10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q 

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

For the quarterly period ended March 31, 2020

OR

☐ 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.)
1555 Blake Street, Unit 502 Denver, CO	80202
(Address of principal executive offices)	(Zip Code)

(303) 862-9000

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	N/A	N/A

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. Yes ☑ No ☐

Indicate by a checkmark whether the registrant has submitted electronically every Interactive Date File required to be submitted 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 such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☑	Smaller reporting company	☑
		Emerging growth company	☐

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑ 

As of May 8, 2020, the registrant had 23,504,820 shares of common stock outstanding.

AmeriCann, Inc.

FORM 10-Q

TABLE OF CONTENTS

			PAGE NO.
PART I   FINANCIAL INFORMATION
	Item 1.	Unaudited Financial Statements:
		Consolidated Balance Sheets as of March 31, 2020 and September 30, 2019	3
		Consolidated Statements of Operations for the Three and Six Months Ended March 31, 2020 and 2019	4
		Consolidated Statements of Changes in Stockholders' Equity for the Six Months Ended March 31, 2020 and 2019	5
		Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2020 and 2019	6
		Notes to Consolidated Financial Statements	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
	Item 4.	Controls and Procedures	19
PART II  OTHER INFORMATION
	Item 6.	Exhibits	20
	SIGNATURES		21

2

Part I:  FINANCIAL INFORMATION

Item 1.      UNAUDITED Financial Statements

AMERICANN, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)  

	March 31, 2020			September 30, 2019
Assets
Current Assets:
Cash and cash equivalents	$	414,904		$	465,843
Restricted cash		871			826,219
Tenant receivable		2,667			11,564
Current portion of prepaid land lease		-			57,959
Prepaid expenses and other current assets		13,652			13,632
Current portion of note receivable - related party		30,860			32,270
Total current assets		462,954			1,407,487
Property, Plant and Equipment, net		7,729,990			7,572,788
Operating lease - right-of-use asset		6,947,605			-
Notes and other receivables (net of allowance of $1,761,675 as of September 30, 2019)		-			-
Note receivable - related party		108,261			116,493
Prepaid land lease and related deposits, net of current portion		-			2,666,129
Security deposit and other assets		3,110			3,110
Total assets	$	15,251,920		$	11,766,007
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued expenses	$	83,139		$	265,276
Interest payable (including $4,964 and $12,283 to related parties)		45,325			121,883
Other payables		11,005			9,129
Operating lease liability, short term		9,273			-
Notes payable		150,000			385,000
Total current liabilities		298,742			781,288
Notes payable (net of unamortized discounts of $727,342 and $882,603)		3,272,658			3,117,397
Notes payable - related party		581,646			1,756,646
Operating lease liability, long term		4,243,224			-
Total liabilities		8,396,270			5,655,331
Commitments and contingencies - see Note 7
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; 23,504,820 shares issued and outstanding as of March 31, 2020 and September 30, 2019		2,351			2,351
Additional paid in capital		24,268,607			24,121,534
Accumulated deficit		(17,415,308	)		(18,013,209	)
Total stockholders' equity		6,855,650			6,110,676
Total liabilities and stockholders' equity	$	15,251,920		$	11,766,007

See accompanying notes to unaudited consolidated financial statements.

3

AMERICANN, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	Three Months Ended March 31,						Six months ended March 31,
	2020			2019			2020			2019
Revenues:
Rental income - related party	$	34,690		$	-		$	69,381		$	-
Total revenues		34,690			-			69,381			-
Operating expenses:
Advertising and marketing		1,415			44,190			37,541			61,046
Professional fees		143,779			170,310			230,388			299,243
General and administrative expenses		393,616			305,091			849,964			517,203
Recovery of loss provision for doubtful accounts		-			-			(1,761,675	)		-
Total operating expenses		538,810			519,591			(643,782	)		877,492
(Loss) income from operations		(504,120	)		(519,591	)		713,163			(877,492	)
Other income (expense):
Interest income		320,313			7,417			320,313			15,089
Interest expense		(206,606	)		(11,736	)		(366,055	)		(163,124	)
Other income (expense)		-			-			-			(3,030	)
Interest expense - related party		(29,671	)		(33,010	)		(69,520	)		(66,871	)
Total other income (expense)		84,036			(37,329	)		(115,262	)		(217,936	)
Net (loss) income	$	(420,084	)	$	(556,920	)	$	597,901		$	(1,095,428	)
Basic and diluted (loss) income per common share	$	(0.02	)	$	(0.02	)	$	0.03		$	(0.05	)
Weighted average common shares outstanding		23,504,820			22,913,023			23,504,820			22,738,806

See accompanying notes to unaudited consolidated financial statements.

4

AMERICANN, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(unaudited)

	Preferred Stock				Common Stock				Paid In		Accumulated
	Shares		Amount		Shares		Amount		Capital		Deficit			Total
Balances, September 30, 2018		-	$	-		22,106,763	$	2,211	$	19,937,606	$	(13,109,541	)	$	6,830,276
Stock issued for cash, net		-		-		311,816		31		649,969		-			650,000
Conversion of debt		-		-		31,328		3		46,989		-			46,992
Stock issued for warrants exercised, net		-		-		308,000		31		395,469		-			395,500
Stock issued for services		-		-		25,000		3		64,997		-			65,000
Net loss		-		-		-		-		-		(538,508	)		(538,508	)
Balances, December 31, 2018		-	$	-		22,782,907	$	2,279	$	21,095,030	$	(13,648,049	)	$	7,449,260
Stock issued for cash, net		-		-		176,609		17		303,984		-			304,001
Conversion of debt		-		-		20,000		2		29,998		-			30,000
Stock issued for warrants exercised, net		-		-		25,000		3		24,997		-			25,000
Net loss		-		-		-		-		-		(556,920	)		(556,920	)
Balances, March 31, 2019		-	$	-		23,004,516	$	2,301	$	21,454,009	$	(14,204,969	)	$	7,251,341

	Preferred Stock				Common Stock				Paid In		Accumulated
	Shares		Amount		Shares		Amount		Capital		Deficit			Total
Balances, September 30, 2019		-	$	-		23,504,820	$	2,351	$	24,121,534	$	(18,013,209	)	$	6,110,676
Stock-based compensation		-				-		-		108,522		-			108,522
Net income		-				-		-		-		1,017,985			1,017,985
Balances, December 31, 2019		-	$	-		23,504,820	$	2,351	$	24,230,056	$	(16,995,224	)	$	7,237,183
Stock-based compensation		-				-		-		38,551		-			38,551
Net loss		-				-		-		-		(420,084	)		(420,084	)
Balances, March 31, 2020		-	$	-		23,504,820	$	2,351	$	24,268,607	$	(17,415,308	)	$	6,855,650

See accompanying notes to unaudited consolidated financial statements. 

5

AMERICANN, INC.

consolidated STATEMENTS OF CASH FLOWS

(unaudited)

	Six months ended March 31,
	2020			2019
Cash flows from operating activities:
Net income (loss)	$	597,901		$	(1,095,428	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		221,355			691
Amortization of right of use assets		33,352			-
Recovery of loss provision for doubtful accounts		(1,761,675	)		-
Stock based compensation and option expense		147,073			-
Stock issued for services		-			65,000
Loss on disposal of fixed assets		-			3,030
Amortization of equity instruments issued to lessor		-			19,730
Amortization of debt discount		155,261			128,068
Changes in operating assets and liabilities:
Tenant receivable		8,897			-
Notes and other receivables		1,761,675			-
Prepaid expenses		(20	)		210
Accounts payable and accrued expenses		(182,137	)		(15,913	)
Operating lease liability		(4,372	)		-
Interest payable		(69,238	)		(75	)
Interest payable - related party		(7,320	)		(12,742	)
Other payables		1,876			13,247
Net cash flows provided by (used in) operations		902,628			(894,182	)
Cash flows from investing activities:
Additions to construction in progress		-			(2,702,532	)
Additions to fixed assets		(378,557	)		-
Payments received on notes receivable - related party		9,642			11,445
Net cash flows used in investing activities		(368,915	)		(2,691,087	)
Cash flows from financing activities:
Common stock issued for cash, net		-			954,001
Proceeds from the exercise of warrants		-			420,500
Payments on note payable - related party		(1,175,000	)		-
Principal payments on notes payable		(235,000	)		(35,000	)
Net cash flows (used in) provided by financing activities		(1,410,000	)		1,339,501
Net decrease in cash, cash equivalents, and restricted cash		(876,287	)		(2,245,768	)
Cash, cash equivalents, and restricted cash at beginning of period		1,292,062			4,016,949
Cash, cash equivalents, and restricted cash at end of period	$	415,775		$	1,771,181
Supplementary Disclosure of Cash Flow Information:
Cash paid for interest	$	356,872		$	114,745
Cash paid for income taxes	$	-		$	-
Shares issued for conversion of debt and accrued interest		-			76,992

See accompanying notes to unaudited consolidated financial statements.   

6

AMERICANN, INC.

Notes To Unaudited consolidated Financial Statements

NOTE 1. NATURE OF BUSINESS AND BASIS OF PRESENTATION

AmeriCann, Inc. ("the Company", “we”, “our” or "the Issuer") was organized under the laws of the State of Delaware on June 25, 2010.

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 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 six months ended March 31, 2020 and 2019, 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 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 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.

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:

	March 31, 2020		September 30, 2019
Cash and cash equivalents	$	414,904	$	465,843
Restricted cash		871		826,219
Total cash, cash equivalents, and restricted cash shown in the cash flow statement	$	415,775	$	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 to twenty years. Property, plant and equipment consist of:

	March 31, 2020			September 30, 2019
Buildings and improvements	$	7,600,157		$	7,571,176
Computer equipment		349,576			-
Furniture and equipment		2,764			2,764
Total		7,952,497			7,573,940
Accumulated depreciation		(222,507	)		(1,152	)
Property, plant and equipment, net	$	7,729,990		$	7,572,788

7

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 12 months or less).

Recent Accounting Pronouncements

Recently Adopted Standards

In 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: (1) whether any of the Company’s contracts are or contain leases, (2) lease classification and (3) 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 six months ended March 31, 2020 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 7, Leases, Commitments and Contingencies, for more information. 

NOTE 2. GOING CONCERN 

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. The Company had an accumulated deficit of $17,415,308 and $ 18,013,209 at March 31, 2020 and September 30, 2019, respectively. 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. 

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

8

NOTE 3. NOTES AND OTHER RECEIVABLES

Notes and other receivables as of March 31, 2020 and September 30, 2019, consisted of the following: 

	March 31, 2020			September 30, 2019
Notes and other receivables from WGP, a licensed medical marijuana cultivator; $673,294 note secured by real and personal property of the borrower, interest rate of 18.0%; accrued consulting and legal fees of $206,675, construction advances of $332,357 and accrued interest of $549,349 at September 30, 2019. Net of reserves of $1,761,675 as of September 30, 2019. Balance was collected in full in February 2020.	$	-		$	-
Related party note receivable from BASK, a non-profit corporation, interest rate of 18.0%; monthly principal and interest payments of $4,422, maturing in 2023.		139,121			148,763
		139,121			148,763
Less: Current portion		(30,860	)		(32,270	)
	$	108,261		$	116,493

The notes and other receivables from Wellness Group Pharms (“WGP”) were fully reserved as of September 30, 2019 due to ongoing disputes between the Company and WGP. The Company filed a Demand for Arbitration against WGP on April 7, 2017. On January 18, 2018, the arbitration panel awarded the Company $1,045,000 plus interest at the rate of 18% per year from April 18, 2015 to March 18, 2018 for $550,000. In addition to the principal and interest awarded of $1,595,000, the Company was also awarded its attorneys’ fees and arbitration fees. The Company, as of December 31, 2019, reversed the previously recorded reserve on the receivable with WGP in the amount of $1,761,675 since on February 5, 2020 the Company received cash of $2,069,138 from WGP as payment in full for the fully reserved notes and other receivables which include principal, interest, attorneys’ fees and arbitration fees.

NOTE 4.  NOTES PAYABLE

Unrelated

On August 2, 2019 the Company secured a $4,000,000 investment from an unrelated third party in the form of a loan. The loan was evidenced by a note which bears interest at the rate of 11% per year, is due and payable on August 2, 2022 and is secured by a first lien on Building 1 at the Company’s Massachusetts Cannabis Center (“MCC”).

The note holder also received a warrant which allows the holder to purchase 600,000 shares of the Company’s common stock at a price of $1.50 per share. The warrant will expire on the earlier of (i) August 2, 2024 or (ii) twenty days after written notice of the holder that the daily Volume Weighted Average Price of the Company’s common stock was at least $4.00 for twenty consecutive trading days and the average daily trading volume of the Company’s common stock during the twenty trading days was at least 150,000 shares.

9

The broker for the loan received a cash commission of $320,000 plus warrants to purchase 48,000 shares of the Company's common stock. The warrants are exercisable at a price of $1.50 per share and expire on August 2, 2024. The cash commission and the fair value of the warrants amounting to $52,392 were recognized as a discount to the note.

