Americann, Inc.

NOTE

. INCOME TAXES

Deferred income taxes arise from the temporary differences between financial statement and income tax recognition of net operating losses. These loss carryovers

are limited under the Internal Revenue Code should a significant change in ownership occur. The Company accounts for income taxes pursuant to ASC Topic

740.

The Company early adopted ASU

2015

17,

Balance Sheet Classification of Deferred Taxes, during the year ended

September 30, 2016.

Deferred income taxes arise from the temporary differences between financial statement and income tax recognition of net operating losses and other items. Loss carryovers are limited under the Internal Revenue Code should a

significant change in ownership occur.

The components of the deferred income tax assets and liabilities arising under ASC

Topic

740

were as follows:

	September 30,
	2017		2016

Deferred tax assets	$	-	$	-

Deferred tax liabilities		-		-

Net deferred tax assets/(liabilities)	$	-	$	-

The types of temporary differences between the

tax basis of assets and their financial reporting amounts that give rise to a significant portion of the deferred assets and liabilities are as follows:

	September 30,
	2017						2016
	Temporary Difference			Tax Effect			Temporary Difference			Tax Effect

Deferred tax assets
Net operating loss	$	1,789,958		$	663,358		$	1,156,331		$	428,536
Other temporary differences		716,750			265,628			9,261			3,432
Net deferred tax assets		2,506,708			928,986			1,165,592			431,968
Valuation allowance		(2,506,708	)		(928,986	)		(1,165,592	)		(431,968	)
Total deferred tax asset		-			-			-			-

Deferred tax liabilities
Total deferred liability		-			-			-			-
Total net deferred tax asset	$	-		$	-		$	-		$	-

September 30, 2017

and

September 30, 2016,

the Company had approximately and

$4,370,404

and

$2,551,748

respectively, in unused federal net operating loss carryforwards, which begin to expire principally in the year

2034.

A deferred tax asset at each date of approximately

$928,986

and

$431,968

resulting from the loss carryforwards and other temporary differences has been offset by a

100%

valuation allowance. The change in the valuation allowance for the period ended

September 30, 2017

and

September 30, 2016

was approximately

$497,018

and

$27,396.

A reconciliation of the U.S. statutory federal income tax rate to the effective tax rate is as follows:

	September 30,
	2017			2016

U.S. Federal statutory graduated rate		34.00	%		34.00	%
State income tax rate, net of federal benefit		3.06	%		3.06	%
Total rate		37.06	%		37.06	%

Less: Net operating loss for which no benefit is currently available		(37.06	)%		(37.06	)%
Net effective rate		0.00	%		0.00	%

The Company

’s income tax filings are subject to audit by various taxing authorities. The Company’s open audit periods are

September 30, 2015,

2016,

and

2017.

In evaluating the Company’s provisions and accruals, future taxable income, and reversal of temporary differences, interpretations and tax planning strategies are considered. The Company believes its estimates are appropriate based on current facts and circumstances.