UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact name of registrant as specified in its charter)
|
|
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
|
|
(Address of principal executive offices) |
(Zip Code) |
(
(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.
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).
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 |
☐ |
|
|
☑ |
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
As of April 28, 2023, the registrant had
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, 2023 and September 30, 2022 |
3 |
|
Consolidated Statements of Operations for the Three and Six Months Ended March 31, 2023 and 2022 |
4 |
|
Consolidated Statements of Changes in Stockholders' Equity for the Six Months Ended March 31, 2023 and 2022 |
5 |
|
Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2023 and 2022 |
6 |
|
Notes to Consolidated Financial Statements |
7 |
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
14 |
Item 4. |
Controls and Procedures |
17 |
PART II OTHER INFORMATION |
||
Item 6. |
Exhibits |
18 |
SIGNATURES |
19 |
PART I: FINANCIAL INFORMATION
ITEM 1. UNAUDITED FINANCIAL STATEMENTS
AMERICANN, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, 2023 |
September 30, 2022 |
|||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents |
$ | $ | ||||||
Restricted cash |
||||||||
Tenant receivable |
||||||||
Prepaid expenses and other current assets |
||||||||
Note receivable |
||||||||
Total current assets |
||||||||
Construction in progress |
||||||||
Property and Equipment, net |
||||||||
Operating lease - right-of-use asset |
||||||||
Total assets |
$ | $ | ||||||
Liabilities and Stockholders' Equity | ||||||||
Current Liabilities: | ||||||||
Accounts payable and accrued expenses |
$ | $ | ||||||
Accounts payable - related party |
||||||||
Interest payable (including $ |
||||||||
Other payables |
||||||||
Operating lease liability, short term |
||||||||
Notes payable (net of unamortized discounts of $ |
||||||||
Notes payable |
||||||||
Total current liabilities |
||||||||
Note payable - related party |
||||||||
Operating lease liability, long term |
||||||||
Total liabilities |
||||||||
Commitments and contingencies - see Note 7 |
|
|
||||||
Stockholders' Equity: | ||||||||
Preferred stock, $ |
||||||||
Common stock, $ |
||||||||
Additional paid in capital |
||||||||
Accumulated deficit |
( |
) | ( |
) | ||||
Total stockholders' equity |
||||||||
Total liabilities and stockholders' equity |
$ | $ |
See accompanying notes to unaudited consolidated financial statements.
AMERICANN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Six months Ended March 31, |
Three months Ended March 31, |
|||||||||||||||
2023 |
2022 |
2023 |
2022 |
|||||||||||||
Rental income |
$ | $ | ||||||||||||||
Rental income - related party |
||||||||||||||||
Cost of revenues |
||||||||||||||||
Gross profit |
||||||||||||||||
Operating expenses: | ||||||||||||||||
Advertising and marketing |
||||||||||||||||
Professional fees |
||||||||||||||||
General and administrative expenses |
||||||||||||||||
Total operating expenses |
||||||||||||||||
Income (loss) from operations |
( |
) | ||||||||||||||
Other income (expense): | ||||||||||||||||
Interest income |
||||||||||||||||
Interest expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Interest expense - related party |
( |
) | ( |
) | ||||||||||||
Total other income (expense) |
( |
) | ( |
) | ( |
) | $ | ( |
) | |||||||
Net income (loss) |
$ | $ | ( |
) | $ | $ | ||||||||||
Basic and diluted income (loss) per common share |
$ | $ | ( |
) | $ | $ | ||||||||||
Weighted average common shares outstanding |
See accompanying notes to unaudited consolidated financial statements.
AMERICANN, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(unaudited)
Preferred Stock |
Common Stock |
Paid In |
Accumulated |
|||||||||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
Capital |
Deficit |
Total |
||||||||||||||||||||||
Balances, September 30, 2021 |
$ | - | $ | $ | $ | ( |
) | $ | ||||||||||||||||||||
Net loss |
- | - | ( |
) | ( |
) | ||||||||||||||||||||||
Stock issued for services |
||||||||||||||||||||||||||||
Extension of warrants |
||||||||||||||||||||||||||||
Balances, December 31, 2021 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||
Net loss |
$ | |||||||||||||||||||||||||||
Balances, March 31, 2022 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||
Balances, September 30, 2022 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||
Net income |
- | - | ||||||||||||||||||||||||||
Balances, December 31, 2022 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||
Net income |
- | |||||||||||||||||||||||||||
Balances, March 31, 2023 |
$ | $ | $ | $ | ( |
) | $ |
See accompanying notes to unaudited consolidated financial statements.
