Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Aug. 31, 2019 | Nov. 07, 2019 | Feb. 28, 2019 | |
Document and Entity Information: | |||
Entity Registrant Name | KushCo Holdings, Inc. | ||
Entity Central Index Key | 0001604627 | ||
Trading Symbol | kshb | ||
Current Fiscal Year End Date | --08-31 | ||
Entity Filer Category | Accelerated Filer | ||
Entity Voluntary Filers | No | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Common Stock, Shares Outstanding | 107,360,577 | ||
Entity Public Float | $ 429,262,171 | ||
Document Type | 10-K | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Document Period End Date | Aug. 31, 2019 | ||
Amendment Flag | false | ||
Document Fiscal Year Focus | 2019 | ||
Document Fiscal Period Focus | FY | ||
Entity Small Business | true | ||
Entity Shell Company | false | ||
Entity Emerging Growth Company | true | ||
Entity Ex Transition Period | true |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Aug. 31, 2019 | Aug. 31, 2018 |
Current assets: | ||
Cash | $ 3,944 | $ 13,467 |
Accounts receivable, net | 25,972 | 8,601 |
Inventory | 43,768 | 11,814 |
Prepaid expenses and other current assets | 12,209 | 13,623 |
Total current assets | 85,893 | 47,505 |
Goodwill | 52,267 | 52,267 |
Intangible assets, net | 3,103 | 4,488 |
Property and equipment, net | 11,054 | 4,135 |
Other assets | 6,917 | 250 |
Total Assets | 159,234 | 108,645 |
Current liabilities: | ||
Accounts payable | 10,907 | 2,822 |
Accrued expenses and other current liabilities | 9,460 | 3,071 |
Contingent consideration payable | 5,488 | |
Line of credit | 12,261 | 918 |
Total current liabilities | 32,628 | 12,299 |
Long-term liabilities: | ||
Notes payable | 18,975 | 172 |
Warrant liability | 5,444 | 14,430 |
Other non-current liabilities | 833 | 106 |
Total long-term liabilities | 25,252 | 14,708 |
Total liabilities | 57,880 | 27,007 |
Commitments and contingencies (Note 17) | ||
Stockholders' equity | ||
Preferred stock, $0.001 par value, 10,000 shares authorized, no shares issued and outstanding | ||
Common stock, $0.001 par value, 265,000 shares authorized, 90,041 and 78,273 shares issued and outstanding, respectively | 90 | 78 |
Additional paid-in capital | 164,258 | 104,918 |
Accumulated deficit | (62,994) | (23,358) |
Total stockholders' equity | 101,354 | 81,638 |
Total liabilities and stockholders' equity | $ 159,234 | $ 108,645 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parentheticals) - $ / shares | Aug. 31, 2019 | Aug. 31, 2018 |
Consolidated Balance Sheets | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 10,000 | 10,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 265,000 | 265,000 |
Common stock, shares issued | 90,041 | 78,273 |
Common stock, shares outstanding | 90,041 | 78,273 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands | 12 Months Ended | |
Aug. 31, 2019 | Aug. 31, 2018 | |
Consolidated Statements of Operations | ||
Net revenue | $ 148,954 | $ 52,075 |
Cost of goods sold | 124,386 | 38,741 |
Gross profit | 24,568 | 13,334 |
Operating expenses: | ||
Selling, general and administrative | 72,787 | 25,718 |
Gain on disposition of assets | (1,254) | |
Change in fair value of contingent consideration | (1,780) | 14,138 |
Total operating expenses | 69,753 | 39,856 |
Loss from operations | (45,185) | (26,522) |
Other income (expense): | ||
Change in fair value of warrant liability | 9,294 | 920 |
Change in fair value of equity investment | (931) | |
Interest expense | (2,523) | (276) |
Other expense, net | (164) | (22) |
Total other income | 5,676 | 622 |
Loss before income taxes | (39,509) | (25,900) |
Income tax expense (benefit) | 127 | (1,563) |
Net loss | $ (39,636) | $ (24,337) |
Net loss per share | ||
Basic (in dollars per share) | $ (0.47) | $ (0.37) |
Diluted (in dollars per share) | $ (0.57) | $ (0.37) |
Weighted-average common shares outstanding | ||
Basic (in shares) | 84,880 | 65,336 |
Diluted (in shares) | 84,896 | 65,336 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands | Common Stock | Additional Paid-in Capital | Retained Earnings (Accumulated Deficit) | Total |
Balance at Aug. 31, 2017 | $ 59 | $ 29,677 | $ 979 | $ 30,715 |
Balance (in shares) at Aug. 31, 2017 | 58,607 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Stock-based compensation | $ 2 | 5,470 | 5,472 | |
Stock-based compensation (in shares) | 1,681 | |||
Stock sold to investors | $ 13 | 35,286 | 35,299 | |
Stock sold to investors (in shares) | 13,406 | |||
Stock issued for acquisitions | $ 4 | 34,485 | 34,489 | |
Stock issued for acquisitions (in shares) | 4,579 | |||
Net loss | (24,337) | (24,337) | ||
Balance at Aug. 31, 2018 | $ 78 | 104,918 | (23,358) | 81,638 |
Balance (in shares) at Aug. 31, 2018 | 78,273 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Stock-based compensation | $ 1 | 11,997 | 11,998 | |
Stock-based compensation (in shares) | 882 | |||
Stock sold to investors | $ 9 | 41,583 | 41,592 | |
Stock sold to investors (in shares) | 9,077 | |||
Stock issued for acquisitions | $ 2 | 3,566 | 3,568 | |
Stock issued for acquisitions (in shares) | 1,809 | |||
Issuance of warrants | 2,194 | 2,194 | ||
Net loss | (39,636) | (39,636) | ||
Balance at Aug. 31, 2019 | $ 90 | $ 164,258 | $ (62,994) | $ 101,354 |
Balance (in shares) at Aug. 31, 2019 | 90,041 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | |
Aug. 31, 2019 | Aug. 31, 2018 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net loss | $ (39,636) | $ (24,337) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 2,501 | 1,223 |
Amortization of debt discount | 1,243 | |
Provision for bad debt | 2,628 | 966 |
Provision for sales returns | 477 | 0 |
Provision for inventory reserve | 3,026 | 585 |
Gain on disposal of assets | (1,254) | |
Change in fair value of equity investment | 931 | |
Stock-based compensation | 13,384 | 3,586 |
Change in fair value of warrant liability | (9,294) | (920) |
Offering costs allocated to warrant liability | 1,230 | |
Provision for deferred taxes | 97 | (1,617) |
Change in fair value of contingent consideration | (1,780) | 14,138 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (20,475) | (7,620) |
Inventory | (35,095) | (8,408) |
Prepaid expenses and other current assets | 120 | (10,637) |
Other non-current assets | (535) | |
Accounts payable | 7,874 | 615 |
Accrued expenses and other current liabilities | 4,916 | 1,109 |
Other non-current liabilities | 630 | 150 |
Net cash used in operating activities | (70,242) | (29,937) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Purchase of property, equipment, and intangibles | (8,017) | (2,841) |
Security deposits | (196) | |
Acquisition of Summit, net of cash received | (905) | |
Acquisition of Hybrid, net of cash received | (847) | |
Net cash used in investing activities | (8,017) | (4,789) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Repayment of capital leases | (106) | |
Proceeds from (repayment of) notes payable | 19,015 | (1,888) |
Proceeds from stock option exercises | 79 | 612 |
Proceeds from issuance of common stock | 41,008 | 49,419 |
Proceeds from line of credit | 140,609 | 918 |
Repayments on Lines of Credit | (129,267) | |
Debt issuance costs | (2,602) | |
Payments for contingent consideration | (1,785) | |
Net cash provided by financing activities | 68,736 | 47,276 |
NET INCREASE (DECREASE) IN CASH | (9,523) | 12,550 |
CASH AT BEGINNING OF YEAR | 13,467 | 917 |
CASH AT END OF YEAR | 3,944 | 13,467 |
CASH PAID FOR: | ||
Interest | 1,149 | 74 |
Income taxes | 13 | 330 |
NON-CASH INVESTING AND FINANCING ACTIVITIES | ||
Capital leases | 240 | 177 |
Services prepaid for in common stock | 1,987 | 1,273 |
Unpaid amounts for purchase of property & equipment | 211 | |
Fair value of shares issued related to acquisition of business | 3,568 | 8,273 |
Fair value of contingent equity consideration | $ 4,114 | |
Fair value of shares received from sale of assets | 1,791 | |
Warrants issued with financing agreement | $ 2,194 |
NATURE OF BUSINESS AND SIGNIFIC
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Aug. 31, 2019 | |
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES | |
