NOTE

NATURE OF BUSINESS AND BASIS OF PRESENTATION

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

June 25, 2010.

January 17, 2014,

a privately held limited liability company acquired approximately

93%

of the Company's outstanding shares of common stock from several of the Company's shareholders, which resulted in a change in control of the Company.

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

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

Basis of Presentation

The (a) balance sheet as of

September 30, 2017,

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

three

and

nine

months ended

June 30, 2018

and

2017,

have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission ("SEC"), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company's Form

-K filed with the SEC on

December 4, 2017.

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

2017

as reported in the Form

-K have been omitted.

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

impact on net loss.

Restricted Cash

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

	June 30, 2018		June 30, 2017

Cash and cash equivalents	$	1,006,310	$	10,418
Restricted cash		303,512		-
Total cash, cash equivalents, and restricted cash shown in the statements of cash flows	$	1,309,822	$	10,418

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. See Notes

and

10.

Recent Accounting Pronouncements

January 2018,

the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

No.

2018

01,

LEASES (TOPIC

842

): LAND EASEMENT PRACTICAL EXPEDIENT FOR TRANSITION TO TOPIC

842;

February 25, 2016,

the FASB issued Accounting Standards Update

No.

2016

02,

Leases (Topic

842

), to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing transactions. The FASB has been assisting stakeholders with implementation questions and issues as organizations prepare to adopt Topic

842.

In connection with the FASB’s transition support efforts, a number of stakeholders inquired about the application of the new lease requirements in Topic

842

to land easements. Land easements (also commonly referred to as rights of way) represent the right to use, access, or cross another entity’s land for a specified purpose The amendments in this Update affect the amendments in Update

2016

02,

which are

not

yet effective but

may

be early adopted, and Example

of Subtopic

350

30.

The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in Update

2016

02.

An entity that early adopted Topic

842

should apply the amendments in this Update upon issuance. The Company does

not

expect this amendment to have a material impact on its financial statements.

July 2017,

the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

No.

2017

11,

Earnings Per Share (Topic

260

); Distinguishing Liabilities from Equity (Topic

480

); Derivatives and Hedging (Topic

815

): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. The ASU was issued to address the complexity associated with applying generally accepted accounting principles (GAAP) for certain financial instruments with characteristics of liabilities and equity. The ASU, among other things, eliminates the need to consider the effects of down round features when analyzing convertible debt, warrants and other financing instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option)

longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. The amendments are effective for fiscal years beginning after

December 15, 2018,

and should be applied retrospectively. Early adoption is permitted, including adoption in an interim period. The Company plans to early adopt the ASU, and is currently evaluating implementation date and the impact of this amendment on its financial statements.

May 2017,

the FASB issued ASU

No.

2017

09,

Compensation—Stock Compensation (Topic

718

): Scope of Modification Accounting, to provide clarity and reduce both (

) diversity in practice and (

) cost and complexity when applying the guidance in Topic

718,

Compensation—Stock Compensation, to a change to the terms or conditions of a share-based payment award. The ASU provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in ASC

718.

The amendments are effective for fiscal years beginning after

December 15, 2017,

and should be applied prospectively to an award modified on or after the adoption date. Early adoption is permitted, including adoption in an interim period. The Company does

not

expect this amendment to have a material impact on its financial statements.

February 2017,

the FASB issued ASU

No.

2017

05,

Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic

610

): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets, to clarify the scope of Subtopic

610

20,

Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets, and to add guidance for partial sales of nonfinancial assets. Subtopic

610

20,

which was issued in

May 2014

as a part of ASU

No.

2014

09,

Revenue from Contracts with Customers (Topic

606

), provides guidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts with noncustomers. The amendments are effective for fiscal years beginning after

December 15, 2017,

including interim periods within those fiscal years, which is the same time as the amendments in ASU

No.

2014

09,

and early adoption is permitted. The Company is currently evaluating the impact of this amendment on its financial statements.

January 2017,

the FASB issued ASU

No.

2017

03,

Accounting Changes and Error Corrections (Topic

250

). The ASU adds SEC disclosure requirements for both the quantitative and qualitative impacts that certain recently issued accounting standards will have on the financial statements of a registrant when such standards are adopted in a future period. Specially, these disclosure requirements apply to the adoption of ASU

No.

2014

09,

Revenue from Contracts with Customers (Topic

606

); ASU

No.

2016

02,

Leases (Topic

842

); and ASU

No.

2016

13,

Financial Instruments—Credit Losses (Topic

326

): Measurement of Credit Losses on Financial Instruments. The Company does

not

believe that the adoption of ASU

No.

2014

will have a material impact on its revenue recognition as it pertains to current revenue streams.

Between

May 2014

and

December 2016,

the FASB issued several ASU’s on Revenue from Contracts with Customers (Topic

606

). These updates will supersede nearly all existing revenue recognition guidance under current U.S. generally accepted accounting principles (GAAP). The core principle is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. A

five

-step process has been defined to achieve this core principle, and, in doing so, more judgment and estimates

may

be required within the revenue recognition process than are required under existing U.S. GAAP. The standards are effective for annual periods beginning after

December 15, 2017,

and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standards in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting the standards recognized at the date of adoption (which includes additional footnote disclosures). The Company is currently evaluating the impact of its pending adoption of these standards on its financial statements and expects to adopt the modified retrospective approach. However, the adoption of these new standards will

not

have a material impact on its revenue recognition as it pertains to current revenue streams.

November 2016,

the FASB issued ASU

No.

2016

18,

Statement of Cash Flows (Topic

230

): Restricted Cash (a consensus of the FASB Emerging Issues Task Force), to provide guidance on the presentation of restricted cash or restricted cash equivalents in the statement of cash flows. The amendments should be applied using a retrospective transition method, and are effective for fiscal years beginning after

December 15, 2017,

including interim periods within those fiscal years. This is the

first

period in which the Company has maintained restricted cash balances, and the Company has elected to early adopt this amendment as of

October 1, 2017.

As this amendment affects presentation and disclosures only, the adoption had

impact on the Company’s financial position or results of operations.

February 2016,

the FASB issued Accounting Standards Update

No.

2016

02,

“Leases (Topic

842

)” (“ASU

2016

02”

). ASU

2016

will require lessees to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. Under ASU

2016

02,

a lessee will be required to recognize assets and liabilities for leases with terms of more than

months. Lessor accounting remains substantially similar to current GAAP. In addition, disclosures of leasing activities are to be expanded to include qualitative along with specific quantitative information. ASU

2016

will be effective in fiscal years beginning after

December 15, 2018 (

with early adoption permitted). ASU

2016

mandates a modified retrospective transition method. The Company is currently evaluating the potential impact of adopting this guidance on our consolidated financial statements.