AMERICANN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended March 31, |
||||||||
2023 |
2022 |
|||||||
Cash flows from operating activities: | ||||||||
Net income (loss) |
$ | $ | ( |
) | ||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
Depreciation and amortization |
||||||||
Amortization of right of use assets |
||||||||
Stock based compensation and warrants revaluation expense |
||||||||
Stock issued for services |
||||||||
Amortization of debt discount |
||||||||
Changes in operating assets and liabilities: | ||||||||
Tenant receivable |
( |
) | ||||||
Tenant receivable - related party |
||||||||
Prepaid expenses |
( |
) | ||||||
Accounts payable and accrued expenses |
( |
) | ||||||
Operating lease liability |
( |
) | ( |
) | ||||
Accounts payable - related party |
( |
) | ( |
) | ||||
Interest payable |
( |
) | ( |
) | ||||
Interest payable - related party |
||||||||
Other payables |
( |
) | ||||||
Net cash flows provided byoperations |
||||||||
Cash flows from investing activities: | ||||||||
Additions to construction in progress |
( |
) | ( |
) | ||||
Additions to property and equipment |
( |
) | ||||||
Payments received on notes receivable |
||||||||
Net cash flows (used in) investing activities |
( |
) | ( |
) | ||||
Cash flows from financing activities: | ||||||||
Principal payments on notes payable |
( |
) | ||||||
Net cash flows (used in) financing activities |
( |
) | ||||||
Net change in cash, cash equivalents, and restricted cash |
( |
) | ||||||
Cash, cash equivalents, and restricted cash at beginning of period |
||||||||
Cash, cash equivalents, and restricted cash at end of period |
$ | $ | ||||||
Supplementary Disclosure of Cash Flow Information: | ||||||||
Cash paid for interest |
$ | $ | ||||||
Cash paid for income taxes |
$ | $ |
See accompanying notes to unaudited consolidated financial statements.
AMERICANN, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND BASIS OF PRESENTATION
AmeriCann, Inc. ("the Company", “we”, “our” or "the Issuer") was organized under the laws of the State of Delaware on June 25, 2010. The Company changed its corporate domicile to Colorado in 2022.
The Company designs, develops, leases and plans to operate state-of-the-art cannabis cultivation, processing and manufacturing facilities.
The Company's activities are subject to significant risks and uncertainties including the potential failure to secure funding to continue its operations.
Significant Accounting Policies
March 31, 2023 |
September 30, 2022 |
|||||||
Cash and cash equivalents |
$ | $ | ||||||
Restricted cash |
||||||||
Total cash, cash equivalents, and restricted cash shown in the cash flow statement |
$ | $ |
March 31, 2023 |
September 30, 2022 |
|||||||
Buildings and improvements |
$ | $ | ||||||
Computer equipment |
||||||||
Furniture and equipment |
||||||||
Total |
||||||||
Accumulated depreciation |
( |
) | ( |
) | ||||
Property and equipment, net |
$ | $ |
NOTE 2. GOING CONCERN
The accompanying unaudited consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. The Company had an accumulated deficit of $
Management believes that the actions presently being taken to further implement its business plan and generate additional revenues provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to generate additional revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company's ability to further implement its business plan and generate additional revenues. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 3. NOTE RECEIVABLE
Notes and other receivables as of March 31, 2023 and September 30, 2022, consisted of the following:
March 31, 2023 |
September 30, 2022 |
|||||||
Note receivable from BASK, interest rate of |
$ | $ | ||||||
Total | $ | $ |
NOTE 4. NOTES PAYABLE
Unrelated
On February 25, 2021, the Company borrowed $
On August 25, 2020, the Company borrowed $
On August 2, 2019 the Company secured a $
The note holder also received a warrant which allows the holder to purchase
The broker for the loan received a cash commission of $
The Company allocated the proceeds between the note and the warrants based on their relative fair values. The relative fair value of the
On December 4, 2020, the loan was modified and increased by $
At March 31, 2023, the outstanding principal on this note was $
The modified note is secured by a first lien on Building 1 at the Company’s Massachusetts Cannabis Center (“MCC”).