The Company allocated the proceeds between the note and the warrants based on their relative fair values. The relative fair value of the 600,000 warrants was $562,762 which was recognized as additional paid in capital and a corresponding debt discount. 

At March 31, 2020, the outstanding principal on these notes was $4,000,000 and the unamortized debt discount was $727,342. All debt discounts are being amortized on a straight-line basis over the term of the note. Amortization expense related to the debt discounts was $155,261 for the six months ended March 31, 2020.

December 2017 Convertible Note Offering

On December 29, 2017 the Company sold convertible notes in the principal amount of $800,000 to a group of accredited investors. The notes bear interest at 8% per year, are unsecured, and were due and payable on December 31, 2018. On December 31, 2018, the maturity date of the notes were extended to December 31, 2019. The notes were fully paid off in January 2020.

The original notes included a provision to be converted at any time into shares of the Company's common stock at an initial conversion price of $1.50 per share.

The note holders also received warrants which entitle the note holders to purchase up to 533,333 shares of the Company's common stock. The warrants are exercisable at a price of $1.50 per share and expire on October 17, 2022.

The placement agent for the offering received a cash commission of $64,000, plus warrants to purchase 106,667 shares of the Company's common stock. The warrants are exercisable at a price of $1.50 per share and expire on December 29, 2022.

The Company allocated the proceeds between the note and the warrants based on their relative fair values. The relative fair value of the 640,000 warrants was $607,024 which was recognized as additional paid in capital and a corresponding debt discount. After such allocation, the effective conversion price on the issuance date was less than the fair value of the stock into which the notes were convertible, giving rise to a beneficial conversion feature of $128,976 which was recognized as additional paid in capital and a corresponding debt discount.

The $64,000 paid to the placement agent was allocated on a pro-rata basis to the warrants and the debt which was recorded as an offset to additional paid in capital and an increase in debt discount of $48,562 and $15,438, respectively.

During February 2019, a loan in the principal amount of $30,000 was converted into 20,000 shares of common stock.

During May 2018, a loan in the principal amount of $575,000 was converted into 383,333 shares of common stock. In addition, interest payable in the amount of $15,233 was converted into 10,155 shares.

At March 31, 2020 and September 30, 2019, the outstanding principal on these notes was $0 and $195,000, respectively. All debt discounts are being recognized on a straight-line basis over the terms of the notes. Amortization expense related to the debt discounts were $0 and $51,749 for the six months ended March 31, 2020 and 2019, respectively.

February 2018 Convertible Note Offering

On February 12, 2018 the Company sold convertible notes in the principal amount of $810,000 to a group of accredited investors. The notes bear interest at 8% per year, are unsecured, and are due and payable on December 31, 2018. On December 31, 2018, the notes were extended to mature on December 31, 2019. At the option of the note holders, the notes may be converted at any time into shares of the Company's common stock at an initial conversion price of $1.50 per share.

The note holders also received warrants which entitle the note holders to purchase up to 540,000 shares of the Company's common stock. The warrants are exercisable at a price of $1.50 per share and expire on October 17, 2022.

The Company allocated the proceeds between the note and the warrants based on their relative fair values. The relative fair value of the 540,000 warrants was $523,013 which was recognized as additional paid in capital and a corresponding debt discount. After such allocation, the effective conversion price on the issuance date was less than the fair value of the stock into which the note is convertible, giving rise to a beneficial conversion feature of $286,987 which is recognized as additional paid in capital and a corresponding debt discount.

10

During January 2019, a loan in the amount of $35,000 was repaid in cash.

In October 2018, a loan in the principal amount of $45,000 was converted into 30,000 shares of common stock. In addition, interest payable in the amount of $1,992 was converted into 1,328 shares.

During July 2018, loans in the principal amount of $375,000 were converted into 250,000 shares of common stock. In addition, interest payable in the amount of $14,704 was converted into 9,802 shares.

In May 2019, loans in the principal amount of $150,000 were converted into 100,000 shares of common stock. In addition, interest payable in the amount of $19,521 was converted into 13,014 shares.

In April 2019, loans in the amount of $15,000 were converted to 10,000 shares of common stock.

At March 31, 2020 and September 30, 2019, the outstanding principal on these notes was $150,000 and $190,000, respectively. All debt discounts are being recognized on a straight-line basis over the terms of the notes. Amortization expense related to the debt discounts were $0 and $87,001 for the six months ended March 31, 2020 and 2019, respectively. On December 31, 2019, a note in the amount of $150,000 was extended to mature on December 31, 2020. A loan in the amount of $40,000 was paid off in January 2020.

Related Party

On February 1, 2016, we entered into an agreement with an unrelated party which provided us with borrowing capacity of $200,000. On May 1, 2016, the agreement was amended to increase the borrowing capacity to $1,000,000. On July 14, 2016, Strategic Capital Partners (“SCP”) assumed the $521,297 loan borrowed against this credit line, increasing the total balance owed to SCP to $2,431,646. SCP is controlled by Benjamin J. Barton, one of our officers and directors and a principal shareholder. The amounts borrowed from SCP were used to fund our operations.

On July 14, 2016, we entered into a debt modification agreement whereby a portion of the debt was converted into common stock and the remaining debt was renegotiated into two promissory notes.

Of the amounts owed to SCP, $500,000 was converted into 400,000 shares of our common stock ($1.25 conversion rate).

The remaining $1,756,646 owed to SCP was divided into two promissory notes.

The first note, in the principal amount of $1,000,000, bears interest at 9.5% per year and was due and payable on December 31, 2019. Interest is payable quarterly. The note can be converted at any time, at the option of SCP, into shares of our common stock, initially at a conversion price of $1.25 per share.

The second note, in the principal amount of $756,646, bears interest at 8% per year and matures on December 31, 2019. Interest is payable quarterly. The note is not convertible into shares of our common stock but is secured by a first lien on all amounts due to us by WGP. Any payments received from the sale, lease or commercialization of the property in Denver, and any amounts received from WGP, will be applied to the principal amount of the note. Otherwise, all unpaid principal and interest was due on December 31, 2019.

In connection with the debt modification agreement, we issued SCP warrants to purchase 800,000 shares of our common stock, exercisable at a price of $1.50 per share, and warrants to purchase an additional 800,000 shares of common stock, exercisable at a price of $3.00 per share. Both sets of warrants expire on June 30, 2020. We allocated the relative fair values to the warrants, stock options, and convertible debt, as determined by the Black Scholes option pricing model. Based on the Black Scholes option pricing model, a net debt premium of $72,651 was allocated to the warrants which are reflected in additional paid-in-capital. The debt premium is being amortized on a straight-line basis over the term of the notes.

On September 30, 2019, both notes were amended and combined into one note, in the principal amount of $1,756,646, bearing interest of 9% per year and maturing on December 31, 2022. Additionally, the conversion option in the first note was eliminated. The new note is secured by all amounts due from WGP or its affiliates. SCP also received warrants to purchase 1,500,000 shares of the Company's common stock. The warrants are exercisable at a price of $1.25 per share and expire on December 31, 2022. The debt modification was deemed substantial and was accounted for as a debt extinguishment. The fair value of the 1,500,000 warrants was $977,110 and was recognized as loss on extinguishment of debt and the remaining unamortized premium and discount was written off during the year ended September 30, 2019.

Accrued interest on these notes payable was $4,964 and $12,283 at March 31, 2020 and September 30, 2019, respectively. 

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At March 31, 2020 and September 30, 2019, the outstanding principal on these notes was $581,646 and $1,756,646, respectively. Amortization of debt premium was $0 and $10,682 for the six months ended March 31, 2020 and 2019, respectively.

NOTE 5. RELATED PARTY TRANSACTIONS

BASK (formerly Coastal Compassion, Inc). On April 7, 2016, we signed agreements with BASK. BASK is one of a limited number of organizations that has received a provisional or final registration to cultivate, process and sell medical and adult use cannabis by the Massachusetts Cannabis Control Commission.

Pursuant to the agreements, we agreed to provide BASK with financing for construction and working capital required for BASK’s approved dispensary and cultivation center in Fairhaven, MA.

On August 15, 2018, the Company combined the construction and working capital advances of $129,634 and accrued interest of $44,517 into a new loan with payments over 5 years with 18% interest. At March 31, 2020 and September 30, 2019, the outstanding balance on the note receivable was $139,121 and 148,763, respectively

On July 26, 2019, the Company entered into a 15-Year Triple Net lease of Building 1 of the MCC with BASK. The lease commenced on September 1, 2019 and includes an annual base rent of $135,000 and a revenue participation fee equivalent to 15% of BASK's gross revenues. As of March 31, 2020, the BASK tenant receivable balance was $2,667.

Tim Keogh, our Chief Executive Officer, is a Board Member of BASK.

During the six months ended March 31, 2020, the Company incurred and paid $90,000 of consulting fees to SCP.

NOTE 6. INCOME/LOSS PER SHARE

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

	Three Months Ended						Six Months Ended
	March 31,						March 31,
	2020			2019			2020		2019
Net (loss) income attributable to common stockholders	$	(420,084	)	$	(556,920	)	$	597,901	$	(1,095,428	)
Basic weighted average outstanding shares of common stock		23,504,820			22,913,023			23,504,820		22,738,806
Dilutive effects of common share equivalents		-			-			-		-
Dilutive weighted average outstanding shares of common stock		23,504,820			22,913,023			23,504,820		22,738,806
Basic and diluted net (loss) income per share of common stock	$	(0.02	)	$	(0.02	)	$	0.03	$	(0.05	)

As of March 31, 2020, we excluded 1,050,000 of stock options and 11,238,650 of warrants and 100,000 shares that would be issued from conversion of outstanding convertible notes from the computation of diluted net income (loss) per share since the effects are anti-dilutive. As of March 31, 2019, we excluded 150,000 of stock options and 9,145,650 of warrants from the computation of diluted net loss per share since the effects are anti-dilutive. 

NOTE 7.  LEASES, COMMITMENTS AND CONTINGENCIES

MCC. 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 are developing the property as the MCC. Plans for the MCC 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. We paid the seller $100,000 upon the signing of the agreement which amount was applied toward the purchase price at the closing.

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Between August 2015 and September 2016, there were several amendments to the Agreement to extend the closing date to October 14, 2016. As consideration for the extensions, the Company, agreed to increase the purchase price to $4,325,000 and paid the seller $725,000, which was applied to the purchase price of the land. As of September 30, 2016, the Company had paid $925,000 that was applied to the purchase price of the land at closing. On October 17, 2016, the Company closed on the land purchase via a sales-leaseback transaction. See ‘Operating Leases’ section below for additional information.

Operating Leases

Land

On October 17, 2016, the Company closed the previously announced acquisition of a 52.6-acre parcel of undeveloped land in Freetown, Massachusetts. The deposits of $925,000 previously paid by the Company to the seller, Boston Beer Company (“BBC”), were credited against the total purchase price of $4,475,000. The remaining balance of $3,550,000 was paid to BBC by Massachusetts MMP. The property is located approximately 47 miles southeast of Boston. The Company plans to develop the property as the MCC. Plans for the MCC include the construction of sustainable greenhouse cultivation, processing, and infused product facilities that will be leased or sold to Registered Marijuana Dispensaries under the Massachusetts Medical Marijuana Program.

As part of a simultaneous transaction, the Company assigned the property rights to MMP for a nominal fee and entered a lease agreement pursuant to which MMP agreed to lease the property to the Company for an initial term of fifty (50) years. The Company has the option to extend the term of the lease for four (4) additional ten (10) year periods. The lease is a triple net lease, with the Company paying all real estate taxes, repairs, maintenance and insurance.

The lease payments will be the greater of (a) $30,000 per month; (b) $0.38 per square foot per month of any structure built on the property; or (c) 1.5% of all gross monthly sales of products sold by the Company, any assignee of the Company, or any subtenant of the Company. The lease payments will be adjusted up (but not down) every five (5) years by any increase in the Consumer Price Index.

Between October 17, 2016 and April 17, 2017, the monthly lease payments accrued, with all accrued lease payments paid to MMP on April 17, 2017. On April 17, 2017, the Company reimbursed MMP’s costs and expenses associated with the acquisition of the property, the lease, and the acquisition of the shares and the warrant from the Company (as further described below).

Under the terms of the lease, the Company had six (6) months to obtain $2.6 million in capital funding for the construction of the first phase building. In the event that the Company was unable to raise these funds within the six (6) month period, the Company had an additional six (6) month period to do so; provided, that the Company has paid accrued lease payments and closing costs. If the Company was then unable to raise these funds on or before twelve (12) months from October 17, 2016, the lease would terminate. On October 17, 2017, the lease agreement was amended to provide that the Company will have until 16 months from October 17, 2016 to raise $2.6 million in capital funding. In addition to extending the funding deadline, this amendment granted MMP warrants to purchase up to 100,000 shares of Common Stock at an exercise price of $1.50 per share. The warrant can be exercised at any time on or after October 17, 2017 and on or before October 17, 2022. In February and April, 2018, the lease agreement was amended to provide that the Company will have until 20 months from October 17, 2016 to raise $2.6 million in capital funding. In addition to extending the funding deadline, this amendment granted MMP a warrant to purchase up to 100,000 shares of the Company’s common stock at an exercise price of $1.50 per share. The warrant can be exercised at any time on or before October 17, 2022. In July 2018, the Company fulfilled the $2.6 million capital funding commitment.

