863
Commitments and contingencies
Stockholders' Equity:
Preferred stock		$ 0		$ 0
Common stock		1,663		1,663
Additional paid in capital		5,110,296		5,007,497
Accumulated deficit		(4,379,624)		(3,694,167)
Total stockholders' equity		732,335		1,314,993
Total liabilities and stockholders' equity		$ 3,951,640		$ 3,994,856

[1] Net of depreciation of $2,019.

[2] Net of depreciation of $1,458.

[3] For 4900 Jackson LLC.

[4] From WGP, net of allowance of $463,084.

[5] From WGP, net of allowance of $456,470.

[6] Net of amortization of $8,070.

[7] Net of amortization of $1,153.

[8] Including $45,452 to related parties.

[9] Including $0 to related parties.

XML

Statement of Financial Position - Parenthetical - $ / shares	Mar. 31, 2016	Sep. 30, 2015
Statement of Financial Position
Preferred Stock, Par Value	$ 0.0001	$ 0.0001
Preferred Stock, Shares Authorized	20,000,000	20,000,000
Preferred Stock, Shares Issued	0	0
Preferred Stock, Shares Outstanding	0	0
Common Stock, Par Value	$ 0.0001	$ 0.0001
Common Stock, Shares Authorized	100,000,000	100,000,000
Common Stock, Shares Issued	16,631,000	16,631,000
Common Stock, Shares Outstanding	16,631,000	16,631,000

XML

CONDENSED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Mar. 31, 2016	Mar. 31, 2015
Revenues:
Consulting fees	$ 15,000	$ 50,000	$ 30,000	$ 80,000
Total revenues	15,000	50,000	30,000	80,000
Operating expenses:
Advertising and marketing	250	3,200	2,348	6,075
Professional fees	134,751	190,727	353,080	273,466
General and administrative expenses	162,400	273,948	337,545	495,680
Provision for doubtful accounts	3,289	0	6,614	0
Total operating expenses	300,690	467,875	699,587	775,221
Loss from operations	(285,690)	(417,875)	(669,587)	(695,221)
Other income (expense):
Interest income	45,492	54,595	93,787	99,801
Interest expense	(32,249)	(3,111)	(64,205)	(3,111)
Interest expense - related party	(23,594)	(11,199)	(45,452)	(21,061)
Total other income (expense)	(10,351)	40,285	(15,870)	75,629
Net loss	$ (296,041)	$ (377,590)	$ (685,457)	$ (619,592)
Basic and diluted loss per common share	$ (0.02)	$ (0.02)	$ (0.04)	$ (0.04)
Weighted average common shares outstanding	16,631,000	16,603,222	16,631,000	16,591,989

XML

CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)		6 Months Ended
		Mar. 31, 2016	Mar. 31, 2015
Cash flows from operating activities:
Net loss		$ (685,457)	$ (619,592)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		7,478	502
Provision for doubtful accounts		6,614	0
Stock based compensation and option expense		102,799	272,306
Changes in operating assets and liabilties:
Interest receivable (increase/decrease)		1,951	(16,386)
Amounts due (increase/decrease)	[1]	(64,371)	11,259
Prepaid expenses (increase/decrease)		25,022	(20,000)
Accounts payable and accrued expenses (increase/decrease)		127,856	41,055
Related party payables (increase/decrease)		0	(10,857)
Interest payable (increase/decrease)		25,467	3,033
Interest payable - related party (increase/decrease)		45,452	3,377
Other payables (increase/decrease)		(8,018)	6,422
Deferred revenue (increase/decrease)		5,000	(11,740)
Net cash flows used in operations		(410,207)	(340,621)
Cash flows from investing activities:
Purchase of fixed assets		(4,327)	(25,000)
Deposit on land		(250,000)	(100,000)
Payments received on note receivable	[2]	184,234	35,000
Advances made on note receivable		0	(937,341)
Net cash flows used in investing activities		(70,093)	(1,027,341)
Cash flows from financing activities:
Proceeds from note payable		116,185	611,006
Proceeds from note payable - related party		227,500	790,000
Payments on note payable - related party		0	(207,000)
Net cash flows provided by financing activities		343,685	1,194,006
Net decrease in cash and cash equivalents		(136,615)	(173,956)
Cash and cash equivalents at beginning of period		201,353	173,956
Cash and cash equivalents at end of period		64,738	0
Supplementary Disclosure of Cash Flow Information:
Cash paid for interest		15,932	17,684
Cash paid for income taxes		0	0
Expenses paid on behalf of Company		0	37,720
Deposit used for loan advances		0	100,000
Deferred financing costs		0	27,772
Accrued liabilities paid directly to lender		$ 0	$ 11,222
Shares issued for prepaid services		0	50,000

[1] From WGP.