February 2018 Convertible Note Offering
On February 12, 2018, the Company sold convertible notes in the principal amount of $
Related Party
SCP. On September 30, 2019, we entered into an amended note with Strategic Capital Partners, LLC (“SCP”), in the principal amount of $
Accrued interest on the note was $
At March 31, 2023 and September 30, 2022, the outstanding principal on this note was $
During the year ended September 30, 2022, the Company also incurred $
NOTE 5. TENANT RECEIVABLE
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 $
On July 26, 2019, the Company entered into a
Tim Keogh, our Chief Executive Officer, was a Board Member of BASK between August 2013 and November 2021.
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, |
|||||||||||||||
2023 |
2022 |
2023 |
2022 |
|||||||||||||
Net income (loss) attributable to common stockholders |
$ | $ | $ | $ | ( |
) | ||||||||||
Basic weighted average outstanding shares of common stock |
||||||||||||||||
Dilutive effects of common share equivalents |
||||||||||||||||
Dilutive weighted average outstanding shares of common stock |
||||||||||||||||
Basic and diluted net income (loss) per share of common stock |
$ | $ | $ | $ | ( |
) |
As of March 31, 2023 we excluded
As of March 31, 2022 we excluded
NOTE 7. COMMITMENTS AND CONTINGENCIES
Operating Leases
Land
On October 17, 2016, the Company closed the acquisition of the
As part of a simultaneous transaction, the Company assigned the property rights to Massachusetts Medical Properties (“MMP”) for a nominal fee and entered a lease agreement pursuant to which MMP agreed to lease the property to the Company for an initial term of fifty (
) years. The Company has the option to extend the term of the lease for four ( ) additional ten ( ) 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) $
Effective October 1, 2019, the Company adopted Topic 842 and recorded ROU assets and lease liabilities of $
The Company completed the construction of Building I on the leased land and on September 1, 2019, BASK, commenced its
As of March 31, 2023, the Company’s right-of-use assets were $
The table below presents lease related terms and discount rates as of March 31, 2023.
As of March 31, 2023 |
||||
Weighted average remaining lease term | ||||
Operating leases |
||||
Weighted average discount rate | ||||
Operating leases |
% |
The reconciliation of the maturities of the operating leases to the lease liabilities recorded in the Consolidated Balance Sheet as of March 31, 2023 are as follows:
2023 |
||||
2024 |
||||
2025 |
||||
2026 |
||||
2027 |
||||
Thereafter |
||||
Total lease payments |
||||
Less: Interest |
( |
) | ||
$ | ||||
Less: operating lease liability, current portion |
( |
) | ||
Operating lease liability, long term |
$ |
Office space
The Company leases its office space located at 1555 Blake St., Unit 502, Denver, CO 80202 for $
Lease expense for office space was $
Aggregate rental expense under all leases totaled $
NOTE 8. STOCKHOLDERS’ EQUITY
Common Stock. There was no common stock activity during the six months ended March 31, 2023.
Stock Options. There was no stock option activity during the six months ended March 31, 2023.
Stock option details are as follows:
Weighted |
||||||||||||||||
Weighted |
Average |
|||||||||||||||
Average |
Contractual |
Aggregate |
||||||||||||||
Number of |
Exercise |
Term |
Intrinsic |
|||||||||||||
Shares |
Price |
(Years) |
Value |
|||||||||||||
Exercisable at September 30, 2022 |
$ | $ | - | |||||||||||||
Outstanding as of March 31, 2023 |
$ | $ | - | |||||||||||||
Vested and expected to vest at March 31, 2023 |
$ | $ | - | |||||||||||||
Exercisable at March 31, 2023 |
$ | $ | - |
Stock option-based compensation expense associated with stock options was $
Warrants. Warrant activity as of and for the three months ended March 31, 2023 is as follows:
Weighted |
||||||||||||||||
Weighted |
Average |
|||||||||||||||
Average |
Contractual |
Aggregate |
||||||||||||||
Number of |
Exercise |
Term |
Intrinsic |
|||||||||||||
Shares |
Price |
(Years) |
Value |
|||||||||||||
Outstanding as of September 30, 2022 |
$ | - | ||||||||||||||
Expired |
( |
) | ||||||||||||||
Outstanding as of March 31, 2023 |
$ | - | ||||||||||||||
Exercisable at March 31, 2023 |
$ | - |
NOTE 9. INCOME TAXES
We did
record any income tax expense or benefit for the six months ended March 31, 2023 or 2022. 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, 2023 and September 30, 2022.
As of March 31, 2023, we did not have any unrecognized tax benefits. There were no significant changes to the calculation since September 30, 2022.