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 – NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES Nature of Business KushCo Holdings, Inc. (“KushCo” or the “Company”) was incorporated in the state of Nevada on February 26, 2014. The Company specializes in marketing and selling customized packaging products, vaporizers, hydrocarbon gases, solvents, accessories and branding solutions to customers operating in the regulated medical and recreational cannabis industries. The Company provides custom branding on packaging products, and its testing standards meet the requirements set by the Consumer Product Safety Commission. The Company’s packaging products primarily consist of bottles, bags, tubes and containers. The Company maintains relationships with a broad range of manufacturers and also has sophisticated in-house labeling and customization capabilities. The Company sells a wide selection of vaporizer cartridges with a variety of core materials and heating technologies, as well as a wide selection of batteries to match the cartridges. The Company provides ultra-pure hydrocarbon gases, including isobutene, n-butane, propane, ethanol, pre-mixes, custom blends and other solvents, which are essential in the extraction process. The Company’s wholly-owned subsidiary, The Hybrid Creative, LLC, is a full-service creative agency that serves both cannabis and non-cannabis clients across the U.S., Canada and Europe. The Company’s wholly-owned subsidiary Kim International Corporation (“KIM”), a California corporation, was originally incorporated as Hy Gro Economics Corporation ("Hy Gro") on December 2, 2010. On October 30, 2012, Hy Gro amended its articles of incorporation to reflect a name change to KIM International Corporation. On March 4, 2014, the shareholders of KIM exchanged all 10,000 of their common shares for 32,400 common shares of KushCo Holdings, Inc. The operations of KIM became the operations of KushCo after the share exchange and accordingly the transaction is accounted for as a recapitalization of KIM whereby the historical financial statements of KIM are presented as the historical financial statements of the combined entity. KIM was the acquiring entity in accordance with ASC 805, Business Combinations . The accumulated losses of KIM were carried forward after the completion of the share exchange. Operations prior to the share exchange were those of KIM. Acquisition of CMP Wellness, LLC On May 1, 2017, the Company entered into a merger agreement with Lancer West Enterprises, Inc. a California corporation, Walnut Ventures, a California corporation, Jason Manasse, an individual, and Theodore Nicols, an individual, pursuant to which each of Lancer West Enterprises, Inc. and Walnut Ventures were merged with and into Merger Sub, with Merger Sub as the surviving corporation, resulting in the Company’s indirect acquisition of CMP Wellness, LLC, a California limited liability company, which prior to the merger, was owned 100% by Lancer West Enterprises, Inc. and Walnut Ventures. CMP Wellness, LLC is a distributor of vaporizers, cartridges and accessories. See Note 3 for a further description of the CMP Wellness acquisition. Acquisition of Summit Innovations, LLC On May 2, 2018, the Company completed its acquisition of Summit Innovations, LLC (“Summit”), a leading distributor of hydrocarbon gases to the legal cannabis industry. Pursuant to the terms of the Agreement and Plan of Merger (the “Merger Agreement”), Summit merged with and into KCH Energy, LLC (“KCH”), a wholly-owned subsidiary of the Company, with KCH as the surviving entity. See Note 4 for a further description of the Summit acquisition. Registered Offerings On June 7, 2018, January 15, 2019 and September 26, 2019, the Company entered into securities purchase agreements with certain accredited investors in connection with its registered direct offerings. See Notes 13 and 15 for further description of these transactions. Acquisition of Hybrid Creative, LLC On July 11, 2018, the Company completed its acquisition of Hybrid Creative, LLC (“Hybrid”), a specialist design agency. Pursuant to the terms of the Membership Interest Purchase Agreement (Agreement”) with the members of Zach Darling Creative Associates, LLC (“ZDCA”), parent of wholly-owned subsidiary, Hybrid, the Company purchased the entire issued member interest of ZDCA. Following the acquisition, ZDCA operates as a wholly-owned subsidiary of the Company, with Hybrid continuing to operate as wholly-owned subsidiary of ZDCA. See Note 5 for a further description of the Hybrid acquisition. Consolidation of an Entity In July 2018, the Company invested $1.0 million in the form of a convertible promissory note in a third-party company. The convertible promissory note provides the Company with the option to convert the principal balance of the note, at any time prior to the maturity date, into equity of this entity, representing 100% of the equity interests. As primary beneficiary, the Company consolidated this entity. Amendments to Articles of Incorporation or Bylaws On August 29, 2018, KushCo Holdings, Inc. (formerly known as Kush Bottles, Inc.) filed Amended and Restated Articles of Incorporation (the “Amended and Restated Charter”) with the Secretary of State for the State of Nevada. The Amended and Restated Charter changed the Company’s name from Kush Bottles, Inc. to KushCo Holdings, Inc. The Amended and Restated Charter became effective on September 1, 2018 and was approved by the Company’s stockholders at the Company’s 2018 Annual Meeting of Stockholders on May 8, 2018. In June 2019, the Company moved its corporate headquarters from Garden Grove, California to Cypress, California. The address for the Company’s new corporate headquarters is 6261 Katella Avenue, Suite 250, Cypress, CA 90630. Basis of Presentation The accompanying consolidated financial statements and related notes include the activity of the Company and its wholly-owned subsidiaries, have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on previously reported results of operations or retained earnings (accumulated deficit). Significant inter-company transactions and balances have been eliminated in consolidation. References to amounts in these notes to consolidated financial statements are in thousands, except per share data, unless otherwise specified. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenues and expenses during the reporting period. Significant estimates relied upon in preparing these consolidated financial statements include revenue recognition, accounts receivable reserves, inventory and related reserves, valuations and purchase price allocations related to business combinations, expected future cash flows used to evaluate the recoverability of long-lived assets, estimated fair values of long-lived assets used to record impairment charges related to intangible assets and goodwill, amortization periods, accrued expenses, stock-based compensation, and recoverability of the Company’s net deferred tax assets and any related valuation allowance. Although the Company regularly assesses these estimates, actual results could differ materially from these estimates. Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Actual results may differ from management’s estimates if past experience or other assumptions do not turn out to be substantially accurate. The Company is subject to a number of risks similar to those of other companies of similar size and having a focus of serving the cannabis industry, including, the development stage of certain products, competition, limited number of suppliers, integration of acquisitions, substantial indebtedness, government regulations, protection of proprietary rights, and dependence on key individuals. Cash and Cash Equivalents The Company considers cash and cash equivalents to consist of cash on hand and investments having an original maturity of 90 days or less that are readily convertible into cash. The Company deploys its cash and cash equivalents with financial institutions with highly rated credit and monitors the amount on deposit at the financial institution. The Company has cash deposits held at certain institutions at August 31, 2019 of which $2,630 was in excess of Federal Deposit Insurance Corporation insured limits. There were no cash equivalents outstanding as of August 31, 2019 and 2018. Accounts Receivable Trade accounts receivable are carried at their estimated collectible amounts. Trade credit is generally extended on a short-term basis and thus do not bear interest. Trade accounts receivables are periodically evaluated for collectability based on past credit history and their current financial condition. The Company maintains reserves for uncollectible accounts receivable and potential sales