[2] For 4900 Jackson LLC.

XML

Note 1. Nature of Business and Basis of Presentation

6 Months Ended

Mar. 31, 2016

Notes

Note 1. Nature of Business and Basis of Presentation

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.

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 business plan is to offer a comprehensive, turnkey package of services that includes consulting, design, construction and financing to approved and licensed marijuana operators throughout the United States. The Company's business plan is based on the anticipated growth of the regulated marijuana market in the United States.

The Company's activities are subject to significant risks and uncertainties including failure to secure funding to properly expand its operations.

Basis of Presentation

The (a) condensed balance sheet as of September 30, 2015, which has been derived from audited financial statements, and (b) the unaudited condensed financial statements as of and for the three and six months ended March 31, 2016 and 2015, 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 January 13, 2016. 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 2015 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 loss.

Recent Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, to reduce complexity in accounting standards involving several aspects of the accounting for employee share-based payment transactions, including (1) the income tax consequences,  (2) classification of awards as either equity or liabilities, and (3) classification on the statement of cash flows. The amendments will be effective for financial statements issued for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, and early adoption is permitted.  Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value should be applied using a modified retrospective transition method, amendments related to the presentation of employee taxes paid on the statement of cash flows when an employer withholds shares to meet the minimum statutory withholding requirement should be applied retrospectively, amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement and the practical expedient for estimating expected term should be applied prospectively, and amendments related to the presentation of excess tax benefits on the statement of cash flows can be applied using either a prospective transition method or a retrospective transition method. An entity that elects early adoption must adopt all of the amendments in the same period. The Company is currently evaluating the impact of these amendments on its financial statements.

In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations, to clarify the implementation guidance on principal versus agent considerations and address how an entity should assess whether it is the principal or the agent in contracts that include three or more parties.  The effective date and transition requirements for these amendments are the same as the effective date and transition requirements of ASU 2014-09. The Company is currently evaluating the impact of these amendments on its financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases: (Topic 842), to provide guidance on recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements, specifically differentiating between different types of leases.  The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from all leases. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous GAAP. There continues to be a differentiation between finance leases and operating leases. However, the principal difference from previous guidance is that the lease assets and lease liabilities arising from operating leases should be recognized in the balance sheet.   The accounting applied by a lessor is largely unchanged from that applied under previous GAAP.  The amendments will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early adoption is permitted.  In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that entities may elect to apply. These practical expedients relate to the identification and classification of leases that commenced before the effective date, initial direct costs for leases that commenced before the effective date, and the ability to use hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset. An entity that elects to apply the practical expedients will, in effect, continue to account for leases that commence before the effective date in accordance with previous GAAP unless the lease is modified, except that lessees are required to recognize a right-of-use asset and a lease liability for all operating leases at each reporting date based on the present value of the remaining minimum rental payments that were tracked and disclosed under previous GAAP.  The Company is currently evaluating the impact of these amendments on its financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which will supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. As amended by the FASB in July 2015, the standard is effective for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). The Company is currently evaluating the impact of its pending adoption of ASU 2014-09 on its consolidated financial statements and has not yet determined the method by which it will adopt the standard in 2018.

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Note 2. Going Concern

6 Months Ended

Mar. 31, 2016

Notes

Note 2. Going Concern

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 $4,379,624 and $3,694,167 at March 31, 2016 and September 30, 2015, respectively, and had a net loss of $685,457 for the six months ended March 31, 2016. These matters, among others, raise substantial doubt about the Company’s 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 through the sale of its securities. Further, the amount due from WGP of $1,185,641 (before an allowance of $463,084) may not be collectible and the agreement for the sale of land for $2,500,000 has been terminated.