The Company received a credit for the $925,000 paid towards the purchase price of the land in the form of discounted lease payments. For the initial fifty (50) year term of the lease, the lease payments will be reduced by $1,542 each month

In connection with the sale of the property to MMP and the lease, the Company and MMP entered into a Share Purchase Agreement pursuant to which the Company issued to MMP 100,000 shares of its common stock at par value of $0.0001 (“Common Stock”), and a warrant to purchase up to 3,640,000 shares of Common Stock at an exercise price of $1.00 per share. The warrant can be exercised at any time on or after October 17, 2018 and on or before October 17, 2020. The warrant does not contain a cashless exercise provision. The fair value of the warrant was established using the Black Scholes option pricing model using the following assumptions:

● Risk-free interest rate – 1.12 percent

● Expected term – 4.0 years

● Volatility – 115 percent

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The Company allocated $1,899,966 to the warrant which is reflected in additional paid-in-capital and was initially allocated to prepaid land lease. The fair value of the common stock on the date of the agreement was $73,000, which is also reflected in additional paid-in-capital and was also initially allocated to prepaid land lease. On June 26, 2019 the expiration date of warrants to purchase 3,640,000 shares of common stock was extended to October 17, 2021. In August 2019, the Company completed construction of Building 1 at MCC and on September 1st, 2019, Bask, Inc commenced its 15-year lease of Building 1 which includes a base rent plus 15% of BASK’s gross revenue. The Company has the option to extend the term of the land lease for four (4) additional ten (10) year periods.

Effective October 1, 2019, the Company adopted Topic 842 and recorded ROU assets and lease liabilities of $6,980,957 and $4,256,869, respectively. As part of the adoption, prepaid land lease balance of $2,724,088 was classified as a component of the Company’s ROU assets.

The Company constructed Building 1 on the leased land and on September 1, 2019, BASK, commenced its 15-year sublease of Building 1 which includes a base rent plus 15% of BASK’s gross revenues. This sublease income is recorded as Rental income - related party on the Company’s consolidated statement of operations.

As of March 31, 2020, the Company’s right-of-use assets were $6,947,605, the Company’s current maturities of operating lease liabilities were $9,273, and the Company’s noncurrent lease liabilities were $4,243,224. During the six months ended March 31, 2020, the Company had operating cash flows from operating leases of 170,750.

The table below presents lease related terms and discount rates as of March 31, 2020.

	As of March 31, 2020
Weighted average remaining lease term
Operating leases (in years)		46.5
Weighted average discount rate
Operating leases		7.9	%

The reconciliation of the maturities of the operating leases to the lease liabilities recorded in the Consolidated Balance Sheet as of March 31, 2020 are as follows:

2020 (six months remaining)	$	170,750
2021	$	341,500
2022	$	341,500
2023	$	341,500
2024	$	341,500
Thereafter	$	14,343,000
Total lease payments		15,879,750
Less: Interest		(11,627,253	)
	$	4,252,497
Less: operating lease liability, current portion		(9,273	)
Operating lease liability, long term	$	4,243,224

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Office space

In January 2018 the Company's offices moved to 1550 Wewatta St, Denver, CO 80202. The office space lease is a month-to-month lease with an original term of less than 12 months. The leases require the Company to pay all taxes, maintenance, insurance, and other operating expenses. Lease expense for office space was $4,247 and $3,993 for the three months ended March 31, 2020 and 2019, respectively and $8,048 and $7,743 for the six months ended March 31, 2020 and 2019, respectively. This lease was terminated effective April 30, 2020, see Note 10.

Aggregate rental expense under all leases totaled $103,666 and $103,615 for the three months ended March 31, 2020 and 2019, respectively. Aggregate rental expense under all leases totaled $191,037 and $207,170 for the six months ended March 31, 2020 and 2019, respectively.

NOTE 8.  STOCKHOLDERS’ EQUITY

Equity Line Agreement. On December 12, 2017, the Company entered into an amended and restated equity line agreement with Mountain States Capital, LLC (MSC). Under the equity line agreement, MSC agreed to provide the Company with up to $10,000,000 of funding through the purchase of shares of the Company's common stock.

The equity line agreement expired on August 14, 2019.

During the three months ended December 31, 2018, we sold 311,816 shares of common stock pursuant to the equity line agreement and received $650,000 in cash from the sale of these shares

Stock Options. There was no stock option activity for the six months ended March 31, 2020. Stock option details are as follows: 

					Weighted
			Weighted		Average
			Average		Contractual		Aggregate
	Number of		Exercise		Term		Intrinsic
	Shares		Price		(Years)		Value
Outstanding as of September 30, 2019		800,000	$	1.69		4.0	$	-
Outstanding as of March 31, 2020		1,050,000	$	1.64		4.0	$	-
Vested and expected to vest at March 31, 2020		1,050,000	$	1.64		4.0	$	-
Exercisable at March 31, 2020		850,000	$	1.68		3.8	$	-

Stock option-based compensation expense associated with stock options was $147,073 and $0 for the six months ended March 31, 2020 and 2019, respectively. At March 31, 2020, the remaining unrecognized stock-based compensation associated with stock options is $93,529. These expenses are expected to be recognized over a remaining weighted average period of 2.0 years.

Warrants. There was no warrant activity for the six months ended March 31, 2020. Warrant details are as follows:

					Weighted
			Weighted		Average
			Average		Contractual		Aggregate
	Number of		Exercise		Term		Intrinsic
	Shares		Price		(Years)		Value
Outstanding as of September 30, 2019		11,238,650		1.52		2.3	$	-
Outstanding as of March 31,2020		11,238,650		1.52		1.8	$	-
Exercisable at March 31, 2020		11,238,650		1.52		1.8	$	-

NOTE 9. INCOME TAXES

We did not record any income tax expense or benefit for the three or six months ended March 31, 2020 or 2019. We increased our valuation allowance and reduced our net deferred tax assets to zero. Our assessment of the realization of our deferred tax assets has not changed, and as a result we continue to maintain a full valuation allowance for our net deferred assets as of March 31, 2020 and 2019.

As of March 31, 2020, we did not have any unrecognized tax benefits. There were no significant changes to the calculation since September 30, 2019.

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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 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, 2019 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's business plan is to design, develop, operate and/or lease state-of-the-art cannabis cultivation, processing and manufacturing facilities throughout the United States. AmeriCann’s team includes board members, consultants, engineers and architects who specialize in real estate development, traditional horticulture, lean manufacturing, medical research, facility construction, regulatory compliance, security, marijuana cultivation and genetics, extraction processes, and infused product development.

AmeriCann’s flagship project is the Massachusetts Cannabis Center. The Massachusetts Cannabis Center (“MCC”) is being developed on a 52-acre parcel located in Southeastern Massachusetts. AmeriCann’s MCC project is permitted for 987,000 sq. ft. of cannabis cultivation and processing infrastructure, which is being developed in phases to support both the existing medical cannabis and the newly emerging adult-use cannabis marketplace.

The first phase of the million square foot project, Building 1, a 30,000 square foot cultivation and processing facility, is complete and the building is currently 100% leased by a vertically-integrated Massachusetts cannabis company.

AmeriCann, Inc. has applied for Marijuana Product Manufacturing and cultivation licenses to operate at MCC and also enter into agreements with other licensed cannabis businesses in Massachusetts to occupy space in the million square foot project. AmeriCann will generate revenue through lease arrangements with the operators that include base rents and royalty payments up to 15% of gross revenue generated from products produced at MCC.

AmeriCann, through a 100% owned subsidiary, AmeriCann Brands, Inc., has applied for licenses from the Massachusetts Cannabis Control Commission to cultivate cannabis and provide extraction and product manufacturing support to the entire MCC project, as well as to other licensed cannabis farmers throughout regulated markets. AmeriCann Brands plans to occupy space in Building 2 at MCC which is in the final design process. In addition to large-scale extraction of cannabis plant material, AmeriCann Brands plans to produce branded consumer packaged goods including cannabis beverages, vaporizer products, edible products, non-edible products and concentrates at the state-of-the-art facility.

AmeriCann plans to replicate the brands, technology and innovations developed at its MCC project to new markets as a multi-state operator.

COVID-19 Pandemic

The Company believes that the COVID- 19 pandemic has had certain impacts on its business, but management does not believe there has been a material impact from the effects of the pandemic on the Company’s business and operations, results of operations, financial condition, cash flows, liquidity or capital and financial resources.

The Company has established policies to monitor the pandemic and has taken a number of actions to protect its employees, including restricting travel, encouraging quarantine and isolation when warranted, and directing most of its employees to work from home.

The Company’s Joint Venture partner recently commenced operations at AmeriCann’s Massachusetts Cannabis Center (“MCC”) in Freetown, MA. The initial phase of the development, Building 1, is a 30,000-square foot state-of-the-art cultivation and processing facility, 100 percent of which is occupied by Bask, Inc., an existing Massachusetts licensed vertically integrated cannabis operator. Building 1 is an operating, licensed medical cannabis cultivation and processing facility, which supports Bask’s medical dispensary, home delivery service, and wholesale partners.

In an effort to mitigate the COVID- 19 pandemic Massachusetts implemented a “Stay at Home Advisory.” The advisory commenced March 24, 2020. Massachusetts Governor Baker deemed medical cannabis businesses as an essential service and, therefore, Building 1 has continued to operate in a standard manner without interruption, while management implemented guidelines from the CDC and Massachusetts.

Since the “Stay at Home Advisory” was implemented and Adult-use cannabis sales in Massachusetts have been prohibited, Bask’s retail medical sales have increased significantly from levels recorded prior to the commencement of the Advisory, while wholesale sales have decreased. More than 7,200 new patients in Massachusetts have obtained medical cards after the “Stay at Home Advisory” commenced.

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SIGNIFICANT ACCOUNTING POLICIES

Leases

Effective October 1, 2019, we adopted ASC 842 Lease Accounting using the Transition method. 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 12 months or less).

RESULTS OF OPERATIONS 

Total Revenues

During the three months ended March 31, 2020 and 2019, we generated $34,690 and $0 in revenue, respectively. During the six months ended March 31, 2020 and 2019, we generated $69,381 and $0 in revenue, respectively. The increase in revenues is due to the lease rent revenue from BASK.

Advertising and Marketing Expenses

Advertising and marketing expenses were $1,415 and $44,190 for the three months ended March 31, 2020 and 2019, respectively. During the six months ended March 31, 2020 and 2019, the advertising and marketing expenses were $37,541 and $61,046 respectively. The decrease is due to a decrease in public relations costs, as the Company is shifting its focus to the planning and development of Building 2, the second phase of development at the Massachusetts Cannabis Center.

Professional Fees  

Professional fees were $143,779 and $170,310 for the three months ended March 31, 2020 and 2019, respectively. During the six months ended March 31, 2020 and 2019, the professional fees were $230,388 and $299,243, respectively. The decrease is due to a decrease in legal fees.

General and Administrative Expenses

General and administrative expenses were $393,616 and $305,091 for the three months ended March 31, 2020 and 2019, respectively. During the six months ended March 31, 2020 and 2019, the general and administrative expenses were $849,964 and $517,203, respectively. The increase is primarily a result of an increase in depreciation expense, stock compensation expense and payroll expenses.

Recovery of Provision for Doubtful Accounts

Provision for doubtful accounts was $0 for the three months ended March 31, 2020 and 2019, respectively. During the six months ended March 31, 2020 and 2019, the recovery of provision for doubtful accounts was $1,761,675 and $0, respectively. The decrease is a result of a reversal of the reserve on the receivable balance with WGP, as the payment was received in February 2020.

Interest Income

Interest income was $320,313 and $7,417 for the three months ended March 31, 2020 and 2019, respectively. During the six months ended March 31, 2020 and 2019, the interest income was $320,313 and $15,089, respectively. The increase is a result of the collection of the receivable balance from WGP.

Interest Expense

Interest expense was $206,606 and $11,736 for the three months ended March 31, 2020 and 2019, respectively. During the six months ended March 31, 2020 and 2019, the interest expense was $366,055 and $163,124, respectively. The increase is primarily attributable to interest on the $4,000,000 loan and the amortization of debt discounts during the three and six months ended March 31, 2020.

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Net Operating Income/Loss 

We had a net (loss) of $(420,084) and $(556,920) for the three months ended March 31, 2020 and 2019, respectively. We had a net income (loss) of $597,901 and $(1,095,428) for the six months ended March 31, 2020 and 2019, respectively. The decrease in net loss is attributable to an increase in revenues as well as the collection of the arbitration award and changes in operating expenses and interest income and expense, each of which is described above.