returns. In aggregate, such reserves reduce our gross accounts receivable to its estimated net realizable value. The Company’s allowance for doubtful accounts and sales return reserve was $1,058 and $477, respectively as of August 31, 2019 and $1,000 and $0, respectively, as of August 31, 2018. Inventory Inventories are stated at the lower of cost or net realizable value using the average cost method. The Company’s inventory consists of finished goods of $43,768 and $11,814 as of August 31, 2019 and 2018, respectively. The Company establishes reserves for excess and obsolete inventory, based on prevailing circumstances and judgment based on the Company’s experience. The Company’s inventory reserve was $2,640 and $585 as of August 31, 2019 and 2018, respectively. The Company also makes prepayments against the future delivery of inventory classified as prepaid inventory. The Company’s prepaid inventory was $7,134 and $11,019 and was included in prepaid expenses and other current assets as of August 31, 2019 and 2018, respectively. Property and Equipment Property and equipment is recorded at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the shorter of estimated useful life of the asset or the lease term, after the asset is placed in service. The estimated useful lives of the property and equipment are generally as follows: computer software acquired for internal use, three to seven years; computer equipment, two to three years; leasehold improvements, three to 15 years or term of lease; and furniture and equipment, one to seven years. Gains and losses from the retirement or disposition of property and equipment are included in operations in the period incurred. Maintenance and repairs are expensed as incurred. Gains or losses resulting from the retirement or sale of property and equipment are recorded as operating income or expenses, respectively. Fair Value of Financial Instruments The fair value of certain of our financial instruments, including cash, accounts receivable, other current assets, accounts payable and liabilities, capital lease obligations and deferred revenue approximate their fair values because of the short-term maturity of these instruments. The carrying amount of the Company’s long-term notes payable approximates its fair value based on interest rates available to the Company for similar debt instruments and similar remaining maturities. Derivative Financial Instruments The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. Management evaluates all of the Company’s financial instruments, including warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is remeasured at the end of each reporting period. Concentration of Risk The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, and accounts receivable. Collateral is not required for accounts receivable. The Company maintains an allowance for its doubtful accounts receivable. This allowance is based upon historical loss patterns, the number of days that billings are past due and an evaluation of the potential risk of loss associated with delinquent accounts. Receivables are written-off and charged against its recorded allowance when the Company has exhausted collection efforts without success. The Company’s losses related to collection of trade receivables have consistently been within management’s expectations. Due to these factors, no additional credit risk beyond amounts provided for collection losses, which the Company reevaluates on a monthly basis based on specific review of receivable agings and the period that any receivables are beyond the standard payment terms, is believed by management to be probable in the Company’s accounts receivable. The Company purchases products from a small number of suppliers. A change in or loss of these suppliers could cause a delay in filling customer orders and a possible loss of sales, which would adversely affect results of operations; however, management believes that suitable replacement suppliers could be obtained in such an event. Intangible Assets acquired through Business Combinations Intangible assets, domain name, trademarks and non-compete agreements that are deemed to have a definite life are amortized over their estimated useful lives and intangible assets with an indefinite life are assessed for impairment at least annually. Quarterly, the Company evaluates the estimated remaining useful life of its intangible assets and whether events or changes in circumstances warrant a revision to the remaining period of amortization. Impairment Assessment The Company evaluates intangible assets and long-lived assets for possible impairment periodically and whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. This includes but is not limited to significant adverse changes in business climate, market conditions, or other events that indicate an asset's carrying amount may not be recoverable. Recoverability of these assets is measured by comparison of the carrying amount of each asset to the future undiscounted cash flows the asset is expected to generate. If the undiscounted cash flows used in the test for recoverability are less than the carrying amount of these assets, the carrying amount of such assets is reduced to fair value. The Company evaluates and tests the recoverability of its goodwill for impairment at least annually during its fourth quarter of each fiscal year or more often if and when circumstances indicate that it is more likely than not goodwill may be impaired. There was no impairment of intangible assets, long-lived assets or goodwill during the years ended August 31, 2019 and 2018. Valuation of Business Combinations and Acquisition of Intangible Assets The Company records intangible assets acquired in business combinations and acquisitions of intangible assets under the acquisition method of accounting. The Company accounts for acquisitions in accordance with ASC Topic 805, Business Combinations . Amounts paid for each acquisition are allocated to the assets acquired and liabilities assumed based on their fair values at the dates of acquisition. The Company then allocates the purchase price in excess of the fair value of the net tangible assets acquired to identifiable intangible assets, including purchased intangibles based on detailed valuations that use information and assumptions provided by management. The Company allocates any excess purchase price over the fair value of the net tangible and intangible assets acquired to goodwill. The Company uses the income approach, the relief from royalty method (both a market and income method), and the with and without method to determine the fair values of its purchased intangible assets. The Company uses the probability-weighted expected return method (an income approach) to determine the appropriate amount of contingent consideration to include in the purchase price for an acquisition. The Company bases its revenue assumptions on estimates of relevant market sizes, expected market growth rates, expected industry trends and expected product introductions by competitors. For the intangible assets acquired, the Company used risk-adjusted discount rates ranging from 19% to 26% to discount its projected cash flows. The Company believes that the estimated purchased intangible asset amounts so determined represent the fair value at the date of acquisition and do not exceed the amount a third party would pay for the projects. The Company also used the income approach (probably weighted cash flow), as described above, to determine the estimated fair value of certain identifiable intangibles assets including domain names and tradenames. Tradenames represent acquired product names that the Company intends to continue to utilize. The Company used the with and without method to ascertain the fair value of the non-competition agreement. The Company estimates and records the acquisition date fair value of contingent consideration as part of purchase price consideration for acquisitions. Additionally, each reporting period, the Company estimates the fair value of contingent consideration and recognizes any changes in the fair value in its consolidated statement of operations. The Company estimates of the fair value of contingent consideration requires subjective assumptions to be made of future operating results, discount rates and probabilities assigned to various potential operating result scenarios. Future revisions to these assumptions could materially