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.

XML

Note 3. Notes Receivable

6 Months Ended

Mar. 31, 2016

Notes

Note 3. Notes Receivable

NOTE 3. NOTES RECEIVABLE

4900 Jackson, LLC (Previously Nature’s Own). On June 23, 2014 the Company entered into a secured financing and consulting agreement with Nature's Own Wellness Center, Inc. ("Nature's Own"). Financing was provided in a series of tranches for the renovation of a 15,000 square foot warehouse into a cannabis growing and processing facility. The total amount of financing was $1,000,000, and accrued interest at 18% per annum. Monthly interest only payments were $15,000 due July 1 through December 1, 2014.  Monthly principal and interest payments of approximately $50,000 began on December 1, 2014 through maturity. The note receivable was collateralized by substantially all of the assets of Nature's Own and was personally guaranteed by one of the majority owners of Nature's Own.  Under the consulting agreement, the Company was to provide consulting services in exchange for fees of $10,000 per month through maturity.

Effective January 1, 2015 the Company and Nature’s Own modified the loan and consulting agreements 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. In addition, the Company considered ASC Subtopic 470-50, Debt Modifications and Extinguishments, and determined that the modification was not an extinguishment and therefore, no gain or loss was recognized. The modification to the consulting agreement extended the term to May 31, 2017.

In early May 2015, Nature's Own's interest in the growing and processing facility was purchased by 4900 Jackson, LLC, which assumed Nature's Own obligations under the loan and consulting agreements. On May 20, 2015, the Company modified the loan and consulting agreements with 4900 Jackson, LLC. Pursuant to the modified loan agreement, 4900 Jackson, LLC made an accelerated principal payment to the Company of $300,000 in exchange for the Company reducing the interest rate from 18% to 12%, and the maturity date was extended to May 1, 2017.  In addition, the Company received a payment of $35,000 from Nature’s Own during 2015. The Company analyzed the modifications 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 as there was an exchange of an interest rate reduction for accelerated principal repayments. In addition, the Company considered ASC Subtopic 470-50, Debt Modifications and Extinguishments, and determined that the modification was not an extinguishment and therefore, no gain or loss was recognized. The proceeds of the loan will continue to be used to develop the cannabis growing and processing facility. On May 20, 2015, a modification was also made to the consulting agreement to reduce the monthly fee from $10,000 to $5,000 through May 31, 2017.

At March 31, 2016 and September 30, 2015, the balance of the note receivable was $402,071 and $586,305, respectively. Interest income was $13,481 and $43,234 for the three months ended March 31, 2016 and 2015, respectively; and $29,414 and $88,440 for the six months ended March 31, 2016 and 2015, respectively.  Consulting fees earned were $15,000 and $50,000 for the three months ended March 31, 2016 and 2015, respectively; and $30,000 and $80,000 for the six months ended March 31, 2016 and 2015, respectively.

WGP.  Beginning September 21, 2014, we entered into a series of agreements with Wellness Group Pharms LLC (“WGP’), an entity that was pursuing licenses to operate marijuana cultivation facilities under the Illinois Compassionate Use of Medical Cannabis Pilot Program Act.  As amended on February 22, 2015, these agreements provided for the following:

We were to replace WGP as the purchasing party under an existing contract to acquire a 16.1 acre parcel in Anna, Illinois as WGP was to take the necessary legal steps to assign the right to acquire ownership to the property starting February 23, 2015.  Subsequent to the amendment, WGP purchased the land.  To date we have not received title to the land.

We were to construct on this parcel a marijuana cultivation facility (consisting of a 27,000 square foot warehouse and a total developable footprint of 285,000 square feet which would be built in future phases according to demand) in accordance with terms specified in WGP’s license application with the State of Illinois within six months of the award of the licenses on February 2, 2015.  To date, payments of $332,357 had been made.

WGP was to lease and operate the facility from us at a base monthly rent of $6.00 per square foot plus 25% of gross monthly sales of cannabis and 20% of gross monthly sales of cannabis infused products. The term of the lease contract was 12 years commencing from the month in which both a final and enforceable occupancy certificate is issued for the facility, and WGP has been granted approval by the State of Illinois to commence production operations in the facility.