LIQUIDITY AND CAPITAL RESOURCES 

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. The Company had an accumulated deficit of $17,415,308 and $18,013,209 at March 31, 2020 and September 30, 2019, respectively, and had a net income of $597,901 (including a reduction of a previously recorded reserve of $1,761,675) for the six months ended March 31, 2020. 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. 

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

Notes Payable

See Notes 4 of the unaudited consolidated financial statements filed with this report for information concerning our notes payable.

Analysis of Cash Flows 

During the six months ended March 31, 2020, our net cash flows provided by operations were $902,628 as compared to net cash flows used in operations of $894,182 for the six months ended March 31, 2019. The increase is primarily due to collection of the arbitration award, timing of working capital payments, and depreciation expense during the six months ended March 31, 2020.

Cash flows used in investing activities were $368,915 for the six months ended March 31, 2020, consisting of additions to fixed assets and payments on notes receivables. Cash flows used in investing activities were $2,691,087 for the six months ended March 31, 2029, consisting of additions to constructions in progress.

Cash flows provided by financing activities were $1,410,000 for the six months ended March 31, 2020, consisting of payments on notes payable. Cash flows provided by financing activities were $1,339,501 for the six months ended March 31, 20190, consisting of common stock issued for cash and proceeds from the exercise of warrants.

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

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OFF-BALANCE SHEET ARRANGEMENTS

As of March 31, 2020, we did not have any off balance sheet arrangements.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our President and Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934), as of the end of the period covered by this Quarterly Report on Form 10-Q.  Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were not effective for the same reasons that our internal control over financial reporting were not effective.

Internal Control over Financial Reporting

As indicated in our Form 10-K filed on January 14, 2020, our Principal Executive Officer and Principal Financial Officer concluded that our internal control over financial reporting was not effective as of September 30, 2019 at the reasonable assurance level, as a result of a material weaknesses primarily related to a lack of a sufficient number of personnel with appropriate training and experience in accounting principles generally accepted in the United States of America, or GAAP, limited or no segregation of duties, and lack of independent directors.

We are currently in the process of evaluating the steps necessary to remediate these material weaknesses.

Change in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the quarterly period ended March 31, 2020 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.

20

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 14, 2020	By:	/s/ Timothy Keogh
		Timothy Keogh
		Principal Executive Officer
	By:	/s/ Benjamin Barton
		Benjamin Barton
		Principal Financial and Accounting Officer

21

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, 2020 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 14, 2020

/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, 2020 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 14, 2020

/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, 2020, 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 14, 2020
By:	/s/ Benjamin Barton
	Benjamin Barton
	Principal Financial Officer

Dated May 14 , 2020

XML

Note 6 - Income (Loss) Per Share

6 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Earnings Per Share [Text Block]

NOTE

6.

INCOME/LOSS PER SHARE

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

	Three Months Ended						Six Months Ended
	March 31,						March 31,
	2020			2019			2020		2019
Net (loss) income attributable to common stockholders	$	(420,084	)	$	(556,920	)	$	597,901	$	(1,095,428	)
Basic weighted average outstanding shares of common stock		23,504,820			22,913,023			23,504,820		22,738,806
Dilutive effects of common share equivalents		-			-			-		-
Dilutive weighted average outstanding shares of common stock		23,504,820			22,913,023			23,504,820		22,738,806
Basic and diluted net (loss) income per share of common stock	$	(0.02	)	$	(0.02	)	$	0.03	$	(0.05	)

As of

March 31, 2020,

we excluded

1,050,000

of stock options and

11,238,650

of warrants and

100,000

shares that would be issued from conversion of outstanding convertible notes from the computation of diluted net income (loss) per share since the effects are anti-dilutive. As of

March 31, 2019,

we excluded

150,000

of stock options and

9,145,650

of warrants from the computation of diluted net loss per share since the effects are anti-dilutive. 

XML

Significant Accounting Policies (Policies)

6 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

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

six

months ended

March 31, 2020

and

2019,

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 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

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.

Cash and Cash Equivalents, Restricted Cash and Cash Equivalents, Policy [Policy Text Block]

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:

	March 31, 2020		September 30, 2019
Cash and cash equivalents	$	414,904	$	465,843
Restricted cash		871		826,219
Total cash, cash equivalents, and restricted cash shown in the cash flow statement	$	415,775	$	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, Policy [Policy Text Block]

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

to

twenty

years. Property, plant and equipment consist of:

	March 31, 2020			September 30, 2019
Buildings and improvements	$	7,600,157		$	7,571,176
Computer equipment		349,576			-
Furniture and equipment		2,764			2,764
Total		7,952,497			7,573,940
Accumulated depreciation		(222,507	)		(1,152	)
Property, plant and equipment, net	$	7,729,990		$	7,572,788

Lessee, Leases [Policy Text Block]

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

12

months or less).

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

Recently Adopted Standards

In

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: (

1

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

2

) lease classification and (

3

) 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

six

months ended

March 31, 2020

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

7,

Leases, Commitments and Contingencies, for more information. 

XML

Note 7 - Leases, Commitments and Contingencies - Future Rental Payments Under Operating Leases (Details) - USD ($)	Mar. 31, 2020	Oct. 01, 2019	Sep. 30, 2019
2020 (six months remaining)	$ 170,750
2021	341,500
2022	341,500
2023	341,500
2024	341,500
Thereafter	14,343,000
Total lease payments	15,879,750
Less: Interest	(11,627,253)
Operating Lease, Liability, Total	4,252,497	$ 4,256,869
Less: operating lease liability, current portion	(9,273)
Operating lease liability, long term	$ 4,243,224		$ 0

XML

Note 6 - Income (Loss) Per Share (Details Textual) - shares	6 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Share-based Payment Arrangement, Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares)	1,050,000	150,000
Warrant [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares)	11,238,650	9,145,650
Convertible Debt Securities [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares)	100,000

XML

Note 9 - Income Taxes (Details Textual) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019
Income Tax Expense (Benefit), Total	$ 0	$ 0	$ 0	$ 0
Unrecognized Tax Benefits, Ending Balance	$ 0		$ 0

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Cash flows from operating activities:
Net income (loss)	$ 597,901	$ (1,095,428)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization	221,355	691
Amortization of right of use assets	33,352
Recovery of loss provision for doubtful accounts	(1,761,675)
Stock based compensation and option expense	147,073
Stock issued for services		65,000
Loss on disposal of assets		3,030
Amortization of equity instruments issued to lessor		19,730
Amortization of debt discount	155,261	128,068
Changes in operating assets and liabilities:
Tenant receivable	8,897
Notes and other receivables	1,761,675
Prepaid expenses	(20)	210
Accounts payable and accrued expenses	(182,137)	(15,913)
Operating lease liability	(4,372)
Interest payable	(69,238)	(75)
Interest payable - related party	(7,320)	(12,742)
Other payables	1,876	13,247
Net cash flows provided by (used in) operations	902,628	(894,182)
Cash flows from investing activities:
Additions to construction in progress		(2,702,532)
Additions to fixed assets	(378,557)
Payments received on notes receivable - related party	9,642	11,445
Net cash flows used in investing activities	(368,915)	(2,691,087)
Cash flows from financing activities:
Common stock issued for cash, net		954,001
Proceeds from the exercise of warrants		420,500
Payments on note payable - related party	(1,175,000)
Principal payments on notes payable	(235,000)	(35,000)
Net cash flows (used in) provided by financing activities	(1,410,000)	1,339,501
Net decrease in cash, cash equivalents, and restricted cash	(876,287)	(2,245,768)
Cash, cash equivalents, and restricted cash at beginning of period	1,292,062	4,016,949
Cash, cash equivalents, and restricted cash at end of period	415,775	1,771,181
Supplementary Disclosure of Cash Flow Information:
Cash paid for interest	356,872	114,745
Cash paid for income taxes
Shares issued for conversion of debt and accrued interest		$ 76,992

XML

Note 3 - Notes Receivable - Schedule of Notes Receivables (Details) (Parentheticals) - USD ($)	6 Months Ended	12 Months Ended
	Mar. 31, 2020	Sep. 30, 2019	Aug. 15, 2018
Notes and other receivables, allowance		$ 1,761,675
BASK [Member]
Interest rate	18.00%	18.00%	18.00%
Periodic payment	$ 4,422	$ 4,422
Wellness Group Pharms LLC [Member]
Secured note	$ 673,294	$ 673,294
Interest rate	18.00%	18.00%
Accrued consulting fees	$ 206,675	$ 206,675
Construction advances	332,357	332,357
Accrued interest	0	549,349
Notes and other receivables, allowance	$ 0	$ 1,761,675

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Mar. 31, 2020	Sep. 30, 2019
Assets
Cash and cash equivalents	$ 414,904	$ 465,843
Restricted cash	871	826,219
Tenant receivable	2,667	11,564
Current portion of prepaid land lease	0	57,959
Prepaid expenses and other current assets	13,652	13,632
Current portion of note receivable - related party	30,860	32,270
Total current assets	462,954	1,407,487
Property, Plant and Equipment, net	7,729,990	7,572,788
Operating lease - right-of-use asset	6,947,605	0
Notes and other receivables (net of allowance of $1,761,675 as of September 30, 2019)	0	0
Note receivable - related party	108,261	116,493
Prepaid land lease and related deposits, net of current portion		2,666,129
Security deposit and other assets	3,110	3,110
Total assets	15,251,920	11,766,007
Current Liabilities:
Accounts payable and accrued expenses	83,139	265,276
Interest payable (including $4,964 and $12,283 to related parties)	45,325	121,883
Other payables	11,005	9,129
Operating lease liability, short term	9,273
Notes payable	150,000	385,000
Total current liabilities	298,742	781,288
Notes payable (net of unamortized discounts of $727,342 and $882,603)	3,272,658	3,117,397
Notes payable - related party	581,646	1,756,646
Operating lease liability, long term	4,243,224	0
Total liabilities	8,396,270	5,655,331
Commitments and contingencies - see Note 7
Stockholders' Equity:
Preferred stock, $0.0001 par value; 20,000,000 shares authorized; no shares issued and outstanding	0	0
Common stock, $0.0001 par value; 100,000,000 shares authorized; 23,504,820 shares issued and outstanding as of March 31, 2020 and September 30, 2019	2,351	2,351
Additional paid in capital	24,268,607	24,121,534
Accumulated deficit	(17,415,308)	(18,013,209)
Total stockholders' equity	6,855,650	6,110,676
Total liabilities and stockholders' equity	$ 15,251,920	$ 11,766,007

XML

Note 7 - Leases, Commitments and Contingencies (Tables)

6 Months Ended

Mar. 31, 2020

Notes Tables

Lease Related Terms and Discount Rates [Table Text Block]

	As of March 31, 2020
Weighted average remaining lease term
Operating leases (in years)		46.5
Weighted average discount rate
Operating leases		7.9	%

Lessee, Operating Lease, Liability, Maturity [Table Text Block]

2020 (six months remaining)	$	170,750
2021	$	341,500
2022	$	341,500
2023	$	341,500
2024	$	341,500
Thereafter	$	14,343,000
Total lease payments		15,879,750
Less: Interest		(11,627,253	)
	$	4,252,497
Less: operating lease liability, current portion		(9,273	)
Operating lease liability, long term	$	4,243,224

XML

Note 1 - Nature of Business and Basis of Presentation - Property, Plant and Equipment, Net (Details) - USD ($)	Mar. 31, 2020	Sep. 30, 2019
Property, plant and equipment, gross	$ 7,952,497	$ 7,573,940
Accumulated depreciation	(222,507)	(1,152)
Property, plant and equipment, net	7,729,990	7,572,788
Building and Building Improvements [Member]
Property, plant and equipment, gross	7,600,157	7,571,176
Computer Equipment [Member]
Property, plant and equipment, gross	349,576
Furniture and Equipment [Member]
Property, plant and equipment, gross	$ 2,764	$ 2,764

XML

Note 8 - Stockholders' Equity (Tables)

6 Months Ended

Mar. 31, 2020

Notes Tables

Share-based Payment Arrangement, Option, Activity [Table Text Block]

					Weighted
			Weighted		Average
			Average		Contractual		Aggregate
	Number of		Exercise		Term		Intrinsic
	Shares		Price		(Years)		Value
Outstanding as of September 30, 2019		800,000	$	1.69		4.0	$	-
Outstanding as of March 31, 2020		1,050,000	$	1.64		4.0	$	-
Vested and expected to vest at March 31, 2020		1,050,000	$	1.64		4.0	$	-
Exercisable at March 31, 2020		850,000	$	1.68		3.8	$	-

Schedule of Stockholders' Equity Note, Warrants or Rights [Table Text Block]

					Weighted
			Weighted		Average
			Average		Contractual		Aggregate
	Number of		Exercise		Term		Intrinsic
	Shares		Price		(Years)		Value
Outstanding as of September 30, 2019		11,238,650		1.52		2.3	$	-
Outstanding as of March 31,2020		11,238,650		1.52		1.8	$	-
Exercisable at March 31, 2020		11,238,650		1.52		1.8	$	-

XML

Note 2 - Going Concern (Details Textual) - USD ($)	Mar. 31, 2020	Sep. 30, 2019
Retained Earnings (Accumulated Deficit), Ending Balance	$ (17,415,308)	$ (18,013,209)

XML

Note 1 - Nature of Business and Basis of Presentation

6 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Organization, Consolidation, Basis of Presentation, Business Description and Accounting Policies [Text Block]

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 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

six

months ended

March 31, 2020

and

2019,

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 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

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.