change the Company’s estimate of the fair value of contingent consideration and, therefore, materially affect the Company’s future financial results. A portion of the contingent consideration liability is to be settled with the issuance of shares of common stock once contingent provisions set forth in respective acquisition agreements have been achieved. Upon achievement of contingent provisions, respective liabilities are relieved and offset by increases to common stock and additional paid in capital in the Company’s stockholders’ equity. The Company uses its best estimates and assumptions to accurately assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the fair value of certain tangible and intangible assets acquired and liabilities assumed, with the corresponding offset to goodwill. Net Income (Loss) Per Share The Company computes net income (loss) per common share under ASC Topic 260, Earnings per Share (“ASC 260”). Basic net income (loss) per common share is computed by dividing net earnings by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per common share is computed by dividing net earnings by the sum of (a) the weighted average number of shares of common stock outstanding during the period and (b) the potentially dilutive securities outstanding during the period. Stock options are potentially dilutive securities; and the number of dilutive options is computed using the treasury stock method. For the year ended August 31, 2019, net loss is adjusted for changes in fair value of warrants recorded as a liability (see Note 13) and weighted average diluted shares includes dilutive warrants. The following table sets forth the calculation of basic and diluted net income (loss) per common share. August 31, August 31, 2019 2018 Net loss $ (39,636) $ (24,337) Less: Decrease in fair value of warrants (8,986) — Net loss available to common shareholders $ (48,622) $ (24,337) Weighted average common shares outstanding: Basic 84,880 65,336 Net effect of dilutive warrants 16 — Diluted 84,896 65,336 Net loss per common share per share: Basic $ (0.47) $ (0.37) Diluted $ (0.57) $ (0.37) For the year ended August 31, 2018, basic and diluted weighted average shares are the same as the Company generated a net loss for the period and potentially dilutive securities are excluded because they have an anti-dilutive impact. The computation of diluted net loss per share for the year ended August 31, 2019 does not include 4,579 options and 2,045 warrants because their inclusion would have an anti-dilutive effect on net loss per share. The computation of diluted net loss per share for the year ended August 31, 2018 does not include 646 options and 822 warrants because their inclusion would have an anti-dilutive effect on net loss per share. Revenue Recognition The Company adopted ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), using the modified retrospective method. As a practical expedient allowed under ASC 606, the Company applied the new guidance only to contracts that were not completed as of the date of initial application. The Company did not record any cumulative effect adjustment to retained earnings as of September 1, 2019 and did not record any material adjustment to gross revenue for the fiscal year ended August 31, 2019 as a result of applying the guidance in ASC 606. The Company markets and sells packaging products, vaporizers, hydrocarbon gases, solvents, accessories and branding solutions to customers operating in the regulated medical and recreational cannabis industries. The Company expenses fulfillment costs as incurred because the amortization period would be less than one year in accordance with the ASC 606 practical expedient. In accordance with ASC 606, the Company applies the following steps to recognize revenue for the sale of products that reflects the consideration to which the Company expects to be entitled to receive in exchange for the promised goods: · Identify the contract with a customer A contract with a customer exists when the Company enters into an enforceable contract with a customer. The contract is based on either the acceptance of standard terms, or the execution of terms and conditions contracts. These contracts define each party's rights, payment terms and other contractual terms and conditions of the sale. The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience and, in some circumstances, published credit and financial information pertaining to the customer. · Identify the performance obligations in the contract Performance obligations promised in a contract are identified based on the goods that will be transferred to the customer that are both capable of being distinct and are distinct in the context of the contract, whereby the transfer of the goods is separately identifiable from other promises in the contract. The Company has concluded the sale of finished goods and related shipping and handling are accounted for as a single performance obligation. · Determine the transaction price The transaction price is determined based on the consideration to which the Company will be entitled to receive in exchange for transferring goods to the customer. The Company estimates the amount of potential refunds at each reporting period using a portfolio approach of historical data, adjusted for changes in expected customer experience, including seasonality and changes in economic factors. Discounts provided to customers are accounted for as an element of the transaction price and as a reduction to revenue. Discounts were $822 and $465 for the years ended August 31, 2019 and 2018, respectively. Revenue is presented net of taxes collected from customers and remitted to governmental authorities. · Allocate the transaction price to the performance obligations in the contract The Company’s products are sold at their standalone selling price. · Recognize revenue when the Company satisfies a performance obligation Revenue is recognized when control of the finished goods is transferred to the customer. Control of the finished goods is transferred at a point in time, upon delivery to the customer. The period of time between the satisfaction of the performance obligation and when payment is due from the customer is not significant. Sales returns are estimated based on historical facts and circumstances. In the following table, product sales are disaggregated as follows for the years ended August 31, 2019 and 2018: August 31, August 31, 2019 2018 Manufacturing $ 147,498 $ 51,967 Services 1,456 108 Total Revenue $ 148,954 $ 52,075 Warranty Costs The Company has not had any historical warranty related expenditures from the sales of its products, which if incurred would result in the return of any defective products by customers. Stock-based Compensation The Company accounts for its stock-based awards in accordance with ASC Topic 718, Compensation (“ASC 718”), which requires fair value measurement and recognition of compensation expense for all share-based payment awards made to employees and directors, including restricted stock awards. The Company estimates the fair value of its stock options using the Black-Scholes option pricing model and its restricted stock using the stock price on the date of the approval of the award. The fair value is then expensed over the requisite service periods of the awards, which is generally the vesting period and the related amount is recognized in the consolidated statements of operations. Advertising The Company conducts advertising for the promotion of its products and services. In accordance with ASC Topic 720 Other expenses (“ASC 720”), advertising costs are charged to operations when incurred. Advertising costs were $1,304 and $753 for the fiscal years ended August 31, 2019 and 2018, respectively. Income Taxes The Company accounts for income taxes under FASB ASC Topic 740, Accounting for Income Taxes (“ASC 740”). As part of the process of preparing the consolidated financial statements, the Company is required to estimate an income tax provision (benefit) in each of the jurisdictions in which it operates. This process involves estimating the current income tax provision (benefit) together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within the consolidated balance sheets. The Company recorded a valuation allowance to reduce deferred tax assets to an amount that more likely than not will be realized. While future taxable income and ongoing prudent and