We were to provide working capital advances up to a maximum borrowing amount of $2,772,724, with such advances accruing interest at a rate of 18% per annum.  No principal or interest payments were due until WGP had cash on hand of $250,000, but in any event all principal and interest is due December 31, 2017.  As of March 31, 2016, advances of $673,294 had been made.

We were to receive consulting fees of $20,000 per month, with such unpaid amounts accruing interest at a rate of 18% per annum beginning on March 1, 2015 through the term of the 12 year lease.  In fiscal 2015, $40,000 had been earned and recognized. There are no similar revenues for fiscal 2016.

Between February 2015 and April 2015, both parties operated under this agreement.  We made working capital advances totaling $673,294 (inclusive of the deposit of $100,000 made under the Initial WGP Agreements) and we recognized consulting revenues of $40,000.  We also incurred construction costs totaling $332,357 to begin developing the facility in connection with its obligations under the amended agreement.  However, WGP did not assign its rights to acquire the 16.1 acre parcel to us as required under the amended agreement.  Instead, WGP acquired the property directly.  We have notified WGP that we have fulfilled our obligations pursuant to our agreements with WGP but due to WGP's breach of contract, and repeated lack of good faith and fair dealing, the agreement was terminated.  WGP has claimed that our construction costs were unauthorized.  We dispute WGP’s claim.  To date, there is no change in the dispute with WGP.

Included in Amounts due from WGP in our balance sheet at March 31, 2016 are working capital advances of $673,294, accrued consulting fees of $40,000, construction advances of $332,357 and accrued interest of $139,990 for a total of $1,185,641.  In addition, an allowance for doubtful accounts of $463,084 has been recognized.

We have a formal security agreement covering $600,000 of the advances made to WGP (and related interest), whereby the indebtedness is secured by all real and personal property of WGP.  We believe all other amounts owed by WGP are due and payable and that additional security interests are implied in the agreements.  However, given the current dispute with WGP, we have established a provision for all amounts owed by WGP (including related interest) that are not covered by a formal security agreement.  This provision is reflected as a separate component of operating expense within our accompanying statement of operations.

Interest income associated with the $673,294 advanced to WGP was $30,215 and $11,690 for the three months ended March 31, 2016 and 2015, respectively; and $60,762 and $11,690 for the six months ended March 31, 2016 and 2015, respectively.

XML

Note 4. Land Held For Resale

6 Months Ended

Mar. 31, 2016

Notes

Note 4. Land Held For Resale

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 at 4200 Monaco Street, 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 August 14, 2015 the Company signed an agreement to sell the five-acre parcel for a total purchase price of $2,500,000.  The closing of the transaction was to take place on or before September 14, 2015. If the prospective buyer did not purchase the property, then, on or before September 15, 2015 the buyer was obligated to loan the Company $900,000, which bears interest at 12% per year and will be due and payable in six months.

On September 15, 2015 the Company and the buyer agreed to extend the closing date of the property to November 1, 2015.  In connection with the extension of the closing date, the buyer and an unrelated third party loaned the Company $900,000.   The Company used $650,000 to repay a loan which was secured by the property.  (See Note 5).

On November 1, 2015, the buyer failed to close the purchase of the property and the agreement with the buyer was terminated.

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Note 5. Note Payable

6 Months Ended

Mar. 31, 2016

Notes

Note 5. Note Payable

NOTE 5. NOTE PAYABLE

On March 21, 2015, the Company closed on a $650,000 loan from a third party. The loan was due September 21, 2015 and was secured by the land held for sale the Company owns at 4200 Monaco Street, Denver, Colorado. The annual interest rate for the loan was 14%. The loan is interest only with the principal and any accrued interest due on September 21, 2015. Interest expense was $80,623 and $0 for the years ended September 30, 2015 and 2014, respectively. As part of the financing the Company incurred $27,772 of deferred financing costs that were recognized as interest expense in 2015. This note was repaid as described below.