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, 2022 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K
Forward-Looking Statements
The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, (“the Exchange Act”), which are subject to the “safe harbor” created by those sections. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “should,” “could,” “predicts,” “potential,” “continue,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements. All forward-looking statements in this Form 10-Q are made based on our current expectations, forecasts, estimates and assumptions, and involve risks, uncertainties and other factors that could cause results or events to differ materially from those expressed in the forward-looking statements. In evaluating these statements, you should specifically consider various factors, uncertainties and risks that could affect our future results or operations. These factors, uncertainties and risks may cause our actual results to differ materially from any forward-looking statement set forth in this Form 10-Q. You should carefully consider these risk and uncertainties described and other information contained in the reports we file with or furnish to the SEC before making any investment decision with respect to our securities. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this cautionary statement.
OVERVIEW
AmeriCann designs, develops, leases and operates state-of-the-art cannabis cultivation, processing and manufacturing facilities. AmeriCann’s team includes board members, consultants, engineers and architects who specialize in real estate development, traditional horticulture, lean manufacturing, medical research, facility construction, regulatory compliance, security, marijuana cultivation and genetics, extraction processes, and infused product development.
AmeriCann’s flagship project is the Massachusetts Cannabis Center. The Massachusetts Cannabis Center (“MCC”) is being developed on a 52-acre parcel located in southeastern Massachusetts. AmeriCann’s MCC project is permitted for over 800,000 sq. ft. of cannabis cultivation and processing infrastructure which is being developed in phases to support both the existing medical cannabis and the newly emerging adult-use cannabis marketplace.
The first phase of the project, Building 1, a 30,000 square foot cultivation and processing facility, is fully-operational and is currently 100% leased by a vertically-integrated Massachusetts cannabis company. AmeriCann generates revenue through lease arrangements with the operators that includes base rent and royalty payments of 15% of gross revenue generated from products produced at the MCC.
The increase in Operating Revenue for the quarter ending March 31, 2023 is the result of increased cultivation yields and increases in the production and sale of manufactured goods from the Massachusetts Cannabis Center.
A summary of operational highlights included the following:
● |
AmeriCann’s operating revenue for the quarter ended March 31, 2023, increased approximately 12% from the quarter ended March 31, 2022. |
● |
In addition to increased cultivation productivity in the state-of-the-art greenhouse, the manufacturing of cannabis-infused products has increased dramatically in Building 1. |
● |
Manufactured infused products produced at Building 1 have achieved success as some of the bestselling cannabis brands in Massachusetts in their respective categories. |
● |
The cannabis market in Massachusetts generated $1.76 billion in total sales during 2022 which was an increase of over 8.5% from the prior year. |
● |
The Massachusetts cannabis market has exceeded $4 billion in sales since the inception of the Commonwealth’s regulated cannabis program. |
AmeriCann, through a 100% owned subsidiary, AmeriCann Brands, Inc., has received two licenses from the Massachusetts Cannabis Control Commission to cultivate cannabis and provide extraction and product manufacturing support to the entire MCC project, as well as to other licensed cannabis farmers throughout regulated markets. AmeriCann Brands plans to operate in Building 2 at the MCC 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 additional markets.
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 long-term 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.
SIGNIFICANT ACCOUNTING POLICIES
Leases
Effective October 1, 2019, we adopted ASC 842, Lease Accounting using the effective date method. We determine if an arrangement is a lease at inception.
Right-of-Use (ROU) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Variable lease payments are not included in the calculation of the right-of-use asset and lease liability due to uncertainty of the payment amount and are recorded as lease expense in the period incurred. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
Under the available practical expedient, we account for the lease and non-lease components as a single lease component for all classes of underlying assets as both a lessee and lessor. Further, we elected a short-term lease exception policy on all classes of underlying assets, permitting us to not apply the recognition requirements of this standard to short-term leases (i.e. leases with terms of 12 months or less).
RESULTS OF OPERATIONS
Total Revenues
During the three months ended March 31, 2023 and 2022, we generated $748,406 and $667,366 in revenue, respectively. During the six months ended March 31, 2023 and 2022, we generated $1,483,172 and $1,318,311 in revenue, respectively. The increase in revenues is due to higher rental revenue and participation fee revenues as a result of increased cultivation yields and increases in the production and sale of manufactured goods from the Massachusetts Cannabis Center.
Cost of Revenues
During the three months ended March 31, 2023 and 2022, we incurred $0 and $10,500 of costs of revenue, respectively. During the six months ended March 31, 2023 and 2022, we incurred $13,615 and $21,950 of cost of revenue, respectively. The decrease in cost is due to conclusion of a facilities maintenance agreement.
