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    ACAN   US0305881072

AMERICANN, INC.

(ACAN)
Delayed OTC Markets  -  12:40:03 2023-01-30 pm EST
0.2506 USD   +4.42%
01/09Americann, Inc. : Other Events, Financial Statements and Exhibits (form 8-K)
AQ
01/09AmeriCann Reports Record Fiscal Year-End and Quarterly Financial Results
AQ
2022AMERICANN, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (form 10-K)
AQ
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AMERICANN, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

05/16/2022 | 04:08pm EST

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, 2021 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 plans to operate 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 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 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, 2022 is 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 from Building 1 increased over 52% from the

quarter ended March 31, 2021 to the quarter ending March 31, 2022.

? The manufacturing of cannabis infused products, including the recently

launched 1906 branded "Drops", Howl's Tincture, and Harpoon Extracts, has

increased dramatically at the Massachusetts Cannabis Center. Sales of

manufactured infused products are expected to be even stronger once the

anticipated increase of production and sales for 1906 "Drops" are realized.

? For the months of December, January and February 1906 "Drops" was the top

selling edible product in the Massachusetts market. Howl's Tincture was the

top selling brand in the Tincture Category.

? AmeriCann's tenant, Bask, Inc. added adult-use retail sales in February of

    2021.




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  ? In February 2022, revenue from the Massachusetts cannabis market was $139.6
    million which was 40% greater than February 2021.




  ? For the 2021 calendar year, revenue for the Massachusetts cannabis market was
    $1.62 billion, 75% more than 2020 revenue. Experts believe the market will
    exceed $1.8 billion annually.




  ? Total Massachusetts cannabis sales have exceeded $2.8 billion since the
    inception of the Commonwealth's regulated cannabis program.




  ? Cannabis sales nationally have been excellent as the industry has produced
    strong sales growth in markets across the country.



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 new markets throughout the country as a multi-state operator. The outlook for new states continues to improve with legislation recently passing in New York, New Jersey, Connecticut, Virginia and New Mexico. Several additional states are expected to pass adult use regulations including Pennsylvania and Rhode Island in the near term which will create additional opportunities for AmeriCann's business model.



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.




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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, 2022 and 2021, we generated $667,366 and $437,344 in revenue, respectively. During the six months ended March 31, 2022 and 2021, we generated $1,318,311 and $708,929 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.

Advertising and Marketing Expenses

Advertising and marketing expenses were $10,171 and $7,203 for the three months ended March 31, 2022 and 2021, respectively. During the six months ended March 31, 2022 and 2021, the advertising and marketing expenses were $23,138 and $8,629, respectively. The increase is due to additional social media and marketing expenses in 2022.



Professional Fees


Professional fees were $86,177 and $85,416 for the three months ended March 31, 2022 and 2021, respectively. During the six months ended March 31, 2022 and 2021, the professional fees were $211,236 and $182,272, respectively. The increase is due to an increase in accounting, consulting and legal fees.

General and Administrative Expenses

General and administrative expenses were $375,401 and $370,170 for the three months ended March 31, 2022 and 2021, respectively. During the six months ended March 31, 2022 and 2021, the general and administrative expenses were $1,245,489 and $838,550, respectively. The increase is primarily a result of an increase in stock option compensation.



Interest Income


Interest income was $3,119 and $4,780 for the three months ended March 31, 2022 and 2021, respectively. The decrease is a result of a decline in the principal balance of the BASK note receivable. During the six months ended March 31, 2022 and 2021, the interest income was $6,680 and $9,928, respectively.



Interest Expense


Interest expense was $163,996 and $272,577 for the three months ended March 31, 2022 and 2021, respectively. The decrease is primarily attributable to amortization of debt discounts. During the six months ended March 31, 2022 and 2021, the interest expense was $331,966 and $477,431, respectively.



Net Operating Income/Loss


We had a net income of $24,240 and a net loss of $(304,092) for the three months ended March 31, 2022 and 2021, respectively. We had a net loss of $(508,788) and $(806,376) for the six months ended March 31, 2022 and 2021, respectively. The increase in net income is attributed primarily to higher revenues.




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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 $20,094,233 and $19,585,445 at March 31, 2022 and September 30, 2021, respectively, and had a net income (loss) of $24,240 and $(304,092) for the three months ended March 31, 2022 and March 31, 2021, respectively. The Company had a net loss of $(508,788) and $(806,376) for the six months ended March 31, 2022 and 2021, respectively. ]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, 2022, our net cash flows provided by operations were $255,099 as compared to net cash flows used in operations of $483,093 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) provided by investing activities were $(136,629) and $10,106 for the six months ended March 31, 2022 and 2021, respectively, consisting of payments received on notes receivable offset by additions to construction in progress.

Cash flows provided by financing activities were $0 for the six months ended March 31, 2022. Cash flows provided by financing activities were $647,000 for the six months ended March 31, 2021, consisting of proceeds from note payable offset by principal payments on notes payable.




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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, 2022, we did not have any off-balance sheet arrangements.

© Edgar Online, source Glimpses

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