As indicated in Note 4, on September 15, 2015 the potential buyer loaned the Company $900,000. The loan bears interest at 12% per year and was due and payable on March 16, 2016. The Company used $650,000 of the proceeds to repay the existing loan that was secured by the property.  At March 31, 2016, accrued interest on this note payable was $25,000.  As of March 31, 2016, the Company was in default on the loan.  On April 6, 2016, the loan was modified as follows:

     The principal balance of the loan was increased to $990,000;

     The interest rate was increased to 18% per year; and

     The maturity date of the loan was extended to March 15, 2017.

As this modification was incurred subsequent to March 31, 2016, the financial statements included herein do not reflect the financial impacts of this debt modification.

We may repay the loan at any time without penalty. The loan is secured by a first lien on the five-acre parcel of land in Denver.

On February 1, 2016, the Company entered into an agreement with an unrelated party which provides the Company with borrowing capacity of $200,000.  As of March 31, 2016, we had borrowed $116,185 against this credit line.  The loan bears interest at 8% per year, and all unpaid principal and interest is due on December 31, 2016.  The Company may repay the loan at any time without penalty.  As of March 31, 2016, accrued interest on this loan was $467.

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Note 6. Related Party Transactions and Related Party Notes Payable

6 Months Ended

Mar. 31, 2016

Notes

Note 6. Related Party Transactions and Related Party Notes Payable

NOTE 6. RELATED PARTY TRANSACTIONS AND RELATED PARTY NOTES PAYABLE

At March 31, 2016, we had an outstanding note payable of $1,910,349 to Strategic Capital Partners, an entity controlled by our Chief Financial Officer. Under the note payable, as amended, outstanding amounts accrue interest at 5% per year payable on March 31st and September 30th, with all outstanding principal and interest due on December 31, 2016, and can be repaid at any time prior to maturity. Interest expense was $23,594 and $11,199 for the three months ended March 31, 2016 and 2015, respectively; and $45,452 and $21,061 for the six months ended March 31, 2016 and 2015, respectively.  Interest payable – related party of $45,452 and $0 was included in the accompanying balance sheets at March 31, 2016 and September 30, 2015, respectively. In September 2015, the Company agreed to include $49,849 of accrued and unpaid interest in the principal balance of the loan. During the six months ended March 31, 2016 the Company received advances of $227,500 and no payments were made.

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Note 7. Loss Per Share

6 Months Ended

Mar. 31, 2016

Notes

Note 7. Loss Per Share

NOTE 7. LOSS PER SHARE

The following table sets forth the computation of basic and diluted net loss per share:

	Three Months Ended						Six Months Ended
	March 31,						March 31,
	2016			2015			2016			2015
Net loss attributable to common stockholders	$	(296,041	)	$	(377,590	)	$	(685,457	)	$	(619,592	)
Basic weighted average outstanding shares of common stock		16,631,000			16,603,222			16,631,000			16,591,989
Dilutive effects of common share equivalents		-			-			-			-
Dilutive weighted average outstanding shares of common stock		16,631,000			16,603,222			16,631,000			16,591,989
Basic and diluted net loss per share of common stock	$	(0.02	)	$	(0.02	)	$	(0.04	)	$	(0.04	)

The Company has excluded 1,205,000 of stock options from the computation of diluted net loss per share because the effects are anti-dilutive.

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Note 8. Income Taxes

6 Months Ended

Mar. 31, 2016

Notes

Note 8. Income Taxes

NOTE 8.  INCOME TAXES

The Company did not record any income tax expense or benefit for the three or six months ended March 31, 2016. 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, 2016.

As of March 31, 2016, the Company did not have any unrecognized tax benefits. There were no significant changes to the calculation since September 30, 2015.

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Note 9. Stock Based Compensation

6 Months Ended

Mar. 31, 2016

Notes

Note 9. Stock Based Compensation

NOTE 9. STOCK BASED COMPENSATION

Restricted Stock Awards.  The Company uses restricted stock awards to compensate certain key executives and other individuals.  At March 31, 2016, the Company had 300,000 of outstanding unvested restricted stock awards which vest on March 20, 2017.  Stock-based compensation expense associated with restricted stock awards was $46,813 and $102,989 for the three months ended March 31, 2016 and 2015, respectively, and $93,626 and $205,976 for the six months ended March 31, 2016 and 2015, respectively.  As of March 31, 2016, unrecognized stock-based compensation associated with restricted stock awards totaled $74,900, which is to be recognized over a weighted average period of 0.5 years.

