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AMERICANN, INC. - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operation

August 14, 2014

BUSINESS AND PLAN OF OPERATION

The Company was incorporated on June 25, 2010 under the laws of the State of Delaware. The Company was established as part of the Chapter 11 reorganization of AP Corporate Services, Inc. ("AP"). Under AP's Plan of Reorganization, as confirmed by the U.S. Bankruptcy Court for the Central District of California, the Company was incorporated to: (i) hold any interest which AP retained in the development of an MRI facility in Nevada; and (ii) issue shares of its common stock to AP's general unsecured creditors, to its administrative creditors, and to its shareholders in order to enhance their opportunity to recover from the bankruptcy estate.

Since the Company lacked the resources to effectively develop an MRI facility in June, 2012, the Company decided to promote medical tourism by providing information on a website for those seeking to travel abroad for healthcare services. The Company planned to generate revenue by selling advertising to healthcare providers and related businesses including hotels and travel businesses.

In September 2013 the Company abandoned its business plan relating to promoting medical tourism.

On January 17, 2014Strategic Capital Partners, LLC, ("SCP") a firm controlled by Benjamin J. Barton acquired 14,950,000 shares of the Company's issued and outstanding common stock.

In connection with the acquisition:

? Mr. Barton was appointed as a director of the Company, and ? Dean Konstantine, Josephine Resma and Howard Behling resigned as officers and directors of the Company.



On January 22, 2014 Jay Czarkowski was appointed as a director and Chief Executive Officer of the Company and Benjamin Barton was appointed the Chief Financial officer of the Company. On March 19, 2014, Mr. Czarkowski resigned as an officer and director of the Company.

On February 21, 2014 the Company changed its name from Nevada Health Scan, Inc. to Americann, Inc. On the same day, the Company declared a stock dividend in the amount of four shares of common stock for each issued and outstanding share of common stock.

On February 24, 2014 SCP returned 65,750,000 shares to the Company.

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During March and April 2014 the Company sold 1,000,000 shares of its common stock to a group of private investors at a price of $0.75 per share. SCP purchased 400,000 shares in this offering.

On March 25, 2014, Timothy Keogh was appointed Chief Executive Officer and a director of the Company.

The Company plans to provide an essential set of services to the regulated cannabis industry. The market research firm ArcView Group estimates the market for the regulated cannabis industry for 2013 was $1.53 billion, expected to grow to $2.53 billion in 2014 and $10.2 billion in ten years. Based on the ArcView analysis, the cannabis industry is projected to grow faster than any other industry in the country over the next decade.

While the industry is growing rapidly, the cannabis industry faces two major obstacles that challenge its growth and profitability. The cultivation of cannabis is a very capital-intensive enterprise. Many cannabis entrepreneurs do not have access to the capital that is necessary to build the infrastructure to meet growing demand. Traditional sources of financing, such as banks, are not available currently to cannabis producers and retailers. Also, there is a significant shortage of knowledge related to virtually all areas of the cannabis business. When new states are added to the list of regulated cannabis markets, there will be a scarcity of experience and expertise to serve the needs of growers and retailers in these states.

The Company believes that since the industry is so new, there is significant potential to transform the cannabis business through professionalism, innovation and the application of technology.

The Company does not intend to cultivate, produce, distribute or sell cannabis, but plans to provide a wide variety of essential services to licensed, regulated cannabis growers and retailers. These services include financing, cultivation center design, operational consulting, real estate development, and research.

The Company plans to generate revenue and profits from several sources including developing and selling cannabis cultivation facilities, interest income from loans to licensed cannabis operators, consulting and the licensing or sale of intellectual property.

The Company is based in Colorado, which by virtue of it being the first state to implement cannabis access to adults for non-medical purposes, provides an ideal environment for which to serve the growing cannabis industry as it expands nationally.

RESULTS OF OPERATIONS

In January 2014 the Company began operating in accordance with its new business plan. As of June 30, 2014 the Company had not generated any revenue.

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On June 16, 2014, the Company entered into an option agreement to purchase a five-acre parcel of undeveloped land located in North Central Denver, Colorado. On July 31, 2014 the Company exercised the option. The Company paid $250,000 for the option which was applied to the total purchase price of $2,250,000 for the property.

The property is currently zoned for cannabis cultivation and processing by the City and County of Denver.

The Company plans to develop the property as a facility called the "Denver Cannabis Center." Plans for the Denver Cannabis Center include the construction of a 126,000 square foot facility that would include greenhouse and indoor cultivation areas that will be sold to licensed cannabis operators.

Additional plans for the Denver Cannabis Center include a cannabis dispensary, a research facility, a training center, an infused product production facility and corporate offices.

In developing the Denver Cannabis Center, the Company plans to utilize the most innovative and advanced cultivation methods available. The Company believes that through effective design and optimal practices, its clients and partners can achieve greater efficiency, product quality and the highest level of environmental standards.

The Company plans to build the Denver project as a prototype for development of comparable facilities in other states that allow for and regulate cannabis. To complete the project as planned, the Company will need to receive all necessary government approvals as well as additional capital.

On July 1, 2014 the Company entered into a Financing and Consulting Agreement with Nature's Own Wellness Centers, a licensed Colorado cannabis dispensary owner and grower. Pursuant to the agreement, the Company agreed to loan Nature's Own up to $1,000,000. The proceeds of the secured loan will be used by Nature's Own to convert an existing 15,000 square foot warehouse into a new cannabis growing and processing facility.

On June 23, 2014, $200,000 was advanced to Nature's Own. As of August 1, 2014, the Company had funded $650,000 of the total loan commitment of $1,000,000.

The loan has a 30-month term, bears interest at 18% annually, and requires monthly payments to the Company. Nature's Own will also pay the Company $300,000 in consulting fees for its cannabis operations over the 30-month period. Over the term of the 30-month loan, the agreement calls for the Company to receive average monthly payments of principal, interest and consulting fees in excess of $56,000.

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The Company recently raised $2,363,000 in equity financing via a private placement to accredited investors. The Company sold 876,667 Units at a price of $3.00 per Unit. Each Unit consists of one share of the Company's common stock and one warrant. Each warrant allows the holder to purchase one share of the Company's common stock at a price of $8.00 per share at any time on or before April 30, 2018. Benjamin J. Barton, an officer and director of the Company, purchased $2,000,000 of the Units for cash as an investment.

On July 30, 2014 the Company's Board of Directors approved the issuance of up to $10 million in a Convertible Note Offering to accredited and institutional investors. The secured notes will carry an annual interest rate, be convertible into common stock at the discretion of the investors and include warrants.

With the expected offering proceeds, the Company plans to expand to other states that have approved and regulate cannabis. The Company will limit its funding to states in which cannabis is approved and regulated by the respective state in which the cannabis entrepreneurs operate.

Since the Company was inactive prior to January 2014, any comparison of the Company's operating results for the six months ended June 30, 2014 and its financial condition as of June 30, 2014 with any prior periods would not be meaningful.

LIQUIDITY AND CAPITAL RESOURCES

The Company's sources and (uses) of funds for the six months ended June 30, 2014 are shown below:

Net cash provided by (used in) operations $ (319,880 ) Purchase of equipment $ (4,626 ) Loan to third party $ (200,000 ) Option payment $ (250,000 ) Sale of common stock $ 800,001 Loan from related party $ 5,600



The Company does not have any firm commitments from any person to provide it with any capital.

See Note 2 to the financial statements included as part of this report for a description of the Company's accounting policies and recent accounting pronouncements.

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Source: Edgar Glimpses


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