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:

	March 31, 2020		September 30, 2019
Cash and cash equivalents	$	414,904	$	465,843
Restricted cash		871		826,219
Total cash, cash equivalents, and restricted cash shown in the cash flow statement	$	415,775	$	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

to

twenty

years. Property, plant and equipment consist of:

	March 31, 2020			September 30, 2019
Buildings and improvements	$	7,600,157		$	7,571,176
Computer equipment		349,576			-
Furniture and equipment		2,764			2,764
Total		7,952,497			7,573,940
Accumulated depreciation		(222,507	)		(1,152	)
Property, plant and equipment, net	$	7,729,990		$	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

12

months or less).

Recent Accounting Pronouncements

Recently Adopted Standards

In

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: (

1

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

2

) lease classification and (

3

) 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

six

months ended

March 31, 2020

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

7,

Leases, Commitments and Contingencies, for more information. 

XML

Note 4 - Notes Payable (Details Textual) - USD ($)					1 Months Ended								6 Months Ended		12 Months Ended
	Aug. 02, 2019	Feb. 12, 2018	Dec. 29, 2017	Jul. 14, 2016	Jan. 31, 2020	May 31, 2019	Apr. 30, 2019	Feb. 28, 2019	Jan. 31, 2019	Oct. 31, 2018	Jul. 31, 2018	May 31, 2018	Mar. 31, 2020	Mar. 31, 2019	Sep. 30, 2019	Dec. 31, 2019	May 01, 2016	Feb. 01, 2016
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share)													$ 1.52		$ 1.52
Notes Payable, Noncurrent, Total													$ 3,272,658		$ 3,117,397
Amortization of Debt Discount (Premium)													155,261	$ 128,068
Notes Payable, Current, Total													150,000		385,000
Debt Instrument, Mature Date Extended, Amount																$ 150,000
Repayments of Notes Payable					$ 40,000								235,000	35,000
Interest Payable, Related Party, Current													4,964		12,283
Notes Amendment [Member]
Gain (Loss) on Extinguishment of Debt, Total															977,110
Conversion from December 2017 Convertible Notes to Common Stock [Member]
Debt Conversion, Original Debt, Amount								$ 30,000				$ 575,000
Debt Conversion, Converted Instrument, Shares Issued (in shares)								20,000				383,333
Debt Conversion, Accrued Interest												$ 15,233
Debt Conversion, Converted Interest payable, Shares Issued (in shares)												10,155
February 2018 Convertible Notes, Loan Principal Converted into Common Stock [Member]
Debt Conversion, Original Debt, Amount						$ 150,000				$ 45,000
Debt Conversion, Converted Instrument, Shares Issued (in shares)						100,000				30,000	250,000
February 2018 Convertible Notes, Interest Payable Converted into Common Stock [Member]
Debt Conversion, Original Debt, Amount						$ 19,521				$ 1,992	$ 14,704
Debt Conversion, Converted Instrument, Shares Issued (in shares)						13,014				1,328	9,802
February 2018 Convertible Notes, Loan Converted into Common Stock [Member]
Debt Conversion, Original Debt, Amount							$ 15,000
Debt Conversion, Converted Instrument, Shares Issued (in shares)							10,000
December 2017 Convertible Notes [Member] | GVC Capital LLC [Member]
Payments of Debt Issuance Costs			$ 64,000
Debt Instrument, Unamortized Discount, Total			15,438
Adjustments to Additional Paid in Capital, Warrant Issued			$ 48,562
Unrelated Party [Member] | Promissory Notes [member]
Average Closing Price per Share (in dollars per share)	$ 4
Average Daily Volume Of Shares Trades (in shares)	150,000
Payments of Debt Issuance Costs	$ 320,000
Strategic Capital Partners [Member]
Debt Instrument, Convertible, Conversion Price (in dollars per share)				$ 1.25
Amortization of Debt Discount (Premium)													0	10,682
Debt Conversion, Converted Instrument, Shares Issued (in shares)				400,000
Line of Credit Outstanding Amount Assumed by Related Party				$ 521,297
Notes Payable, Related Parties				2,431,646									581,646		1,756,646
Debt Instrument, Unamortized Premium, Total				72,651
Interest Payable, Related Party, Current													4,964		$ 12,283
Strategic Capital Partners [Member] | Debt Converted into Common Stock [Member]
Debt Conversion, Original Debt, Amount				500,000
Strategic Capital Partners [Member] | Debt Converted into Promissory Notes [Member]
Debt Conversion, Original Debt, Amount				$ 1,756,646
Strategic Capital Partners [Member] | Promissory Note One [Member]
Debt Instrument, Interest Rate, Stated Percentage				9.50%
Debt Instrument, Convertible, Conversion Price (in dollars per share)				$ 1.25
Notes Payable, Related Parties				$ 1,000,000
Strategic Capital Partners [Member] | Promissory Note Two [Member]
Debt Instrument, Interest Rate, Stated Percentage				8.00%											9.00%
Notes Payable, Related Parties				$ 756,646
Warrants Issued to Unrelated Parties Lenders [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares)	600,000
Warrants Issued to Unrelated Parties Lenders [Member] | Promissory Notes [member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares)	600,000
Warrants and Rights Outstanding	$ 562,762
Warrants to Purchase Additional Shares [Member]
Debt Instrument, Convertible, Conversion Price (in dollars per share)	$ 1.50
Warrants to Purchase Additional Shares [Member] | Strategic Capital Partners [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares)				800,000
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share)				$ 3
Warrants Issued to Placement Agent [Member] | Promissory Notes [member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares)	48,000
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share)	$ 1.50
Warrants Issued to Placement Agent [Member] | December 2017 Convertible Notes [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares)			106,667
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share)			$ 1.50
Warrants Issued to Accredited Investors [Member] | December 2017 Convertible Notes [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares)			533,333
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share)			$ 1.50
Warrants Issued to Accredited Investors [Member] | February 2018 Convertible Notes [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares)		540,000
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share)		$ 1.50
Warrants Issued to Accredited Investors and Placement Agent [Member] | December 2017 Convertible Notes [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares)			640,000
February 2018 Convertible Notes, Loan Principal Converted into Common Stock [Member]
Debt Conversion, Original Debt, Amount											$ 375,000
Warrant to Related Party, Set 1 [Member] | Strategic Capital Partners [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares)				800,000
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share)				$ 1.50
Warrants Issued for Notes Amendment [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares)															1,500,000
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share)															$ 1.25
Unrelated Party [Member]
Proceeds from Issuance of Long-term Debt, Total	$ 4,000,000
Debt Instrument, Interest Rate, Stated Percentage	11.00%
Line of Credit Facility, Current Borrowing Capacity																	$ 1,000,000	$ 200,000
Unrelated Party [Member] | Construction Loans [Member]
Proceeds from Issuance of Long-term Debt, Total			$ 800,000
Debt Instrument, Interest Rate, Stated Percentage			8.00%
Debt Instrument, Convertible, Conversion Price (in dollars per share)			$ 1.50
Unrelated Party [Member] | Promissory Notes [member]
Debt Instrument, Unamortized Discount, Total	$ 52,392												727,342
Notes Payable, Noncurrent, Total													4,000,000
Amortization of Debt Discount (Premium)													155,261
Accredited Investors [Member] | December 2017 Convertible Notes [Member] | Convertible Debt [Member]
Debt Instrument, Unamortized Discount, Total			$ 607,024
Amortization of Debt Discount (Premium)													0	51,749
Debt Instrument, Convertible, Beneficial Conversion Feature			$ 128,976
Notes Payable, Current, Total													0		$ 195,000
Accredited Investors [Member] | February 2018 Convertible Notes [Member] | Convertible Debt [Member]
Debt Instrument, Interest Rate, Stated Percentage		8.00%
Debt Instrument, Convertible, Conversion Price (in dollars per share)		$ 1.50
Debt Instrument, Unamortized Discount, Total		$ 523,013
Amortization of Debt Discount (Premium)													0	$ 87,001
Debt Instrument, Convertible, Beneficial Conversion Feature		286,987
Notes Payable, Current, Total													$ 150,000		$ 190,000
Debt Instrument, Face Amount		$ 810,000
Repayments of Convertible Debt									$ 35,000

XML

Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($)	Mar. 31, 2020	Sep. 30, 2019
Notes and other receivables, allowance		$ 1,761,675
Interest payable, related parties	$ 4,964	12,283
Note payable, discount, noncurrent	$ 727,342	$ 882,603
Preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred stock, shares authorized (in shares)	20,000,000	20,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized (in shares)	100,000,000	100,000,000
Common stock, shares issued (in shares)	23,504,820	23,504,820
Common stock, shares outstanding (in shares)	23,504,820	23,504,820

XML

Note 7 - Leases, Commitments and Contingencies

6 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

NOTE

7.

 LEASES, COMMITMENTS AND CONTINGENCIES

MCC.

 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 are developing the property as the MCC. Plans for the MCC 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. We paid the seller

$100,000

upon the signing of the agreement which amount was applied toward the purchase price at the closing.

Between

August 2015

and

September 2016,

there were several amendments to the Agreement to extend the closing date to

October 14, 2016.

As consideration for the extensions, the Company, agreed to increase the purchase price to

$4,325,000

and paid the seller

$725,000,

which was applied to the purchase price of the land. As of

September 30, 2016,

the Company had paid

$925,000

that was applied to the purchase price of the land at closing. On

October 17, 2016,

the Company closed on the land purchase via a sales-leaseback transaction. See ‘Operating Leases’ section below for additional information.

Operating Leases

Land

On

October 17, 2016,

the Company closed the previously announced acquisition of a

52.6

-acre parcel of undeveloped land in Freetown, Massachusetts. The deposits of

$925,000

previously paid by the Company to the seller, Boston Beer Company (“BBC”), were credited against the total purchase price of

$4,475,000.

The remaining balance of

$3,550,000

was paid to BBC by Massachusetts MMP. The property is located approximately

47

miles southeast of Boston. The Company plans to develop the property as the MCC. Plans for the MCC include the construction of sustainable greenhouse cultivation, processing, and infused product facilities that will be leased or sold to Registered Marijuana Dispensaries under the Massachusetts Medical Marijuana Program.

As part of a simultaneous transaction, the Company assigned the property rights to MMP for a nominal fee and entered a lease agreement pursuant to which MMP agreed to lease the property to the Company for an initial term of

fifty

(

50

) years. The Company has the option to extend the term of the lease for

four

(

4

) additional

ten

(

10

) year periods. The lease is a triple net lease, with the Company paying all real estate taxes, repairs, maintenance and insurance.

The lease payments will be the greater of (a)

$30,000

per month; (b)

$0.38

per square foot per month of any structure built on the property; or (c)

1.5%

of all gross monthly sales of products sold by the Company, any assignee of the Company, or any subtenant of the Company. The lease payments will be adjusted up (but

not

down) every

five

(

5

) years by any increase in the Consumer Price Index.

Between

October 17, 2016

and

April 17, 2017,

the monthly lease payments accrued, with all accrued lease payments paid to MMP on

April 17, 2017.

On

April 17, 2017,

the Company reimbursed MMP’s costs and expenses associated with the acquisition of the property, the lease, and the acquisition of the shares and the warrant from the Company (as further described below).

Under the terms of the lease, the Company had

six

(

6

) months to obtain

$2.6

million in capital funding for the construction of the

first

phase building. In the event that the Company was unable to raise these funds within the

six

(

6

) month period, the Company had an additional

six

(

6

) month period to do so; provided, that the Company has paid accrued lease payments and closing costs. If the Company was then unable to raise these funds on or before

twelve

(

12

) months from

October 17, 2016,

the lease would terminate. On

October 17, 2017,

the lease agreement was amended to provide that the Company will have until

16

months from

October 17, 2016

to raise

$2.6

million in capital funding. In addition to extending the funding deadline, this amendment granted MMP warrants to purchase up to

100,000

shares of Common Stock at an exercise price of

$1.50

per share. The warrant can be exercised at any time on or after

October 17, 2017

and on or before

October 17, 2022.

In

February

and

April, 2018,

the lease agreement was amended to provide that the Company will have until

20

months from

October 17, 2016

to raise

$2.6

million in capital funding. In addition to extending the funding deadline, this amendment granted MMP a warrant to purchase up to

100,000

shares of the Company’s common stock at an exercise price of

$1.50

per share. The warrant can be exercised at any time on or before 

October 17, 2022.

