AmeriCann, Inc. - Quarter Report: 2021 March (Form 10-Q)

 

 

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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, 2021

 

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: 000-54231

 

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 7, 2021, the registrant had 23,696,310 shares of common stock outstanding.

 

 

 

 

		March 31, 2021				September 30, 2020
Assets
Current Assets:
Cash and cash equivalents		$	356,943			$	183,009
Restricted cash			10,229				10,150
Tenant receivable - related party			176,237				124,617
Prepaid expenses and other current assets			2,500				2,500
Current portion of note receivable - related party			38,012				37,165
Total current assets			583,921				357,441
Construction in progress			6,500				-
Property and equipment, net			7,287,076				7,512,421
Operating lease - right-of-use asset			6,880,373				6,914,080
Note receivable - related party			64,894				82,347
Total assets		$	14,822,764			$	14,866,289
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued expenses		$	204,050			$	276,155
Accounts payable - related party			130,000				65,000
Interest payable (including $4,016 and $26,246 to related parties)			52,221				72,895
Other payables			20,059				20,571
Operating lease liability, short term			10,030				4,728
Notes payable			450,000				150,250
Total current liabilities			866,360				589,599
Notes payable (net of unamortized discounts of $425,365 and $571,483)			4,074,635				3,578,517
Notes payable - related party			581,646				581,646
Operating lease liability, long term			4,233,196				4,243,224
Total liabilities			9,755,837				8,992,986
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; 23,696,310 shares issued and outstanding as of March 31, 2021 and September 30, 2020			2,370				2,370
Additional paid in capital			24,593,485				24,593,485
Accumulated deficit			(19,528,928	)			(18,722,552	)
Total stockholders' equity			5,066,927				5,873,303
Total liabilities and stockholders' equity		$	14,822,764			$	14,866,289

 

		Three Months Ended March 31,								Six months Ended March 31,
		2021				2020				2021				2020
Revenues:
Rental income - related party		$	437,344			$	34,690			$	708,929			$	69,381
Total revenues			437,344				34,690				708,929				69,381
Operating expenses:
Advertising and marketing			7,203				1,415				8,629				37,541
Professional fees			85,416				143,779				182,272				230,388
General and administrative expenses			381,020				393,616				856,901				849,964
Recovery of loss from provision for doubtful accounts			-				-				-				(1,761,675	)
Total operating expenses			473,639				538,810				1,047,802				(643,782	)
(Loss) income from operations			(36,295	)			(504,120	)			(338,873	)			713,163
Other income (expense):
Interest income			4,780				320,313				9,928				320,313
Interest expense			(259,669	)			(206,606	)			(451,328	)			(366,055	)
Interest expense - related party			(12,908	)			(29,671	)			(26,103	)			(69,520	)
Total other income (expense)			(267,797	)			84,036				(467,503	)			(115,262	)
Net (loss) income		$	(304,092	)		$	(420,084	)		$	(806,376	)		$	597,901
Basic and diluted (loss) income per common share		$	(0.01	)		$	(0.02	)			(0.03	)		$	0.03
Weighted average common shares outstanding			23,696,310				23,504,820				23,696,310				23,504,820

 

		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

		Preferred Stock								Common Stock								Paid In				Accumulated
		Shares				Amount				Shares				Amount				Capital				Deficit				Total
Balances, September 30, 2020			-			$	-				23,696,310			$	2,370			$	24,593,485			$	(18,722,552	)		$	5,873,303
Net loss			-								-				-				-				(502,284	)			(502,284	)
Balances, December 31, 2020			-			$	-				23,696,310			$	2,370			$	24,593,485			$	(19,224,836	)		$	5,371,019
Net loss			-								-				-				-				(304,092	)			(304,092	)
Balances, March 31, 2021			-			$	-				23,696,310			$	2,370			$	24,593,485			$	(19,528,928	)		$	5,066,927

 