Stock Options.Stock option activity as of and for the six months ended March 31, 2016 is as follows: 

					Weighted
			Weighted		Average
			Average		Contractual		Aggregate
	Number of		Exercise		Term		Intrinsic
	Shares		Price		(Years)		Value
Outstanding at September 30, 2015		1,205,000	$	8.70
Granted		-	$	-
Cancelled		-	$	-
Exercised		-	$	-
Outstanding as of March 31, 2016		1,205,000	$	8.70		1.9	$	-
Vested and expected to vest at after March 31, 2016		1,205,000	$	8.70		1.9	$	-
Exercisable at March 31, 2016		1,205,000	$	8.70		1.9	$	-

Stock-based compensation associated with stock options totaled $4,264 and $39,867for the three months ended March 31, 2016 and 2015, respectively, and $9,173 and $49,662for the six months ended March 31, 2016 and 2015, respectively.  At March 31, 2016, there is no remaining unrecognized stock-based compensation associated with stock options.

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Note 10. Commitments and Contigencies

6 Months Ended

Mar. 31, 2016

Notes

Note 10. Commitments and Contigencies

NOTE 10. COMMITMENTS AND CONTIGENCIES

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. 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 $100,000 deposit upon the signing of the agreement which will be applied toward the purchase price of $4,000,000 at the closing or returned at the option of the Company. On August 27, 2015, after addressing the site considerations, the agreement was amended to extend the closing date to October 30, 2015 to provide additional time for permitting. In connection with the amendment, the Company paid the seller an additional $100,000 which will be applied to the purchase price.

On October 23, 2015, the Company extended the closing date to December 29, 2015 with a payment to the seller of $100,000.  The $100,000 paid to the seller will be applied to the purchase price of the property if the closing takes place.

On December 8, 2015, The Town of Freetown Planning Board unanimously approved the Company’s site plan application for the MMCC.  The site plan application requested 977,000 square feet of infrastructure for medical marijuana cultivation, processing, testing and associated administration in Freetown's Industrial Park.  On March 24, 2016, the Department of Public Health (the “DPH”) for the Commonwealth of Massachusetts approved the Company’s consulting and development agreements relating to the MMCC.  Although the DPH has approved these agreements, the actual lease agreement with the first tenant for the MMCC has not been finalized or approved by the DPH.

On December 22, 2015 the Company and the seller amended the agreement to extend the closing date to the earlier of 5 business days following the Company’s receipt of certain approval, or February 29, 2016. As consideration for the extension of the closing date, the Company agreed to increase the purchase price for the property to $4,100,000 and paid the seller a non-refundable fee of $100,000 which will be applied to the purchase price if the closing occurs.

On February 29, 2016, the Company and the seller amended the agreement to extend the closing date. As consideration for the extension of the closing date, the Company agreed to increase the purchase price for the property to $4,150,000 and paid the seller $50,000, which will be applied to the purchase price if the closing occurs.

On March 31, 2016, the Company and the seller amended the agreement to extend the closing date to May 16, 2016. On April 1, 2016, as consideration for the extension of the closing date, the Company paid the seller $75,000, which will be applied to the purchase price if the closing occurs.

The Company has paid $525,000 that will be applied to the purchase price if the closing occurs.

Operating Leases. The Company leases its office space located at 3200 Brighton Boulevard, Denver, Colorado for $2,870 per month under a month-to-month lease.

The Company leases an automobile under an operating lease commencing October 4, 2014 for 39 months at $611 per month. At March 31, 2016, the future rental payments required under this lease are $3,668 for the remainder of fiscal 2016, $7,332 for fiscal 2017 and $1,834 for fiscal 2018.

Except as described above, the Company has no other non-cancelable lease commitments.

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Note 11. Subsequent Events

6 Months Ended

Mar. 31, 2016

Notes

Note 11. Subsequent Events

NOTE 11. SUBSEQUENT EVENTS

On April 7, 2016, we signed agreements with Coastal Compassion Inc. (“CCI”).  CCI is one of a limited number of non-profit organizations that has received a provisional or final registration to cultivate, process and sell medical cannabis by the Massachusetts   Department of Public Health.  CCI has agreed to become the initial tenant in our planned MMCC.  Tim Keogh, our Chief Executive Officer, is a Board Member of CCI.