In

July 2018,

the Company fulfilled the

$2.6

million capital funding commitment.

The Company received a credit for the

$925,000

paid towards the purchase price of the land in the form of discounted lease payments. For the initial

fifty

(

50

) year term of the lease, the lease payments will be reduced by

$1,542

each month

In connection with the sale of the property to MMP and the lease, the Company and MMP entered into a Share Purchase Agreement pursuant to which the Company issued to MMP

100,000

shares of its common stock at par value of

$0.0001

(“Common Stock”), and a warrant to purchase up to

3,640,000

shares of Common Stock at an exercise price of

$1.00

per share. The warrant can be exercised at any time on or after

October 17, 2018

and on or before

October 17, 2020.

The warrant does

not

contain a cashless exercise provision. The fair value of the warrant was established using the Black Scholes option pricing model using the following assumptions:

● Risk-free interest rate – 1.12 percent

● Expected term – 4.0 years

● Volatility – 115 percent

The Company allocated

$1,899,966

to the warrant which is reflected in additional paid-in-capital and was initially allocated to prepaid land lease. The fair value of the common stock on the date of the agreement was

$73,000,

which is also reflected in additional paid-in-capital and was also initially allocated to prepaid land lease. On

June 26, 2019

the expiration date of warrants to purchase

3,640,000

shares of common stock was extended to

October 17, 2021.

In

August 2019,

the Company completed construction of Building

1

at MCC and on

September

1st,

2019,

Bask, Inc commenced its

15

-year lease of Building

1

which includes a base rent plus

15%

of BASK’s gross revenue. The Company has the option to extend the term of the land lease for

four

(

4

) additional

ten

(

10

) year periods.

Effective

October 1, 2019,

the Company adopted Topic

842

and recorded ROU assets and lease liabilities of

$6,980,957

and

$4,256,869,

respectively. As part of the adoption, prepaid land lease balance of

$2,724,088

was classified as a component of the Company’s ROU assets.

The Company constructed Building

1

on the leased land and on

September 1, 2019,

BASK, commenced its

15

-year sublease of Building

1

which includes a base rent plus

15%

of BASK’s gross revenues. This sublease income is recorded as Rental income - related party on the Company’s consolidated statement of operations.

As of

March 31, 2020,

the Company’s right-of-use assets were

$6,947,605,

the Company’s current maturities of operating lease liabilities were

$9,273,

and the Company’s noncurrent lease liabilities were

$4,243,224.

During the

six

months ended

March 31, 2020,

the Company had operating cash flows from operating leases of

170,750.

The table below presents lease related terms and discount rates as of

March 31, 2020.

	As of March 31, 2020
Weighted average remaining lease term
Operating leases (in years)		46.5
Weighted average discount rate
Operating leases		7.9	%

The reconciliation of the maturities of the operating leases to the lease liabilities recorded in the Consolidated Balance Sheet as of

March 31, 2020

are as follows:

2020 (six months remaining)	$	170,750
2021	$	341,500
2022	$	341,500
2023	$	341,500
2024	$	341,500
Thereafter	$	14,343,000
Total lease payments		15,879,750
Less: Interest		(11,627,253	)
	$	4,252,497
Less: operating lease liability, current portion		(9,273	)
Operating lease liability, long term	$	4,243,224

Office space

In

January 2018

the Company's offices moved to

1550

Wewatta St, Denver, CO

80202.

The office space lease is a month-to-month lease with an original term of less than

12

months. The leases require the Company to pay all taxes, maintenance, insurance, and other operating expenses. Lease expense for office space was

$4,247

and

$3,993

for the

three

months ended

March 31, 2020

and

2019,

respectively and

$8,048

and

$7,743

for the

six

months ended

March 31, 2020

and

2019,

respectively. This lease was terminated effective

April 30, 2020,

see Note

10.

Aggregate rental expense under all leases totaled

$103,666

and

$103,615

for the

three

months ended

March 

31,

2020

and

2019,

respectively. Aggregate rental expense under all leases totaled

$191,037

and

$207,170

for the

six

months ended

March 

31,

2020

and

2019,

respectively.

XML

Note 1 - Nature of Business and Basis of Presentation (Tables)

6 Months Ended

Mar. 31, 2020

Notes Tables

Cash, Cash Equivalents, and Restricted Cash [Table Text Block]

	March 31, 2020		September 30, 2019
Cash and cash equivalents	$	414,904	$	465,843
Restricted cash		871		826,219
Total cash, cash equivalents, and restricted cash shown in the cash flow statement	$	415,775	$	1,292,062

Property, Plant and Equipment [Table Text Block]

	March 31, 2020			September 30, 2019
Buildings and improvements	$	7,600,157		$	7,571,176
Computer equipment		349,576			-
Furniture and equipment		2,764			2,764
Total		7,952,497			7,573,940
Accumulated depreciation		(222,507	)		(1,152	)
Property, plant and equipment, net	$	7,729,990		$	7,572,788

XML

Note 8 - Stockholders' Equity - Warrant Activity (Details) - $ / shares	6 Months Ended	12 Months Ended
	Mar. 31, 2020	Sep. 30, 2019
Outstanding, warrants (in shares)	11,238,650	11,238,650
Outstanding, warrants, weighted average exercise price (in dollars per share)	$ 1.52	$ 1.52
Outstanding, warrants, weighted average remaining contract term (Year)	1 year 292 days	2 years 109 days
Exercisable, warrants (in shares)	11,238,650
Exercisable, warrants, weighted average exercise price (in dollars per share)	$ 1.52
Exercisable, warrants, weighted average remaining contract term (Year)	1 year 292 days

XML

Note 7 - Leases, Commitments and Contingencies - Lease Related Terms and Discount Rates (Details)	Mar. 31, 2020
Operating leases (in years) (Year)	46 years 182 days
Operating leases	7.90%

XML

Note 5 - Related Party Transactions (Details Textual) - USD ($)				6 Months Ended
	Sep. 01, 2019	Jul. 26, 2019	Aug. 15, 2018	Mar. 31, 2020	Sep. 30, 2019
Lessee, Operating Lease, Term of Contract (Year)				46 years 182 days
Operating Lease, Percentage of Leassee's Gross Revenue	15.00%
Tenant Receivable, Current				$ 2,667	$ 11,564
BASK [Member]
Notes Receivable, Related Parties			$ 129,634	$ 139,121	$ 148,763
Interest Receivable			$ 44,517
Note Receivable, Term (Year)			5 years
Note Receivable, Interest Rate			18.00%	18.00%	18.00%
BASK [Member] | Lease Agreement [Member]
Lessee, Operating Lease, Term of Contract (Year)		15 years
Annual Base Rent		$ 135,000
Operating Lease, Percentage of Leassee's Gross Revenue		15.00%
Strategic Capital Partners [Member] | Consulting Services [Member]
Related Party Transaction, Amounts of Transaction				$ 90,000

XML

Note 1 - Nature of Business and Basis of Presentation - Restricted Cash (Details) - USD ($)	Mar. 31, 2020	Sep. 30, 2019	Mar. 31, 2019	Sep. 30, 2018
Cash and cash equivalents	$ 414,904	$ 465,843
Restricted cash	871	826,219
Total cash, cash equivalents, and restricted cash shown in the cash flow statement	$ 415,775	$ 1,292,062	$ 1,771,181	$ 4,016,949

XML

Note 3 - Notes and Other Receivables

6 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

NOTE

3.

NOTES AND OTHER RECEIVABLES

Notes and other receivables as of

March 31, 2020

and

September 30, 2019,

consisted of the following: 

	March 31, 2020			September 30, 2019
Notes and other receivables from WGP, a licensed medical marijuana cultivator; $673,294 note secured by real and personal property of the borrower, interest rate of 18.0%; accrued consulting and legal fees of $206,675, construction advances of $332,357 and accrued interest of $549,349 at September 30, 2019. Net of reserves of $1,761,675 as of September 30, 2019. Balance was collected in full in February 2020.	$	-		$	-
Related party note receivable from BASK, a non-profit corporation, interest rate of 18.0%; monthly principal and interest payments of $4,422, maturing in 2023.		139,121			148,763
		139,121			148,763
Less: Current portion		(30,860	)		(32,270	)
	$	108,261		$	116,493

The notes and other receivables from Wellness Group Pharms (“WGP”) were fully reserved as of

September 30, 2019

due to ongoing disputes between the Company and WGP. The Company filed a Demand for Arbitration against WGP on

April 7, 2017.

On

January 18, 2018,

the arbitration panel awarded the Company

$1,045,000

plus interest at the rate of

18%

per year from

April 18, 2015

to

March 18, 2018

for

$550,000.

In addition to the principal and interest awarded of

$1,595,000,

the Company was also awarded its attorneys’ fees and arbitration fees. The Company, as of

December 31, 2019,

reversed the previously recorded reserve on the receivable with WGP in the amount of

$1,761,675

since on

February 5, 2020

the Company received cash of

$2,069,138

from WGP as payment in full for the fully reserved notes and other receivables which include principal, interest, attorneys’ fees and arbitration fees.

XML

Note 3 - Notes Receivable - Schedule of Notes Receivables (Details) - USD ($)	Mar. 31, 2020	Sep. 30, 2019	Aug. 15, 2018
Notes and other receivables (net of allowance of $1,761,675 as of September 30, 2019)	$ 0	$ 0
Notes and Other Receivables, Net	139,121	148,763
Less: Current portion	(30,860)	(32,270)
Note receivable - related party	108,261	116,493
BASK [Member]
Notes Receivable, Related Parties	139,121	148,763	$ 129,634
Wellness Group Pharms LLC [Member]
Notes and other receivables (net of allowance of $1,761,675 as of September 30, 2019)

XML

Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($)	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Total
Balances (in shares) at Sep. 30, 2018	22,106,763
Balances at Sep. 30, 2018	$ 2,211	$ 19,937,606	$ (13,109,541)	$ 6,830,276
Stock issued for cash, net (in shares)	311,816
Stock issued for cash, net	$ 31	649,969		650,000
Conversion of debt (in shares)	31,328
Conversion of debt	$ 3	46,989		46,992
Stock issued for warrants exercised, net (in shares)	308,000
Stock issued for warrants exercised, net	$ 31	395,469		395,500
Stock issued for services (in shares)	25,000
Stock issued for services	$ 3	64,997		65,000
Net income (loss)			(538,508)	(538,508)
Balances (in shares) at Dec. 31, 2018	22,782,907
Balances at Dec. 31, 2018	$ 2,279	21,095,030	(13,648,049)	7,449,260
Balances (in shares) at Sep. 30, 2018	22,106,763
Balances at Sep. 30, 2018	$ 2,211	19,937,606	(13,109,541)	6,830,276
Net income (loss)				(1,095,428)
Balances (in shares) at Mar. 31, 2019	23,004,516
Balances at Mar. 31, 2019	$ 2,301	21,454,009	(14,204,969)	7,251,341
Balances (in shares) at Dec. 31, 2018	22,782,907
Balances at Dec. 31, 2018	$ 2,279	21,095,030	(13,648,049)	7,449,260
Stock issued for cash, net (in shares)	176,609
Stock issued for cash, net	$ 17	303,984		304,001
Conversion of debt (in shares)	20,000
Conversion of debt	$ 2	29,998		30,000
Stock issued for warrants exercised, net (in shares)	25,000
Stock issued for warrants exercised, net	$ 3	24,997		25,000
Net income (loss)			(556,920)	(556,920)
Balances (in shares) at Mar. 31, 2019	23,004,516
Balances at Mar. 31, 2019	$ 2,301	21,454,009	(14,204,969)	7,251,341
Balances (in shares) at Sep. 30, 2019	23,504,820
Balances at Sep. 30, 2019	$ 2,351	24,121,534	(18,013,209)	6,110,676
Net income (loss)			1,017,985	1,017,985
Stock-based compensation		108,522		108,522
Balances (in shares) at Dec. 31, 2019	23,504,820
Balances at Dec. 31, 2019	$ 2,351	24,230,056	(16,995,224)	7,237,183
Balances (in shares) at Sep. 30, 2019	23,504,820
Balances at Sep. 30, 2019	$ 2,351	24,121,534	(18,013,209)	6,110,676
Net income (loss)				597,901
Balances (in shares) at Mar. 31, 2020	23,504,820
Balances at Mar. 31, 2020	$ 2,351	24,268,607	(17,415,308)	6,855,650
Balances (in shares) at Dec. 31, 2019	23,504,820
Balances at Dec. 31, 2019	$ 2,351	24,230,056	(16,995,224)	7,237,183
Net income (loss)			(420,084)	(420,084)
Stock-based compensation		38,551		38,551
Balances (in shares) at Mar. 31, 2020	23,504,820
Balances at Mar. 31, 2020	$ 2,351	$ 24,268,607	$ (17,415,308)	$ 6,855,650