Advertising and Marketing Expenses
Advertising and marketing expenses were $3,953 and $10,171 for the three months ended March 31, 2023 and 2022, respectively. During the six months ended March 31, 2023 and 2022, the advertising and marketing expenses were $5,371 and $23,138, respectively. The decrease is due to lower social media and marketing expenses in 2023.
Professional Fees
Professional fees were $83,339 and $86,177 for the three months ended March 31, 2023 and 2022, respectively. During the six months ended March 31, 2023 and 2022, the professional fees were $203,852 and $211,236, respectively. The decrease is primarily due to aa decrease in legal fees.
General and Administrative Expenses
General and administrative expenses were $391,957 and $375,401 for the three months ended March 31, 2023 and 2022, respectively. The increase is primarily due to increased property taxes. During the six months ended March 31, 2023 and 2022, the general and administrative expenses were $783,263 and $1,245,489, respectively. The decrease is primarily due to stock option compensation expense in 2022.
Interest Income
Interest income was $1,133 and $3,119 for the three months ended March 31, 2023 and 2022, respectively. During the six months ended March 31, 2023 and 2022, the interest income was $2,796 and $6,680, respectively. The decrease is a result of a decline in the principal balance of the BASK note receivable.
Interest Expense
Interest expense was $183,668 and $163,996 for the three months ended March 31, 2023 and 2022, respectively. The increase is primarily attributable to amortization of debt discounts. During the six months ended March 31, 2023 and 2022, the interest expense was $370,500 and $331,966, respectively.
Net Operating Income/Loss
We had a net income of $86,622 and $24,240 for the three months ended March 31, 2023 and 2022, respectively. We had a net income of $109,367 and a net loss of $ (508,788) for the six months ended March 31, 2023 and 2022, respectively. The increase in net income is attributed primarily to higher revenues and lower general and administrative expense.
LIQUIDITY AND CAPITAL RESOURCES
The accompanying unaudited consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. The Company had an accumulated deficit of $19,649,322 and $19,758,689 at March 31, 2023 and September 30, 2022, respectively.
The Company is continuing to support the optimization of operations and generate additional revenues from its Massachusetts Cannabis Center (MCC). The Company's cash position and quarterly revenue is currently significant enough to support the Company's daily operations. The Company is not obligated to raise additional funds for the expansion of the MCC. When Management determines expansion opportunities exist the Company may finance construction with cash from operations, a sale-lease-back, refinancing and expand existing debt, issuance of new debt, or sales of equity.
Management believes that the actions presently being taken to further implement its business plan and generate additional revenues provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to generate additional revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company's ability to further implement its business plan and generate additional revenues. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Notes Payable
See 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, 2023, our net cash flows provided by operations were $272,732 as compared to net cash flows provided by operations of $255,099 for the six months ended March 31, 2022. The increase is primarily due to timing of working capital payments, and stock-based compensation expense during the six months ended March 31, 2022.
Cash flows used by investing activities were $(210,988) and $(136,629) for the six months ended March 31, 2023 and 2022, respectively, consisting of payments received on notes receivable offset by additions to property and equipment and construction in progress.
Cash flows used by financing activities were $150,000 and $0 for the six months ended March 31, 2023 and 2022, respectively, consisting of principal payments on notes payable.
We do not have any firm commitments from any person to provide us with any additional capital.
OFF-BALANCE SHEET ARRANGEMENTS
As of March 31, 2023, we did not have any off-balance sheet arrangements.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our President and Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were not effective for the same reasons that our internal control over financial reporting was not effective.
Internal Control over Financial Reporting
As indicated in our Form 10-K filed on December 29, 2022, our Principal Executive Officer and Principal Financial Officer concluded that our internal control over financial reporting was not effective as of September 30, 2022 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, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within any company have been detected.
PART II OTHER INFORMATION
ITEM 6. EXHIBITS
Exhibit |
Description of Document |
31.1 |
|
31.2 |
|
32 |
|
101.INS |
Inline XBRL Instance Document. |
101.SCH |
Inline XBRL Taxonomy Extension Schema Document. |
101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
104 |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
AMERICANN, INC. |
|||
Dated: May 11, 2023 |
By: |
/s/ Timothy Keogh |
|
Timothy Keogh |
|||
Principal Executive Officer |
|||
By: |
/s/ Benjamin Barton |
||
Benjamin Barton |
|||
Principal Financial and Accounting Officer |