Pursuant to the agreements, we agreed to provide CCI with financing of up to $2.5 million for a five-year term at 18% interest per year for construction and working capital required for CCI’s approved dispensary and cultivation center in Fairhaven, MA.  For a three- year period beginning April 1, 2016, we have agreed to consult with CCI in the design, construction and operation of the Fairhaven facility.  CCI will pay us $10,000 each month for these consulting services.  Although the DPH has approved our agreement with CCI relating to the development and lease terms of the MMCC, the actual lease agreement with CCI has not been finalized or approved by the DPH.  We will need to secure significant capital to provide the financing to CCI.

On April 12, 2016, we signed agreements with AQUSCAN Delaware Corp. (“AQUSCAN”).  AQUSCAN is one of eleven applicants for a vertically-integrated license to cultivate, process and sell medical cannabis in Delaware.  The Delaware Division of Public Health is scheduled announce the application results in August of 2016 and award licenses for up to two new Registered Compassion Centers (“RCC”).  AQUSCAN has agreed to become the sole tenant in our planned Delaware Medical Cannabis Center (“DMCC”) if a RCC license is awarded.  We will build and own the facility.

The DMCC project is designed on 10 acres of unimproved land located in Garrison Oak Technology Park in Dover, DE.  We have signed a Purchase and Sale Agreement for the property with the City of Dover that is contingent upon the award of a license.

In addition to building a state-of-the-art cultivation facility at the DMCC, we will purchase and renovate an existing 3,200 square foot building located in Dover as a secure, medical cannabis dispensary.

Additionally, we may provide AQUSCAN with financing of up to $750,000 for a five-year term at 18% interest per year for working capital associated with establishing and maintaining the RCC.

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Note 1. Nature of Business and Basis of Presentation: Basis of Presentation (Policies)

6 Months Ended

Mar. 31, 2016

Policies

Basis of Presentation

Basis of Presentation

The (a) condensed balance sheet as of September 30, 2015, which has been derived from audited financial statements, and (b) the unaudited condensed financial statements as of and for the three and six months ended March 31, 2016 and 2015, 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 January 13, 2016. 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 2015 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 loss.

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Note 1. Nature of Business and Basis of Presentation: Recent Accounting Pronouncements (Policies)

6 Months Ended

Mar. 31, 2016

Policies

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, to reduce complexity in accounting standards involving several aspects of the accounting for employee share-based payment transactions, including (1) the income tax consequences,  (2) classification of awards as either equity or liabilities, and (3) classification on the statement of cash flows. The amendments will be effective for financial statements issued for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, and early adoption is permitted.  Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value should be applied using a modified retrospective transition method, amendments related to the presentation of employee taxes paid on the statement of cash flows when an employer withholds shares to meet the minimum statutory withholding requirement should be applied retrospectively, amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement and the practical expedient for estimating expected term should be applied prospectively, and amendments related to the presentation of excess tax benefits on the statement of cash flows can be applied using either a prospective transition method or a retrospective transition method. An entity that elects early adoption must adopt all of the amendments in the same period. The Company is currently evaluating the impact of these amendments on its financial statements.

In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations, to clarify the implementation guidance on principal versus agent considerations and address how an entity should assess whether it is the principal or the agent in contracts that include three or more parties.  The effective date and transition requirements for these amendments are the same as the effective date and transition requirements of ASU 2014-09. The Company is currently evaluating the impact of these amendments on its financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases: (Topic 842), to provide guidance on recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements, specifically differentiating between different types of leases.  The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from all leases. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous GAAP. There continues to be a differentiation between finance leases and operating leases. However, the principal difference from previous guidance is that the lease assets and lease liabilities arising from operating leases should be recognized in the balance sheet.   The accounting applied by a lessor is largely unchanged from that applied under previous GAAP.  The amendments will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early adoption is permitted.  In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that entities may elect to apply. These practical expedients relate to the identification and classification of leases that commenced before the effective date, initial direct costs for leases that commenced before the effective date, and the ability to use hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset. An entity that elects to apply the practical expedients will, in effect, continue to account for leases that commence before the effective date in accordance with previous GAAP unless the lease is modified, except that lessees are required to recognize a right-of-use asset and a lease liability for all operating leases at each reporting date based on the present value of the remaining minimum rental payments that were tracked and disclosed under previous GAAP.  The Company is currently evaluating the impact of these amendments on its financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which will supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. As amended by the FASB in July 2015, the standard is effective for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). The Company is currently evaluating the impact of its pending adoption of ASU 2014-09 on its consolidated financial statements and has not yet determined the method by which it will adopt the standard in 2018.