XML

Document And Entity Information - shares	6 Months Ended
	Mar. 31, 2020	May 08, 2020
Document Information [Line Items]
Entity Registrant Name	Americann, Inc.
Entity Central Index Key	0001508348
Current Fiscal Year End Date	--09-30
Entity Filer Category	Non-accelerated Filer
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Interactive Data Current	Yes
Entity Common Stock, Shares Outstanding (in shares)		23,504,820
Entity Shell Company	false
Document Type	10-Q
Document Period End Date	Mar. 31, 2020
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Amendment Flag	false

XML

Note 8 - Stockholders' Equity (Details Textual) - USD ($)	3 Months Ended	6 Months Ended
	Dec. 31, 2018	Mar. 31, 2020	Mar. 31, 2019	Dec. 12, 2017
Proceeds from Issuance of Common Stock			$ 954,001
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in shares)		0
Share-based Payment Arrangement, Option [Member]
Share-based Payment Arrangement, Expense		$ 147,073	$ 0
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total		$ 93,529
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition (Year)		2 years
Equity Line Agreement [Member]
Stock Issued During Period, Shares, New Issues (in shares)	311,816
Proceeds from Issuance of Common Stock	$ 650,000
Mountain States Capital, LLC [Member]
Line of Credit Facility, Maximum Borrowing Capacity				$ 10,000,000

XML

Note 6 - Income (Loss) Per Share - Schedule of Earnings Per Share, Basic and Diluted (Details) - USD ($)	3 Months Ended				6 Months Ended
	Mar. 31, 2020	Dec. 31, 2019	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2020	Mar. 31, 2019
Net income (loss)	$ (420,084)	$ 1,017,985	$ (556,920)	$ (538,508)	$ 597,901	$ (1,095,428)
Basic weighted average outstanding shares of common stock (in shares)	23,504,820		22,913,023		23,504,820	22,738,806
Dilutive effects of common share equivalents (in shares)	0		0		0	0
Dilutive weighted average outstanding shares of common stock (in shares)	23,504,820		22,913,023		23,504,820	22,738,806
Basic and diluted (loss) income per common share (in dollars per share)	$ (0.02)		$ (0.02)		$ 0.03	$ (0.05)

XML

Note 6 - Income (Loss) Per Share (Tables)

6 Months Ended

Mar. 31, 2020

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended						Six Months Ended
	March 31,						March 31,
	2020			2019			2020		2019
Net (loss) income attributable to common stockholders	$	(420,084	)	$	(556,920	)	$	597,901	$	(1,095,428	)
Basic weighted average outstanding shares of common stock		23,504,820			22,913,023			23,504,820		22,738,806
Dilutive effects of common share equivalents		-			-			-		-
Dilutive weighted average outstanding shares of common stock		23,504,820			22,913,023			23,504,820		22,738,806
Basic and diluted net (loss) income per share of common stock	$	(0.02	)	$	(0.02	)	$	0.03	$	(0.05	)

XML

Note 5 - Related Party Transactions

6 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

NOTE

5.

RELATED PARTY TRANSACTIONS

BASK (formerly Coastal Compassion, Inc)

.

 On

April 7, 2016,

we signed agreements with BASK. BASK is

one

of a limited number of organizations that has received a provisional or final registration to cultivate, process and sell medical and adult use cannabis by the Massachusetts Cannabis Control Commission.

Pursuant to the agreements, we agreed to provide BASK with financing for construction and working capital required for BASK’s approved dispensary and cultivation center in Fairhaven, MA.

On

August 15, 2018,

the Company combined the construction and working capital advances of

$129,634

and accrued interest of

$44,517

into a new loan with payments over

5

years with

18%

interest. At

March 31, 2020

and

September 30, 2019,

the outstanding balance on the note receivable was

$139,121

and

148,763,

respectively

On

July 26, 2019,

the Company entered into a

15

-Year Triple Net lease of Building

1

of the MCC with BASK. The lease commenced on

September 1, 2019

and includes an annual base rent of

$135,000

and a revenue participation fee equivalent to

15%

of BASK's gross revenues. As of

March 31, 2020,

the BASK tenant receivable balance was

$2,667.

Tim Keogh, our Chief Executive Officer, is a Board Member of BASK.

During the

six

months ended

March 31, 2020,

the Company incurred and paid

$90,000

of consulting fees to SCP.

XML

Note 9 - Income Taxes

6 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Income Tax Disclosure [Text Block]

NOTE

9.

INCOME TAXES

We did

not

record any income tax expense or benefit for the

three

or

six

months ended

March 31, 2020

or

2019.

We increased our valuation allowance and reduced our net deferred tax assets to zero. Our assessment of the realization of our deferred tax assets has

not

changed, and as a result we continue to maintain a full valuation allowance for our net deferred assets as of

March 31, 2020

and

2019.

As of

March 31, 2020,

we did

not

have any unrecognized tax benefits. There were

no

significant changes to the calculation since

September 30, 2019.

XML

Note 8 - Stockholders' Equity - Stock Option Activity (Details) - $ / shares	6 Months Ended	12 Months Ended
	Mar. 31, 2020	Sep. 30, 2019
Shares Outstanding (in shares)	1,050,000	800,000
Outstanding, weighted average exercise price (in dollars per share)	$ 1.64	$ 1.69
Outstanding, weighted average contractual term (Year)	4 years	4 years
Shares Vested and expected to vest (in shares)	1,050,000
Vested and expected to vest, weighted average exercise price (in dollars per share)	$ 1.64
Vested and expected to vest, weighted average contractual term (Year)	4 years
Shares Exercisable (in shares)	850,000
Exercisable, weighted average exercise price (in dollars per share)	$ 1.68
Exercisable, weighted average contractual term (Year)	3 years 292 days

XML

Note 7 - Leases, Commitments and Contingencies (Details Textual)					1 Months Ended	3 Months Ended		6 Months Ended		14 Months Ended	21 Months Ended
	Sep. 01, 2019	Apr. 17, 2018 USD ($) $ / shares shares	Oct. 17, 2017 USD ($) $ / shares shares	Oct. 17, 2016 USD ($) a $ / shares shares	Jul. 31, 2018 USD ($)	Mar. 31, 2020 USD ($) $ / shares	Mar. 31, 2019 USD ($)	Mar. 31, 2020 USD ($) $ / shares	Mar. 31, 2019 USD ($)	Sep. 30, 2016 USD ($)	Sep. 30, 2016 USD ($)	Oct. 01, 2019 USD ($)	Sep. 30, 2019 USD ($) $ / shares	Jun. 26, 2019 shares	Jan. 14, 2015 USD ($) a
Lessee, Operating Lease, Term of Contract (Year)						46 years 182 days		46 years 182 days
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share) | $ / shares						$ 1.52		$ 1.52					$ 1.52
Capital Funding Commitment Fulfilled					$ 2,600,000
Common Stock, Par or Stated Value Per Share (in dollars per share) | $ / shares						$ 0.0001		$ 0.0001					$ 0.0001
Operating Lease, Percentage of Leassee's Gross Revenue	15.00%
Operating Lease, Right-of-Use Asset						$ 6,947,605		$ 6,947,605				$ 6,980,957	$ 0
Operating Lease, Liability, Total						4,252,497		4,252,497				4,256,869
Prepaid Rent						0		0					57,959
Operating Lease, Liability, Current						9,273		9,273
Operating Lease, Liability, Noncurrent						4,243,224		4,243,224					$ 0
Operating Cash Flows from Operating Leases								170,750
Operating Lease, Expense						103,666	$ 103,615	191,037	$ 207,170
1550 Wewatta St, Denver, CO 80202 [Member]
Operating Lease, Expense						$ 4,247	$ 3,993	$ 8,048	$ 7,743
BASK [Member]
Lessee, Operating Sublease, Term (Year)	15 years
Lessee, Operating Sublease, Percentage of Gross Revenues	15.00%
Additional Paid-in Capital [Member]
Warrants Issued During Period, Value, Sale Leaseback Transaction				$ 1,899,966
Stock Issued During Period, Value, Sale Leaseback Transaction				73,000
Warrants Issued for Lease Amendment #1 [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares) | shares			100,000
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share) | $ / shares			$ 1.50
Warrants Issued for Lease Amendment #3 [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares) | shares		100,000
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share) | $ / shares		$ 1.50
Warrants Issued In Connection With Sale Leaseback Transaction [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares) | shares														3,640,000
Sale Leaseback to MMP [Member]
Payments to Acquire Land				$ 925,000
Lessee, Operating Lease, Term of Contract (Year)				50 years
Lessee Leasing Arrangements, Operating Leases, Number of Renewal Periods				4
Lessee, Operating Lease, Renewal Term (Year)				10 years
Sale Leaseback Transaction, Monthly Rental Payments				$ 30,000
Sale Leaseback Transaction, Monthly Rental Payments, Per Square Foot				0.38
Sale Leaseback Transaction, Monthly Rental Payments, Percentage of Gross Monthly Sales				1.50%
Sale Leaseback Transaction, Monthly Rental Payments, Adjustment Period (Year)				5 years
Sale Leaseback Transaction, Period Available to Obtain Capital Funding for Construction of the First Phase Building (Month)		1 year 240 days	1 year 120 days	180 days
Sales Leaseback Transaction, Amount of Capital Funding to Obtain For Construction of the First Phase Building		$ 2,600,000	$ 2,600,000	$ 2,600,000
Sale Leaseback Transaction, Additional Period Available to Obtain Capital Funding for Construction of the First Phase Building (Month)				180 days
Sale Leaseback Transaction, Period Unable to Obtain Capital Funding for Construction of the First Phase Building, After Which the Arrangement Will Terminate (Month)				1 year
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares) | shares				3,640,000
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share) | $ / shares				$ 1
Sale Leaseback Transaction, Discount to the Purchase Price, Monthly Reduction in Payments				$ 1,542
Stock Issued During Period, Shares, Sale Leaseback Transaction (in shares) | shares				100,000
Common Stock, Par or Stated Value Per Share (in dollars per share) | $ / shares				$ 0.0001
Sale Leaseback to MMP [Member] | Accounting Standards Update 2016-02 [Member]
Operating Lease, Right-of-Use Asset												2,724,088
Prepaid Rent												$ (2,724,088)
Sale Leaseback to MMP [Member] | Measurement Input, Risk Free Interest Rate [Member]
Warrants and Rights Outstanding, Measurement Input				0.0112
Sale Leaseback to MMP [Member] | Measurement Input, Expected Term [Member]
Warrants and Rights Outstanding, Measurement Input				4
Sale Leaseback to MMP [Member] | Measurement Input, Price Volatility [Member]
Warrants and Rights Outstanding, Measurement Input				1.15
Massachusetts Land Purchase [Member]
Area of Land (Acre) | a				52.6											52.6
Deposits on Land															$ 100,000
Land, Selling Price				$ 4,475,000						$ 4,325,000
Payments to Acquire Land										$ 725,000	$ 925,000
Payments to Acquire Land Held-for-use				$ 3,550,000

XML

Note 4 - Notes Payable

6 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Debt Disclosure [Text Block]

NOTE

4.

 NOTES PAYABLE

Unrelated

On

August 2, 2019

the Company secured a

$4,000,000

investment from an unrelated

third

party in the form of a loan. The loan was evidenced by a note which bears interest at the rate of

11%

per year, is due and payable on

August 2, 2022

and is secured by a

first

lien on Building

1

at the Company’s Massachusetts Cannabis Center (“MCC”).

The note holder also received a warrant which allows the holder to purchase

600,000

shares of the Company’s common stock at a price of

$1.50

per share. The warrant will expire on the earlier of (i)

August 2, 2024

or (ii)

twenty

days after written notice of the holder that the daily Volume Weighted Average Price of the Company’s common stock was at least

$4.00

for

twenty

consecutive trading days and the average daily trading volume of the Company’s common stock during the

twenty

trading days was at least

150,000

shares.

The broker for the loan received a cash commission of

$320,000

plus warrants to purchase

48,000

shares of the Company's common stock. The warrants are exercisable at a price of

$1.50

per share and expire on

August 2, 2024. 

The cash commission and the fair value of the warrants amounting to

$52,392

were recognized as a discount to the note.

The Company allocated the proceeds between the note and the warrants based on their relative fair values. The relative fair value of the

600,000

warrants was

$562,762

which was recognized as additional paid in capital and a corresponding debt discount. 

At

March 31, 2020,

the outstanding principal on these notes was

$4,000,000

and the unamortized debt discount was

$727,342.

All debt discounts are being amortized on a straight-line basis over the term of the note. Amortization expense related to the debt discounts was

$155,261

for the

six

months ended

March 31, 2020.

December 2017

Convertible Note Offering

On

December 29, 2017

the Company sold convertible notes in the principal amount of

$800,000

to a group of accredited investors. The notes bear interest at

8%

per year, are unsecured, and were due and payable on

December 31, 2018.

On

December 31, 2018,

the maturity date of the notes were extended to

December 31, 2019.

The notes were fully paid off in

January 2020.

The original notes included a provision to be converted at any time into shares of the Company's common stock at an initial conversion price of

$1.50

per share.