		Six months ended
		March 31,
		2021				2020
Cash flows from operating activities:
Net (loss) income		$	(806,376	)		$	597,901
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization			225,345				221,355
Amortization of right of use assets			33,707				33,352
Recovery of loss provision for doubtful accounts			-				(1,761,675	)
Stock based compensation and option expense			-				147,073
Amortization of debt discount			148,868				155,261
Changes in operating assets and liabilities:
Tenant receivable - related party			(51,620	)			8,897
Notes and other receivables			-				1,761,675
Prepaid expenses			-				(20	)
Accounts payable and accrued expenses			(72,105	)			(182,137	)
Operating lease liability			(4,726	)			(4,372	)
Related party payables			65,000				-
Interest payable			1,557				(69,238	)
Interest payable - related party			(22,231	)			(7,320	)
Other payables			(512	)			1,876
Net cash flows (used in) provided by operations			(483,093	)			902,628
Cash flows from investing activities:
Additions to construction in progress			(6,500	)			-
Additions to property and equipment			-				(378,557	)
Payments received on notes receivable - related party			16,606				9,642
Net cash flows provided by (used in) investing activities			10,106				(368,915	)
Cash flows from financing activities:
Proceeds from note payable, net of financing costs			800,000				-
Payments on note payable - related party			-				(1,175,000	)
Principal payments on notes payable			(153,000	)			(235,000	)
Net cash flows provided by (used in) financing activities			647,000				(1,410,000	)
Net increase (decrease) in cash, cash equivalents, and restricted cash			174,013				(876,287	)
Cash, cash equivalents, and restricted cash at beginning of period			193,159				1,292,062
Cash, cash equivalents, and restricted cash at end of period		$	367,172			$	415,775
Supplementary Disclosure of Cash Flow Information:
Cash paid for interest		$	349,237			$	356,872
Cash paid for income taxes		$	-			$	-

 

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 the potential failure to secure funding to continue its operations.

 

Basis of Presentation

 

The (a) consolidated balance sheet as of September 30, 2020, which has been derived from audited financial statements, and (b) the unaudited financial statements as of and for the six months ended March 31, 2021 and 2020, 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 December 21, 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 2020 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:

 

 

Amounts included in restricted cash represent those required to be set aside by the Cannabis Control Commission in Massachusetts.

 

Property 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 and equipment consist of:

 

 

Depreciation expenses for the six months ended March 31, 2021 and March 31, 2020 amounted to $225,345 and $221,355, respectively.

 

 

Leases

 

Effective October 1, 2019, we adopted Topic 842, Lease Accounting using the effective date method. Under this method, periods prior to adoption remain unchanged. 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).

 

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 $19,528,928 and $18,722,552 at March 31, 2021 and September 30, 2020, respectively, and had a net loss of $806,376 for the six months ended March 31, 2021. 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.

 

 

 

NOTE 3. NOTES AND OTHER RECEIVABLES

 

Notes and other receivables as of March 31, 2021 and September 30, 2020, consisted of the following: 

 

 

 

NOTE 4.  NOTES PAYABLE

 

Unrelated

 

On February 25, 2021, the Company borrowed $300,000 from an unrelated party. The loan is unsecured, bears interest at a rate of 11% and is due and payable on August 2, 2021.

 

On August 25, 2020, the Company borrowed $153,000 from an unrelated party. The loan is unsecured, bears interest at a rate of 10% and is due and payable on August 25, 2021.  After February 21, 2021, the Company may not repay the loan without the consent of the lender. At any time after February 21, 2021, the full value of any unpaid principal is convertible into the Company’s common stock at a variable conversion price. The conversion price is equal to: (a) if the market price is greater than or equal to $1.10, the greater of (1) the variable conversion price (defined as market price multiplied by 65 percent) and (2) $0.72, and (b) if the market price is less than $1.10, the lesser of (1) the variable conversion price and (2) $0.72. The Company incurred debt issuance costs of $3,000 which was recorded as a debt discount.   In February 2021, the Company paid off the loan principal balance of $153,000 and paid a prepayment fee of $47,941. Amortization expense related to the debt discount was $2,750 during the six months ended March 31, 2021.

 

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. 