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Note 7. Loss Per Share: Schedule of Earnings Per Share, Basic and Diluted (Tables)

6 Months Ended

Mar. 31, 2016

Tables/Schedules

Schedule of Earnings Per Share, Basic and Diluted

	Three Months Ended						Six Months Ended
	March 31,						March 31,
	2016			2015			2016			2015
Net loss attributable to common stockholders	$	(296,041	)	$	(377,590	)	$	(685,457	)	$	(619,592	)
Basic weighted average outstanding shares of common stock		16,631,000			16,603,222			16,631,000			16,591,989
Dilutive effects of common share equivalents		-			-			-			-
Dilutive weighted average outstanding shares of common stock		16,631,000			16,603,222			16,631,000			16,591,989
Basic and diluted net loss per share of common stock	$	(0.02	)	$	(0.02	)	$	(0.04	)	$	(0.04	)

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Note 9. Stock Based Compensation: Schedule of Share-based Compensation, Stock Options, Activity (Tables)

6 Months Ended

Mar. 31, 2016

Tables/Schedules

Schedule of Share-based Compensation, Stock Options, Activity

					Weighted
			Weighted		Average
			Average		Contractual		Aggregate
	Number of		Exercise		Term		Intrinsic
	Shares		Price		(Years)		Value
Outstanding at September 30, 2015		1,205,000	$	8.70
Granted		-	$	-
Cancelled		-	$	-
Exercised		-	$	-
Outstanding as of March 31, 2016		1,205,000	$	8.70		1.9	$	-
Vested and expected to vest at after March 31, 2016		1,205,000	$	8.70		1.9	$	-
Exercisable at March 31, 2016		1,205,000	$	8.70		1.9	$	-

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Note 2. Going Concern (Details) - USD ($)	Mar. 31, 2016	Sep. 30, 2015
Details
Accumulated deficit	$ 4,379,624	$ 3,694,167

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Note 3. Notes Receivable (Details) - USD ($)		3 Months Ended		6 Months Ended
		Mar. 31, 2016	Mar. 31, 2015	Mar. 31, 2016	Mar. 31, 2015	Sep. 30, 2015
Details
Note receivable	[1]	$ 402,071		$ 402,071		$ 586,305
Interest Income, Other		13,481	$ 43,234	29,414	$ 88,440
Consulting fees		15,000	50,000	30,000	80,000
Customer Advances and Deposits		673,294		673,294
Accrued Professional Fees, Current		40,000		40,000
Customer Advances for Construction		332,357		332,357
Customer Advances, Current		1,185,641		1,185,641
Allowance for Doubtful Other Receivables, Current		463,084		463,084
Interest Income (Expense), after Provision for Loan Loss		$ 30,215	$ 11,690	$ 60,762	$ 11,690

[1] For 4900 Jackson LLC.

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Note 5. Note Payable (Details)	Mar. 31, 2016 USD ($)
Details
Long-term Line of Credit	$ 116,185

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Note 6. Related Party Transactions and Related Party Notes Payable (Details) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Mar. 31, 2016	Mar. 31, 2015
Details
Interest expense - related party	$ 23,594	$ 11,199	$ 45,452	$ 21,061
Proceeds from note payable - related party			$ 227,500	$ 790,000

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Note 9. Stock Based Compensation (Details) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Mar. 31, 2016	Mar. 31, 2015
Details
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost	$ 46,813	$ 102,989	$ 93,626	$ 205,976
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period, Intrinsic Value	$ 4,264	$ 39,867	$ 9,173	$ 49,662