Item 1.01. Entry Into a Material Definitive Agreement
On September 21, 2014 AmeriCann entered into two loan agreements with
Wellness Group Pharms, LLC ("WGP"). Subsequent to entering into the loan
agreements WGP, applied to the state of Illinois for licenses to operate two
marijuana cultivation facilities under the Illinois Compassionate Use of Medical
Cannabis Pilot Program Act.
On February 2, 2015 WGP was notified that it was awarded one of the two
licenses for which it applied under the Illinois act. The State only issued a
total of 18 cultivation and processing licenses. The application process for
cultivation licenses in Illinois was extremely competitive as only approximately
10% of those that applied were awarded licenses.
Under the terms of the loan agreement pertaining to the license awarded to
WGP, AmeriCann had agreed to loan WGP up to $4,700,000, subject to certain
conditions. Proceeds from the loan would be used to construct the marijuana
cultivation facility and for start-up costs.
On February 23, 2015 AmeriCann and WGP amended their agreement and expanded
the scope of their partnership.
The amended agreement calls for AmeriCann to serve as the developer of a
new facility to be called the Illinois Medical Cannabis Center ("IMCC"). WGP
plans to use the IMCC to cultivate, process and distribute medical cannabis to
many of the state's 52 newly licensed medical dispensaries.
When fully constructed, the IMCC will contain approximately 285,000 square
feet capable of producing an estimated 50,000 pounds annually of medical
cannabis. The cost of the entire project, when fully developed, is expected to
be approximately $20 million.
AmeriCann will serve as the project developer and will own the IMCC, plus
provide working capital funding and horticultural assistance to WGP. AmeriCann
will receive, over a 12-year period, a 25% fee on all cannabis produced at the
IMCC, $240,000 annually in consulting fees and $6.00 per square foot in monthly
lease payments.
AmeriCann provided initial funding of $600,000 to WGP on February 23, 2015.
Funds were used for the premium ($400,000) for a $2 million performance bond and
for the payment of a $200,000 state license fee.
AmeriCann intends to commence construction of the IMCC in March with a
first phase of approximately 27,000 square feet. WPG's initial harvest is
projected for late Fall 2015. AmeriCann plans to add additional cultivation
capacity as the Illinois Medical Cannabis Program develops.
Additionally, AmeriCann has commenced development of comprehensive cannabis
infused product line. As a part of the amended agreement, AmeriCann will license
this proprietary product brand to WGP. WGP, in turn, will process, package and
distribute infused cannabis products to licensed medical dispensaries in
Illinois. AmeriCann will receive a 20% royalty from the sale of all cannabis
extractions and infused products.
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With a population of over 12.7 million people, Illinois is the fifth
largest state in the U.S. and one of the largest to adopt a medical marijuana
program.
AmeriCann plans to develop comparable facilities in other states that allow
for the production and sale of medical cannabis. On January 14, 2015 AmeriCann
announced plans to acquire a 52.6 acre parcel of undeveloped land approximately
47 miles southeast of Boston and develop the property as the Massachusetts
Medical Cannabis Center.
Previously AmeriCann closed on a $2,250,000 all cash purchase of a
five-acre parcel of land in Denver, Colorado and plans to develop it as the
Denver Medical Cannabis Center. Plans for the project include 125,000 square
feet of greenhouse and other facilities. The project has received preliminary
approval from the local planning board.
AmeriCann will need to secure significant additional capital to complete
its plans for the Illinois Medical Cannabis Center and its other planned
projects.
AmeriCann does not cultivate, process or sell cannabis. More information is
available at acaninfo.com