feasible tax planning strategies have been considered in assessing the need for the valuation allowance, in the event the Company determines it would be able to realize deferred tax assets in the future in excess of the net recorded amount, an adjustment to the valuation allowance for the deferred tax asset would increase income in the period such determination was made. Likewise, should the Company determine it would not be able to realize all or part of the net deferred tax asset in the future, an adjustment to the valuation allowance for the deferred tax asset would be charged to income in the period such determination was made. During fiscal 2019, the Company maintained a valuation allowance to reduce deferred tax assets to an amount that more likely than not will be realized. The net deferred tax liability for fiscal year 2019 represents the portion of indefinite-life intangibles that could not be used as a future source of taxable income to support the realization of deferred tax assets. Segments The Company only has a single reportable segment. As defined in ASC Topic 280, Segment Reporting, operating segments are components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker, who is the chief executive officer, in deciding how to allocate resources and assess performance. Over the past few years, the Company has completed a number of acquisitions. These acquisitions have allowed the Company to expand its offerings, presence and reach in the cannabis industry. While the Company has offerings in multiple geographic locations for its products for the cannabis industry, as a result of the Company's acquisitions, the Company’s business operates in one operating segment because the majority of the Company's offerings operate similarly, and the Company’s chief operating decision maker evaluates the Company’s financial information and resources and assesses the performance of these resources on a consolidated basis. Since the Company operates in one reportable segment, all required financial segment information can be found in the consolidated financial statements. Recent Accounting Pronouncements Issued but not yet adopted by the Company Fair Value Measurement (Topic 820), - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. In August 2018, the FASB issued Accounting Standards Update (“ASU”) No. 2018-13, which makes a number of changes meant to add, modify or remove certain disclosure requirements associated with the movement amongst or hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted upon issuance of the update. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements. Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. In June 2016, the FASB issued ASU 2016-13, which provides guidance on accounting for credit losses, including trade receivables. The guidance requires the application of a current expected credit loss model, which measure credit losses based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts. The guidance is effective for annual periods beginning after December 15, 2019. The guidance requires companies to apply the requirements using a modified retrospective approach. The Company is currently evaluating the potential impact of the adoption of this standard on our consolidated financial statements and required disclosures. Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. In July 2018, the FASB issued ASU 2018-07, which addresses several aspects of the accounting for nonemployee share-based payment transactions and expands the scope of ASC 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The main provisions of the update change the way nonemployee awards are measured in the financial statements. Under the simplified standards, nonemployee options will be valued once at the date of grant, as compared to at each reporting period end under ASC 505-50. At adoption, all awards without established measurement dates will be revalued one final time, and a cumulative effect adjustment to retained earnings will be recorded as the difference between the pre-adoption value and new value. Companies will be permitted to make elections to establish the expected term and either recognize forfeitures as they occur or apply a forfeiture rate. Compensation expense recognition using a graded vesting schedule will no longer be permitted. This pending content is the result of the FASB’s Simplification Initiative, to maintain or improve the usefulness of the information provided to the users of financial statements while reducing cost and complexity in financial reporting. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. The Company will adopt the ASU effective September 1, 201 |
FISCAL 2018 RESTATEMENT
FISCAL 2018 RESTATEMENT | 12 Months Ended |
Aug. 31, 2019 | |
FISCAL 2018 RESTATEMENT | |
FISCAL 2018 RESTATEMENT | NOTE 2 – FISCAL 2018 RESTATEMENT In connection with the preparation of the Company’s unaudited condensed consolidated interim financial statements as of and for the fiscal quarter ended February 28, 2019, the Company identified inadvertent errors in the accounting for certain shared-settled contingent consideration obligations relating to the Company’s acquisition of CMP Wellness in May 2017, Summit Innovations in May 2018, and Hybrid Creative in July 2018. In connection with those acquisitions, contingent equity consideration relating to certain earn-out arrangements were accounted for as equity. Upon further evaluation, the Company determined that the share-settled contingent consideration should have been accounted for as liabilities with fair value changes recorded in the Company’s consolidated statements of operations. Accordingly, on April 11, 2019, the Company filed Amendment No. 1 to its Annual Report on Form 10-K/A (the “Amended 10-K”), which restated the Company’s previously issued audited consolidated financial statements as of and for the fiscal years ended August 31, 2018 and 2017 and unaudited condensed consolidated interim financial statements as of and for the periods ended May 31, 2017, November 31, 2017, February 28, 2018, and May 31, 2018. |
ACQUISITION OF CMP WELLNESS
ACQUISITION OF CMP WELLNESS | 12 Months Ended |
Aug. 31, 2019 | |
CMP Wellness | |
Business Acquisition [Line Items] | |
ACQUISITION OF CMP WELLNESS | NOTE 3 - ACQUISITION OF CMP WELLNESS On May 1, 2017 (“Merger Date”), the Company and KBCMP, Inc., a Delaware corporation and newly formed wholly-owned subsidiary of the Company (“Merger Sub”), entered into an Agreement of Merger (the “Merger Agreement”) with Lancer West Enterprises, Inc., a California corporation and Walnut Ventures, a California corporation, pursuant to which each of Lancer West Enterprises, Inc. and Walnut Ventures were merged with and into Merger Sub, with Merger Sub as the surviving corporation, resulting in the Company’s indirect acquisition of CMP Wellness, LLC, a California limited liability company, which prior to the merger, was owned 100% by Lancer West Enterprises, Inc. and Walnut Ventures. Membership interest in CMP was the sole and only asset of Lancer West Enterprises, Inc. and Walnut Ventures (“CMP Wellness” or “CMP”). As a result, CMP Wellness became a wholly-owned subsidiary of the Company. CMP Wellness is a distributor of vaporizers, cartridges and accessories. The acquisition consideration consisted of a fixed cash payment of $1,500, unsecured promissory notes in the aggregate principal amount of approximately $771, having a one-year maturity, and an aggregate of 7,800 restricted shares of the Company’s common stock. During the one-year period following the closing, the two sellers of CMP were entitled to receive up to an additional $1,905 in cash, in the aggregate, and 4,741 shares of common stock of the Company, in the aggregate, based on the gross profit generated by the CMP product line for the period from May 1, 2017 to April 30, 2018. Per the terms of the Merger Agreement, post-closing adjustments to CMP’s working capital is directly offset to the unsecured promissory notes payable. Management has estimated that the post-closing working capital adjustments amounted to $104, which resulted in a decrease of the unsecured promissory notes payable from $771 to $667. In accordance with ASC 805, management evaluated the estimated fair value of the contingent consideration based a probability-weighted assessment of the occurrence of CMP reaching certain gross profit earnout targets. The Company initially recorded a contingent liability for the contingent cash consideration of $1,735 and the fair value of the contingent equity consideration of $10,764. Based on information obtained during the fourth fiscal quarter of 2017, the Company revised its estimate of the contingent cash consideration from $1,735 to $1,905, and its estimate of the contingent equity consideration from $10,764 to $11,683. On July 16, 2018, the Company issued an aggregate of 3,741 shares of common stock associated with the contingent equity consideration in accordance with the terms of the Merger Agreement. On May 9, 2019, the Company issued 500 shares of common stock associated with holdback shares in accordance with the terms of the Merger Agreement. |