The note holders also received warrants which entitle the note holders to purchase up to

533,333

shares of the Company's common stock. The warrants are exercisable at a price of

$1.50

per share and expire on

October 17, 2022.

The placement agent for the offering received a cash commission of

$64,000,

plus warrants to purchase

106,667

shares of the Company's common stock. The warrants are exercisable at a price of

$1.50

per share and expire on

December 29, 2022.

The Company allocated the proceeds between the note and the warrants based on their relative fair values. The relative fair value of the

640,000

warrants was

$607,024

which was recognized as additional paid in capital and a corresponding debt discount. After such allocation, the effective conversion price on the issuance date was less than the fair value of the stock into which the notes were convertible, giving rise to a beneficial conversion feature of

$128,976

which was recognized as additional paid in capital and a corresponding debt discount.

The

$64,000

paid to the placement agent was allocated on a pro-rata basis to the warrants and the debt which was recorded as an offset to additional paid in capital and an increase in debt discount of

$48,562

and

$15,438,

respectively.

During

February 2019,

a loan in the principal amount of

$30,000

was converted into

20,000

shares of common stock.

During

May 2018,

a loan in the principal amount of

$575,000

was converted into

383,333

shares of common stock. In addition, interest payable in the amount of

$15,233

was converted into

10,155

shares.

At

March 31, 2020

and

September 30, 2019,

the outstanding principal on these notes was

$0

and

$195,000,

respectively. All debt discounts are being recognized on a straight-line basis over the terms of the notes. Amortization expense related to the debt discounts were

$0

and

$51,749

for the

six

months ended

March 31, 2020

and

2019,

respectively.

February 2018

Convertible Note Offering

On

February 12, 2018

the Company sold convertible notes in the principal amount of

$810,000

to a group of accredited investors. The notes bear interest at

8%

per year, are unsecured, and are due and payable on

December 31, 2018.

On

December 31, 2018,

the notes were extended to mature on

December 31, 2019.

At the option of the note holders, the notes

may

be converted at any time into shares of the Company's common stock at an initial conversion price of

$1.50

per share.

The note holders also received warrants which entitle the note holders to purchase up to

540,000

shares of the Company's common stock. The warrants are exercisable at a price of

$1.50

per share and expire on

October 17, 2022.

The Company allocated the proceeds between the note and the warrants based on their relative fair values. The relative fair value of the

540,000

warrants was

$523,013

which was recognized as additional paid in capital and a corresponding debt discount. After such allocation, the effective conversion price on the issuance date was less than the fair value of the stock into which the note is convertible, giving rise to a beneficial conversion feature of

$286,987

which is recognized as additional paid in capital and a corresponding debt discount.

During

January 2019,

a loan in the amount of

$35,000

was repaid in cash.

In

October 2018,

a loan in the principal amount of

$45,000

was converted into

30,000

shares of common stock. In addition, interest payable in the amount of

$1,992

was converted into

1,328

shares.

During

July 2018,

loans in the principal amount of

$375,000

were converted into

250,000

shares of common stock. In addition, interest payable in the amount of

$14,704

was converted into

9,802

shares.

In

May 2019,

loans in the principal amount of

$150,000

were converted into

100,000

shares of common stock. In addition, interest payable in the amount of

$19,521

was converted into

13,014

shares.

In

April 2019,

loans in the amount of

$15,000

were converted to

10,000

shares of common stock.

At

March 31, 2020

and

September 30, 2019,

the outstanding principal on these notes was

$150,000

and

$

190,000,

respectively. All debt discounts are being recognized on a straight-line basis over the terms of the notes. Amortization expense related to the debt discounts were

$0

and

$87,001

for the

six

months ended

March 31, 2020

and

2019,

respectively. On

December 31, 2019,

a note in the amount of

$150,000

was extended to mature on

December 31, 2020.

A loan in the amount of

$40,000

was paid off in

January 2020.

Related Party

On

February 1, 2016,

we entered into an agreement with an unrelated party which provided us with borrowing capacity of

$200,000.

 On

May 1, 2016,

the agreement was amended to increase the borrowing capacity to

$1,000,000.

On

July 14, 2016,

Strategic Capital Partners (“SCP”) assumed the

$521,297

loan borrowed against this credit line, increasing the total balance owed to SCP to

$2,431,646.

SCP is controlled by Benjamin J. Barton,

one

of our officers and directors and a principal shareholder. The amounts borrowed from SCP were used to fund our operations.

On

July 14, 2016,

we entered into a debt modification agreement whereby a portion of the debt was converted into common stock and the remaining debt was renegotiated into

two

promissory notes.

Of the amounts owed to SCP,

$500,000

was converted into

400,000

shares of our common stock (

$1.25

conversion rate).

The remaining

$1,756,646

owed to SCP was divided into

two

promissory notes.

The

first

note, in the principal amount of

$1,000,000,

bears interest at

9.5%

per year and was due and payable on

December 31, 2019.

Interest is payable quarterly. The note can be converted at any time, at the option of SCP, into shares of our common stock, initially at a conversion price of

$1.25

per share.

The

second

note, in the principal amount of

$756,646,

bears interest at

8%

per year and matures on

December 31, 2019.

Interest is payable quarterly. The note is

not

convertible into shares of our common stock but is secured by a

first

lien on all amounts due to us by WGP. Any payments received from the sale, lease or commercialization of the property in Denver, and any amounts received from WGP, will be applied to the principal amount of the note. Otherwise, all unpaid principal and interest was due on

December 31, 2019.

In connection with the debt modification agreement, we issued SCP warrants to purchase

800,000

shares of our common stock, exercisable at a price of

$1.50

per share, and warrants to purchase an additional

800,000

shares of common stock, exercisable at a price of

$3.00

per share. Both sets of warrants expire on

June 30, 2020.

We allocated the relative fair values to the warrants, stock options, and convertible debt, as determined by the Black Scholes option pricing model. Based on the Black Scholes option pricing model, a net debt premium of

$72,651

was allocated to the warrants which are reflected in additional paid-in-capital. The debt premium is being amortized on a straight-line basis over the term of the notes.

On

September 30, 2019,

both notes were amended and combined into

one

note, in the principal amount of

$1,756,646,

bearing interest of

9%

per year and maturing on

December 31, 2022.

Additionally, the conversion option in the

first

note was eliminated. The new note is secured by all amounts due from WGP or its affiliates. SCP also received warrants to purchase

1,500,000

shares of the Company's common stock. The warrants are exercisable at a price of

$1.25

per share and expire on

December 31, 2022.

The debt modification was deemed substantial and was accounted for as a debt extinguishment. The fair value of the

1,500,000

warrants was

$977,110

and was recognized as loss on extinguishment of debt and the remaining unamortized premium and discount was written off during the year ended

September 30, 2019.

Accrued interest on these notes payable was

$4,964

 and

$12,283

at

March 31, 2020

and

September 30, 2019,

respectively. 

At

March 31, 2020

and

September 30, 2019,

the outstanding principal on these notes was

$581,646

and

$1,756,646,

respectively. Amortization of debt premium was

$0

and

$10,682

 for the

six

months ended

March 31, 2020

and

2019,

respectively.

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Note 8 - Stockholders' Equity

6 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

NOTE

8.

 

STOCKHOLDERS’

EQUITY

Equity Line Agreement.

On

December 12, 2017,

the Company entered into an amended and restated equity line agreement with Mountain States Capital, LLC (MSC). Under the equity line agreement, MSC agreed to provide the Company with up to

$10,000,000

of funding through the purchase of shares of the Company's common stock.

The equity line agreement expired on

August 14, 2019.

During the

three

months ended

December 31, 2018,

we sold

311,816

shares of common stock pursuant to the equity line agreement and received

$650,000

in cash from the sale of these shares

Stock Options

.

There was

no

stock option activity for the

six

months ended

March 31, 2020.

Stock option details are as follows: 

					Weighted
			Weighted		Average
			Average		Contractual		Aggregate
	Number of		Exercise		Term		Intrinsic
	Shares		Price		(Years)		Value
Outstanding as of September 30, 2019		800,000	$	1.69		4.0	$	-
Outstanding as of March 31, 2020		1,050,000	$	1.64		4.0	$	-
Vested and expected to vest at March 31, 2020		1,050,000	$	1.64		4.0	$	-
Exercisable at March 31, 2020		850,000	$	1.68		3.8	$	-

Stock option-based compensation expense associated with stock options was

$147,073

and

$0

for the

six

months ended

March 31, 2020

and

2019,

respectively. At

March 31, 2020,

the remaining unrecognized stock-based compensation associated with stock options is

$93,529.

These expenses are expected to be recognized over a remaining weighted average period of

2.0

years.

Warrants.

 There was

no

warrant activity for the

six

months ended

March 31, 2020.

Warrant details are as follows:

					Weighted
			Weighted		Average
			Average		Contractual		Aggregate
	Number of		Exercise		Term		Intrinsic
	Shares		Price		(Years)		Value
Outstanding as of September 30, 2019		11,238,650		1.52		2.3	$	-
Outstanding as of March 31,2020		11,238,650		1.52		1.8	$	-
Exercisable at March 31, 2020		11,238,650		1.52		1.8	$	-

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Note 3 - Notes and Other Receivables (Tables)

6 Months Ended

Mar. 31, 2020

Notes Tables

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

	March 31, 2020			September 30, 2019
Notes and other receivables from WGP, a licensed medical marijuana cultivator; $673,294 note secured by real and personal property of the borrower, interest rate of 18.0%; accrued consulting and legal fees of $206,675, construction advances of $332,357 and accrued interest of $549,349 at September 30, 2019. Net of reserves of $1,761,675 as of September 30, 2019. Balance was collected in full in February 2020.	$	-		$	-
Related party note receivable from BASK, a non-profit corporation, interest rate of 18.0%; monthly principal and interest payments of $4,422, maturing in 2023.		139,121			148,763
		139,121			148,763
Less: Current portion		(30,860	)		(32,270	)
	$	108,261		$	116,493

XML

Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019
Revenues:
Rental income - related party	$ 34,690		$ 69,381
Total Revenues	34,690		69,381
Operating expenses:
Advertising and marketing	1,415	$ 44,190	37,541	$ 61,046
Professional fees	143,779	170,310	230,388	299,243
General and administrative expenses	393,616	305,091	849,964	517,203
Recovery of loss provision for doubtful accounts			(1,761,675)
Total operating expenses	538,810	519,591	(643,782)	877,492
(Loss) income from operations	(504,120)	(519,591)	713,163	(877,492)
Other income (expense):
Interest income	320,313	7,417	320,313	15,089
Interest expense	(206,606)	(11,736)	(366,055)	(163,124)
Other income (expense)				(3,030)
Interest expense - related party	(29,671)	(33,010)	(69,520)	(66,871)
Total other income (expense)	84,036	(37,329)	(115,262)	(217,936)
Net (loss) income	$ (420,084)	$ (556,920)	$ 597,901	$ (1,095,428)
Basic and diluted (loss) income per common share (in dollars per share)	$ (0.02)	$ (0.02)	$ 0.03	$ (0.05)
Weighted average common shares outstanding (in shares)	23,504,820	22,913,023	23,504,820	22,738,806

XML

Note 1 - Nature of Business and Basis of Presentation (Details Textual)	3 Months Ended
	Mar. 31, 2020	Jan. 17, 2014
Ownership Percentage, Transfered		93.00%
Minimum [Member]
Property, Plant and Equipment, Estimated Useful Lives	3
Maximum [Member]
Property, Plant and Equipment, Estimated Useful Lives	20

XML

Note 2 - Going Concern

6 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Substantial Doubt about Going Concern [Text Block]

NOTE

2.

GOING CONCERN

 

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. The Company had an accumulated deficit of

$17,415,308

and $

18,013,209

at

March 31, 2020

and

September 30, 2019,

respectively. 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. 

Management believes that the actions presently being taken to further implement its business plan and generate additional revenues provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to generate additional revenues and in its ability to raise additional funds, there can be

no

assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company's ability to further implement its business plan and generate additional revenues. The consolidated financial statements do

not

include any adjustments that might be necessary if the Company is unable to continue as a going concern.

XML

Note 3 - Notes and Other Receivables (Details Textual) - USD ($)			3 Months Ended	6 Months Ended
	Feb. 05, 2020	Jan. 18, 2018	Dec. 31, 2019	Mar. 31, 2020	Mar. 31, 2019
Accounts Receivable, Credit Loss Expense (Reversal)			$ (1,761,675)	$ (1,761,675)
Proceeds from Collection of Notes Receivable				$ 9,642	$ 11,445
Wellness Group Pharms LLC [Member]
Proceeds from Collection of Notes Receivable	$ 2,069,138
Demand for Arbitration against WGP [Member]
Litigation Settlement, Amount Awarded from Other Party		$ 1,045,000
Litigation Settlement, Amount Awarded Receivable from Other Party, Interest Rate		18.00%
Litigation Settlement Interest		$ (550,000)
Litigation Settlement, Amount Awarded from Other Party, Including Interest		$ 1,595,000