 

On December 4, 2020, the loan was modified and increased by $500,000. The maturity date of the loan was extended to August 1, 2023. All other provisions of the original loan remain the same. The debt modification was deemed not substantial and was accounted for as a debt modification. The broker for the loan received a cash commission of $40,000 which was expensed when incurred.

 

At March 31, 2021, the outstanding principal on this note was $4,500,000 and the unamortized debt discount was $425,365. All debt discounts are being amortized on a straight-line basis over the term of the modified note. Amortization expense related to the debt discounts was $146,118 and $155,261 for the six months ended March 31, 2021 and 2020, 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 are unsecured and bear interest at 8% per year.  At March 31, 2021 and September 30, 2020, the outstanding principal on these notes was $150,000.  On October 12, 2020, this remaining note was extended to mature on December 31, 2021.

 

 

Related Party

 

SCP. 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 was not convertible into shares of our common stock. All unpaid principal and interest was due on December 31, 2019.

 

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 during the year ended September 30, 2019.

 

The Company made principal payments on the note of $1,175,000 during the year ended September 30, 2020. Accrued interest on the note payable was $4,016 and $26,246 at March 31, 2021 and September 30, 2020, respectively. 

 

 

At March 31, 2021 and September 30, 2020, the outstanding principal on this note was $581,646.

 

During the year ended September 30, 2020, the Company also incurred $180,000 of consulting expenses with SCP of which $65,000 remained outstanding at September 30, 2020. During the six months ended March 31, 2021, the Company incurred $90,000 of consulting expenses with SCP and paid $25,000. As of March 31, 2021, $130,000 remains outstanding.  

 

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, 2021 and September 30, 2020, the outstanding balance on the note receivable was $102,906 and 119,512, 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, 2021, the BASK tenant receivable balance was $176,237.

 

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

 

 

 

NOTE 6. INCOME/LOSS PER SHARE

 

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

 

 

As of March 31, 2021 we excluded 1,850,000 of stock options and 8,911,650 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 intrinsic value of these instruments was zero with the effect being anti-dilutive.  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. 

 

 

 

NOTE 7.  COMMITMENTS AND CONTINGENCIES

 

Massachusetts Cannabis Center. 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 Massachusetts Cannabis Center. 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 acquisition of the 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 Medical Properties, LLC ("MMP"). The property is located approximately 47 miles southeast of Boston. In August 2019, the Company completed construction of Building 1 at MCC.

 

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.

 

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 statements of operations.

 

As of March 31, 2021, the Company’s right-of-use assets were $6,880,373, the Company’s current maturities of operating lease liabilities were $10,030, and the Company’s noncurrent lease liabilities were $4,233,196. During the six months ended March 31, 2021, 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, 2021.

 

 

The reconciliation of the maturities of the operating leases to the lease liabilities recorded in the Consolidated Balance Sheet as of March 31, 2021 are as follows:

 

 

 

Office space

 

The Company leases its office space located at 1555 Blake St., Unit 502, Denver, CO 80202 for $2,500 per month with a lease term of less than 12 months.

 

Lease expense for office space was $7,500 and $4,247 for the three months ended March 31, 2021 and 2020, respectively and $15,000 and $8,048 for the six months ended March 31, 2021 and 2020, respectively.

 

Aggregate rental expense under all leases totaled $214,730 and $87,371 for the three months ended March 31, 2021 and 2020, respectively. Aggregate rental expense under all leases totaled $214,730 and $191,037 for the six months ended March 31, 2021 and 2020, respectively.

 

 

 

NOTE 8.  STOCKHOLDERS’ EQUITY

 

Stock Options. There was no stock option activity for the six months ended March 31, 2021. Stock option details are as follows: 

 

 

Stock option-based compensation expense associated with stock options was $0 and $147,073 for the six months ended March 31, 2021 and 2020, respectively.

 

Warrants. Warrant activity as of and for the six months ended March 31, 2021 is as follows:

 

 

 

 

NOTE 9. INCOME TAXES

 

We did not record any income tax expense or benefit for the three or six months ended March 31, 2021 or 2020. 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, 2021 and 2020.

 

As of March 31, 2021, we did not have any unrecognized tax benefits. There were no significant changes to the calculation since September 30, 2020.