ACQUISITION OF SUMMIT INNOVATIO
ACQUISITION OF SUMMIT INNOVATIONS, LLC | 12 Months Ended |
Aug. 31, 2019 | |
Acquisition of Summit Innovations, LLC | |
Business Acquisition [Line Items] | |
ACQUISITION OF SUMMIT INNOVATIONS, LLC | NOTE 4 - ACQUISITION OF SUMMIT INNOVATIONS, LLC On May 2, 2018, the Company completed its acquisition of Summit, a leading distributor of hydrocarbon gases to the legal cannabis industry. Pursuant to the terms of the Merger Agreement with Summit, Summit merged with and into KCH, a wholly-owned subsidiary of the Company, with KCH as the surviving entity. The acquisition was accounted for using the acquisition method of accounting in accordance with ASC 805. The fixed purchase consideration paid to the Members of Summit at the closing included the cash consideration, consisting of an aggregate of $905 in cash, net of cash received, $188 in cash held back and the share consideration, consisting of an aggregate of 1,280 shares common stock. The Company held back approximately 640 shares of common stock from the share consideration for a period of 15 months for potential post-closing working capital and/or indemnification claims relating to, among other things, breaches of representations, warranties and covenants contained in the Merger Agreement. The Members may become entitled to receive contingent equity consideration of up to an additional 1,280 shares of common stock, in the aggregate, based on the net revenue performance of the Summit business during a one-year period following the closing. Fair value of consideration transferred (based on the May 2, 2018 closing price of $5.59) was as follows: May 2, 2018 Measurement Period August 31, 2018 (As initially reported) Adjustments (1) (As adjusted) Cash $ 945 $ (40) $ 905 Cash held back 500 (312) 188 Fair value of common shares issued to Summit members 3,578 — 3,578 Fair value common shares held back 3,578 (762) 2,816 Fair value contingent consideration payable in common shares 7,155 — 7,155 Total $ 15,756 $ (1,114) $ 14,642 (1) As of August 31, 2018, the Company recorded measurement period adjustments to decrease cash held back from $500 to $188, to decrease cash, net of cash acquired, from $945 to $905, and to decrease the fair value of shares held back from $3,578 to $2,816. The following table summarizes the allocation of the purchase price to the assets acquired and liabilities assumed: May 2, 2018 Measurement Period August 31, 2018 (As initially reported) Adjustments (1) (As adjusted) Accounts receivable, net of allowance $ 471 $ (253) $ 218 Prepaid expenses and other current assets 87 — 87 Inventory 237 — 237 Property and equipment, net 649 — 649 Accounts payable (1,377) 103 (1,274) Accrued expenses and other current liabilities (358) — (358) Notes payable (987) — (987) Total identifiable net assets (1,278) (150) (1,428) Non-compete — 620 620 Goodwill 17,034 (1,584) 15,450 Total fair value of consideration $ 15,756 $ (1,114) $ 14,642 (1) As of August 31, 2018, the Company recorded measurement period adjustments to allocate $620 to the non-compete, decrease accounts receivable, net of allowance, from $471 to $218 and decrease accounts payable from $1,377 to $1,274. As discussed in Note 2, in connection with the Company’s initial acquisition accounting, the Company inadvertently classified the contingent equity consideration as equity. Given that the earnout arrangements allow for a variable number of shares to be issued depending on how the Summit business performs against the revenue target, the Company should have classified the contingent equity consideration as a liability until the contingency is resolved. Accordingly, the Company has recorded the changes in the fair value of its contingent consideration within its statements of operations. The following unaudited pro forma financial data assumes the acquisition had occurred at September 1, 2016. Pro forma results have been prepared by adjusting the Company’s historical results to include Summit's results of operations. The unaudited pro forma results presented do not necessarily reflect the results of operations that would have resulted had the acquisition been completed at September 1, 2016, nor do they indicate the results of operations in future periods. Additionally, the unaudited pro forma results do not include the impact of possible business model changes, nor do they consider any potential impacts of current market conditions or revenues, reduction of expenses, asset dispositions, or other factors. The impact of these items could alter the following pro forma results: Year Ended Year Ended August 31, 2018 August 31, 2017 Unaudited Unaudited Total revenues $ 56,950 $ 19,018 Net loss $ (26,086) $ 1,458 Loss per share: Basic $ (0.40) $ (0.03) Diluted $ (0.40) $ (0.02) On August 13, 2019, the Company issued an aggregate of 1,147 shares of common stock associated with the contingent equity consideration and holdback shares in accordance with the terms of the Merger Agreement. As of August 31, 2019, the Company is holding back the remaining 200 shares pending resolution of certain claims. |
ACQUISITION OF THE HYBRID CREAT
ACQUISITION OF THE HYBRID CREATIVE, LLC | 12 Months Ended |
Aug. 31, 2019 | |
Acquisition of Hybrid Creative, LLC | |
Business Acquisition [Line Items] | |
ACQUISITION OF THE HYBRID CREATIVE, LLC | NOTE 5 - ACQUISITION OF THE HYBRID CREATIVE, LLC On July 11, 2018, the Company completed its acquisition of Hybrid, a marketing and design agency. Pursuant to the terms of the Agreement with the members of ZDCA, parent of wholly-owned subsidiary, Hybrid, the Company purchased the entire issued member interest of ZDCA. Following the acquisition, ZDCA operates as a wholly-owned subsidiary of the Company, with Hybrid continuing to operate as wholly-owned subsidiary of ZDCA. The acquisition was accounted for using the acquisition method of accounting in accordance with ASC 805. The fixed consideration paid to the Members of Hybrid at the closing included the cash consideration, consisting of an aggregate of $847 in cash, net of cash received, $82 in cash held back and the share consideration, consisting of an aggregate of 360 shares common stock. The Company held back 162 shares of common stock from the share consideration until January 1, 2019 in connection with certain representations and warranties. The Members may become entitled to receive cash contingent consideration of up to $485, and up to 213 common shares of equity consideration, based primarily on the net revenue performance of the Hybrid business during the period September 1, 2018 through August 31, 2019. The total purchase price (based on the $5.22 July 11, 2018 closing price) was as follows: August 31, 2018 Cash $ 847 Cash held back 82 Fair value of common shares issued to Hybrid members 1,879 Fair value of contingent cash consideration 450 Estimated fair value of contingent equity consideration 920 Total estimated acquisition consideration $ 4,178 The following table summarizes the allocation of the purchase price to the assets acquired and liabilities assumed: August 31, 2018 Accounts receivable, net of allowance $ 33 Prepaid expenses and other assets 6 Accounts payable (86) Accrued expenses and other current liabilities (278) Notes payable (235) Total identifiable net assets (560) Non-compete 910 Goodwill 3,828 Total fair value of consideration $ 4,178 As discussed in Note 2, in connection with the Company’s initial acquisition accounting, the Company inadvertently classified the contingent equity consideration as equity. Given that the earnout arrangements allow for a variable number of shares to be issued depending on how the Hybrid business performs against the revenue target, the Company should