NOTE

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.

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 design, develop, lease and operate state-of-the-art cultivation, processing and manufacturing facilities for licensed cannabis businesses throughout the United States.

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

Basis of Presentation

The (a) consolidated balance sheet as of

September 30, 2019,

which has been derived from audited financial statements, and (b) the unaudited financial statements as of and for the

three

months ended

December 31, 2019

and

2018,

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

-K filed with the SEC on

January 14, 2020.

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 financial statements which substantially duplicate the disclosure contained in the audited financial statements for fiscal

2019

as reported in the Form

-K have been omitted.

Certain prior period amounts have been reclassified to conform with current period presentation. These reclassifications have

impact on net loss.

Significant Accounting Policies

Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts in the consolidated statements of cash flows:

	December 31, 2019		September 30, 2019

Cash and cash equivalents	$	62,078	$	465,843
Restricted cash		326,222		826,219
Total cash, cash equivalents, and restricted cash shown in the cash flow statement	$	388,300	$	1,292,062

Amounts included in restricted cash represent those required to be set aside by a contractual agreement with a lender for the payment of specific construction related expenditures as part of the Company’s property development in Massachusetts.

Property, Plant and Equipment, net

Property and equipment are stated at cost. Depreciation of property and equipment begins in the month following the month when the asset is placed into service and is provided using the straight-line method for financial reporting purposes at rates based on the estimated useful lives of the assets. Estimated useful lives range from

three

twenty

years. Land is classified as held for sale when management has the ability and intent to sell, in accordance with ASC Topic

360

45.

Property, plant and equipment consist of:

	December 31, 2019			September 30, 2019

Buildings and improvements	$	7,419,051		$	7,571,176
Computer equipment		349,576			-
Furniture and equipment		2,764			2,764
Total		7,771,391			7,573,940
Accumulated depreciation		(109,719	)		(1,152	)
Property, plant and equipment, net	$	7,661,672		$	7,572,788

Leases

Effective

October 1, 2019,

we adopted Topic

842

using the effective date method. Under this method, periods prior to adoption remain unchanged. We determine if an arrangement is a lease at inception.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Variable lease payments are

not

included in the calculation of the right-of-use asset and lease liability due to uncertainty of the payment amount and are recorded as lease expense in the period incurred. As most of our leases do

not

provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. Our lease terms

may

include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Under the available practical expedient, we account for the lease and non-lease components as a single lease component for all classes of underlying assets as both a lessee and lessor. Further, we elected a short-term lease exception policy on all classes of underlying assets, permitting us to

not

apply the recognition requirements of this standard to short-term leases (i.e. leases with terms of

months or less).

Recent Accounting Pronouncements

Recently Adopted Standards

February 2016,

the FASB issued ASU

No.

2016

02,

Leases (Topic

842

) ("ASU

2016

02"

), which provides guidance requiring lessees to recognize a right-of-use asset and a lease liability on the balance sheet for substantially all leases, with the exception of short-term leases. Leases will be classified as either financing or operating, with classification affecting the pattern of expense recognition in the statement of income. The Company adopted Topic

842

effective

October 1, 2019

and elected the package of transition practical expedients for expired or existing contracts, which does

not

require reassessment of: (

) whether any of the Company’s contracts are or contain leases, (

) lease classification and (

) initial direct costs. In

July 2018,

the FASB issued ASU

No.

2018

11,

"Targeted Improvements - Leases (Topic

842

)." The Company did

not

elect the hindsight practical expedient. This update provides an optional transition method that allows entities to elect to apply the standard using the modified retrospective approach at its effective date, versus recasting the prior years presented. If this adoption method is elected, an entity would recognize a cumulative-effect adjustment to the opening balance of retained earnings in the year of adoption. The Company elected this adoption method on

October 1, 2019

and the adoption did

not

result in any cumulative impact to retained earnings.

Additionally, the Company’s adoption of Topic

842

did

not

have a significant impact on the recognition, measurement or presentation of lease revenue and lease expenses within the consolidated statements of operations or the consolidated statements of cash flows. The Company’s adoption of Topic

842

did

not

have a material impact on the timing or amount of the Company’s lease revenue as a lessor in its sublease agreement. The Company’s prepaid land lease balance that was recorded in current and other assets in the Company’s

September 30, 2019

balance sheet has been classified as a component of the Company’s right-of-use assets effective

October 1, 2019.

The consolidated financial statements for the

three

months ended

December 31, 2019

are presented under the new standard, while comparative years presented are

not

adjusted and continue to be reported in accordance with the Company’s historical accounting policy. See Note

Leases, Commitments and Contingencies, for more information.