have classified the contingent equity consideration as a liability until the contingency is resolved. Accordingly, the Company has recorded the changes in the fair value of its contingent consideration within its statements of operations. The following unaudited pro forma financial data assumes the acquisition had occurred at September 1, 2016. Pro forma results have been prepared by adjusting the Company’s historical results to include Hybrid's results of operations. The unaudited pro forma results presented do not necessarily reflect the results of operations that would have resulted had the acquisition been completed at September 1, 2016, nor do they indicate the results of operations in future periods. Additionally, the unaudited pro forma results do not include the impact of possible business model changes, nor do they consider any potential impacts of current market conditions or revenues, reduction of expenses, asset dispositions, or other factors. The impact of these items could alter the following pro forma results: Year Ended Year Ended August 31, 2018 August 31, 2017 Unaudited Unaudited Total revenues $ 53,069 $ 19,922 Net loss $ (24,865) $ 1,624 Loss per share: Basic $ (0.38) $ 0.03 Diluted $ (0.38) $ 0.03 On February 8, 2019, the Company issued an aggregate of 162 shares of common stock associated with the holdback shares in accordance with the terms of the Membership Interest Purchase Agreement. As of February 28, 2019, the Company concluded that ZDCA would not meet the minimum earnout target threshold. Accordingly, the fair value of the related contingent consideration was adjusted to zero. |
CONCENTRATIONS OF RISK
CONCENTRATIONS OF RISK | 12 Months Ended |
Aug. 31, 2019 | |
CONCENTRATIONS OF RISK | |
CONCENTRATIONS OF RISK | NOTE 6 – CONCENTRATIONS OF RISK Supplier Concentrations The Company purchases inventory from various suppliers and manufacturers. For the year ended August 31, 2019, one vendor accounted for approximately 40% of total inventory purchases. For the year ended August 31, 2018, two vendors accounted for approximately 56% of total inventory purchases. Customer Concentrations The Company has a concentration of credit risk with its accounts receivable balance. For the fiscal year ended August 31, 2019, two customers represented approximately 14% and 10% of revenue, respectively, and approximately 18% and 1% of accounts receivable, respectively, at August 31, 2019. No customer accounted for 10% or more of the Company’s net revenues for the fiscal year ended August 31, 2018. |
SALE OF RUB
SALE OF RUB | 12 Months Ended |
Aug. 31, 2019 | |
SALE OF RUB | |
SALE OF RUB | NOTE 7 – SALE OF RUB On September 21, 2018, Smoke Cartel, Inc. (“Smoke Cartel”) and the Company entered into an agreement to sell a web domain and inventory related to the Company’s Rolluh-Bowl (“RUB”) product line. The Company received 1,410 shares of Smoke Cartel common stock as part of the consideration for this transaction. The fair value of its equity investment as of September 21, 2018 was based upon the closing stock price of Smoke Cartel. The following sets forth the calculation of the gain on disposition of assets upon completion of the sale: Fair value of Smoke Cartel as of September 21, 2018 $ 1,791 RUB web domain and inventory sold (537) Gain on disposition of assets $ 1,254 As of August 31, 2019, the fair value of the shares of Smoke Cartel were $592 and is recorded in Other assets on the Company’s consolidated balance sheet. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Aug. 31, 2019 | |
RELATED-PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | NOTE 8 – RELATED-PARTY TRANSACTIONS The Company leased certain California and Colorado facilities from related parties. As of August 31, 2019, the Company no longer leases these facilities. During the years ended August 31, 2019 and 2018, total rent payments of $35 and $215, respectively, were made to these related parties. The Company sells certain products and supplies to two related parties. Sales recognized during the years ended August 31, 2019 and 2018 from the related parties totaled $1,224 and $254, respectively. Total accounts receivable from related parties as of August 31, 2019 was $465. Further, the Company rents certain warehouse equipment from a related party. During the years ended August 31, 2019 and 2018, total payments of $285 and $72, respectively, were made to the related party. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 12 Months Ended |
Aug. 31, 2019 | |
PROPERTY AND EQUIPMENT | |
PROPERTY AND EQUIPMENT | NOTE 9 – PROPERTY AND EQUIPMENT The major classes of fixed assets consist of the following: August 31, August 31, 2019 2018 Machinery and equipment $ 4,430 $ 2,938 Vehicles 603 381 Office Equipment 3,232 385 Leasehold improvements 3,296 1,319 Construction in progress 1,930 — 13,491 5,023 Accumulated Depreciation (2,437) (888) $ 11,054 $ 4,135 Depreciation expense was $1,549 and $401 for the years ended August 31, 2019 and 2018, respectively. |
INTANGIBLE ASSETS AND GOODWILL
INTANGIBLE ASSETS AND GOODWILL | 12 Months Ended |
Aug. 31, 2019 | |
INTANGIBLE ASSETS AND GOODWILL | |
INTANGIBLE ASSETS AND GOODWILL | NOTE 10 – INTANGIBLE ASSETS AND GOODWILL Intangible assets consist of the following as of August 31, 2019 and 2018: As of August 31, 2019 As of August 31, 2018 Weighted Average Estimated Gross Gross Useful Carrying Accumulated Net Carrying Accumulated Net Description Life Value Amortization Amount Value Amortization Amount Domain name 5 years $ — $ — $ — $ 599 $ (166) $ 433 Trade name 6 years 2,600 (1,011) 1,589 2,600 (578) 2,022 Non-compete agreement 4 years 2,370 (856) 1,514 2,370 (337) 2,033 $ 4,970 $ (1,867) $ 3,103 $ 5,569 $ (1,081) $ 4,488 Amortization expense was $952 and $822 for the years ended August 31, 2019 and 2018, respectively. The estimated remaining amortization expense for each of the five succeeding fiscal years: Year ended August 31, 2020 $ 947 2021 881 2022 747 2023 528 $ 3,103 The following table summarizes the carrying amount of goodwill as of August 31, 2019 and 2018: Acquisition Date Dank Bottles November 2015 $ 2,377 CMP Wellness May 2017 30,612 Summit May 2018 15,450 Hybrid August 2018 3,828 $ 52,267 |
ACCRUED EXPENSES AND OTHER CURR
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | 12 Months Ended |
Aug. 31, 2019 | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | NOTE 11 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities consist of the following: August 31, August 31, 2019 2018 Customer deposits $ 2,992 $ 769 Accrued compensation 3,485 993 Sales tax payable 1,047 432 Other accrued expenses 1,936 877 $ 9,460 $ 3,071 |
DEBT
DEBT | 12 Months Ended |
Aug. 31, 2019 | |
DEBT | |
DEBT | NOTE 12 – DEBT Gerber Revolving Line On November 16, 2017, the Company and its wholly-owned subsidiary KIM International Corporation (“KIM”) as borrowers, and all of the Company’s other subsidiaries, as credit parties, entered into a Loan and Security Agreement (the “Loan Agreement”) with Gerber Finance Inc., as lender (“Gerber”), effective as of November 6, 2017. The Loan Agreement originally provided a secured revolving credit facility (the “Revolving Line”) in an aggregate principal amount of up to $2.0 million at any time outstanding. Under the original terms of the Loan Agreement, the principal amount of loans, plus the face amount of any outstanding letters of credit, at any time outstanding could not exceed up to 85% of the Company’s eligible receivables minus reserves. Under the terms of the Loan Agreement, the Company may also request letters of credit from Gerber. The proceeds of the loans under the Loan Agreement will be used for working capital and general corporate purposes. The Revolving Line has a maturity date of November 6, 2019. Borrowings under the Revolving Line accrues interest at a rate based on the prime rate as customarily defined, plus a margin of 3.0%. On March 8, 2018, the Company and KIM entered into a first amendment to the Loan Agreement with Gerber. Pursuant to the first amendment, the aggregate principal amount of the Revolving Line at any time outstanding was increased to $4.0 million and the principal amount of loans, plus the face amount of any outstanding letters of credit, at any time outstanding could not exceed the lesser of (i) 40% of the value of certain inventory and (ii) 50% of certain accounts receivable. On November 9, 2018, the Company and KIM entered into a second amendment to the Loan Agreement with Gerber. Pursuant to the second amendment, the aggregate principal amount of the Revolving Line at any time outstanding was increased to $8.0 million. Additionally, subject to certain exceptions, the face amount of any outstanding letters of credit, at any time outstanding cannot exceed the lesser of (i) 25% of the value of certain inventory (increasing to 40% upon receipt of certain landlord waivers) and (ii) 50% of certain accounts receivable. In April 2019, the Company obtained a waiver of non-compliance with certain covenant violations associated with the restatements described in Note 2. Interest expense during the year ended August 31, 2019 and 2018 was $1,108 and $224, respectively. The Gerber Revolving Line was terminated and repaid in full on August 21, 2019. Monroe Revolving Credit Facility On August 21, 2019, the Company entered into a secured asset based Revolving Credit Facility (“Monroe Revolving Credit Facility”) with an aggregate amount not to exceed $35.0 million outstanding at any time between the Company and its subsidiaries (collectively, the “Borrowers”) and Monroe Capital Management Advisors, LLC, as collateral agent and administrative agent (the “Agent”), and the various lenders party thereto. The credit facility also includes an accordion feature that permits the Borrowers to increase the available revolving commitments under the Credit Facility by up to an additional $15 million, subject to satisfaction of certain conditions. All amounts advanced under the Monroe Revolving Credit Facility will bear interest at a rate per annum equal to either: · 5.25% plus the greatest of: (a) 5.50%; (b) the Federal Funds Rate plus 0.50%; (c) the quotient of (i) the LIBOR rate, divided by (ii) the difference of 100 percent minus, for any lender, the maximum percentage prescribed by the Board of Governors of the Federal Reserve System of the United States (or its successor) for determining reserve requirements of that lender; plus 1.00%; and (d) the Prime Rate; or · 8.50% plus the greater of (a) the quotient of (i) the LIBOR rate, divided by (ii) the difference of one minus the stated maximum reserve percentage to be maintained by member banks of the Federal Reserve System for Eurocurrency funding or liabilities; and (b) 1.00%. As of August 31, 2019, the interest rate was 10.7%. The Monroe Revolving Credit Facility has a five-year term, maturing on August 21, 2024, and is secured by a first priority lien on substantially all of the assets of the Company and its subsidiaries. The Monroe Revolving Credit Facility also contains customary representations and warranties, affirmative and negative covenants, including a financial covenant requiring certain minimum availability, and events of default. The Company incurred closing costs associated with the Monroe Revolving Credit Facility in the amount of $2,602, which were deferred and amortized over the 5-year term of the Monroe Revolving Credit Facility on a straight-line basis. As of August 31, 2019, unamortized deferred closing costs of $2,585 is included in Other assets. Principal of $12,261 remained outstanding as of August 31, 2019. Interest expense and amortization of debt discount, associated with the Monroe Revolving Credit Facility during the year ended August 31, 2019 amounted to $44 and $17, respectively. Monroe Warrants Further on August 21, 2019, the Company entered into a Monroe Subscription Agreement, pursuant to which the Company issued to the Subscribers (i) a Warrant to purchase up to 500 shares of Common Stock at $0.001 par value per share (the “Monroe Warrants”), at an exercise price of $4.25 per share. The Monroe Warrants have a 5 -year term and as such will expire on August 21, 2024. As of August 31, 2019, the Monroe Warrants granted were not exercised. The Monroe Warrants were classified as equity. The estimated fair value of the Monroe Warrants was $989 as of August 21, 2019 and was computed using the Black-Scholes model. Long-term Debt On April 29, 2019, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an institutional investor (the “Investor”), pursuant to which the Company agreed to issue and sell, and the Investor agreed to purchase, a senior note (the “Original Note”) in a private placement offering in the aggregate principal amount of $21.3 million with an original issue discount of $1.3 million, and received net proceeds of $20.0 million. The Original Note is a senior unsecured obligation, and unless earlier redeemed, will mature on October 30, 2020. The Original Note does not bear interest, except upon the occurrence of an event of default. On August 21, 2019, the Company entered into an exchange agreement (the “Exchange Agreement”) with the Investor in order to amend and waive certain provisions of the Purchase Agreement and the Original Note and exchange the Original Note for (i) a new senior note (the “New Senior Note”) for the same aggregate principal amount as the Original Note and (ii) a warrant to purchase up to 650,000 shares of our common stock at an exercise price of $4.25.The Warrants have an expiration date of August 21, 2024 and have not been exercised. As of August 21, 2019, the Warrants were reclassified from a derivative liability to equity with a corresponding adjustment to additional paid-in capital. The fair value of the Warrants was determined using a Black-Scholes model as of August 21, 2019 and was equal to $792. Similar to the terms of the Original Note, the New Senior Note matures on October 30, 2020, at which time the Company must pay the Investor an amount in cash representing 120% of all outstanding principal, less original issue discount, plus any accrued and unpaid interest and accrued and unpaid late charges. Similar to the terms of the Original Note, the New Senior Note will not bear interest except upon the occurrence of an event of default. On November 8, 2019, the Company entered into a Second Exchange Agreement (“Second Exchange Agreement”) with the Investor, pursuant to which we amended the New Senior Note (the “Amended Senior Note”). Pursuant to the terms of the Amended Senior Note, the maturity date of the Amended Senior Note was extended to April 29, 2021 andthe aggregate principal amount of the Amended Senior Note was increased to approximately $24.0 million and increase the original issue discount to $1.5 million. Upon maturity, the Company must pay the Investor an amount in cash representing 120% of all outstanding principal, less original issue discount, plus any accrued and unpaid interest and accrued and unpaid late charges. Similar to the terms of the Original Note, the Amended Senior Note will not bear interest except upon the occurrence of an event of default. Promissory Notes Payable As partial consideration for the acquisition of CMP, the Company issued the sellers unsecured promissory notes totaling $771. Management estimated the post-closing working capital adjustments amounted to $104, which resulted in a decrease of the unsecured promissory notes payable from $771 to $667. The promissory notes matured on May 1, 2018 and bore interest at an annual rate of 1.15%. The notes were repaid in full as of August 31, 2018. |
WARRANT LIABILITY
WARRANT LIABILITY | 12 Months Ended |
Aug. 31, 2019 | |
WARRANT LIABILITY | |
WARRANT LIABILITY | NOTE 13 – WARRANT LIABILITY In June 2018, the Company issued 3,750 five-year warrants to investors in a registered direct offering (the “Offering”). Pursuant to ASC Topic 815, the initial fair value of the warrants of $15,350 was recorded as a warrant liability on the issuance date. The estimated fair values of the warrants were computed at issuance using a Black-Scholes option pricing model, with the following assumptions: stock price $5.56 volatility 78.1%, risk-free rate 2.74%, annual dividend yield 0% and expected life 5.0 years. The estimated fair value of the outstanding warrant liabilities was $5,444 and $14,430 as of August 31, 2019 and 2018, respectively. Increases or decreases in fair value of the warrant liability are included as a component of total other expense in the accompanying consolidated statements of operations for the respective period. The changes to the liability for warrants resulted in a decrease of $8,986 and $920 in warrant liability and a corresponding gain included in other income for the years ended August 31, 2019 and 2018. The estimated fair value of the warrants was computed as of August 31, 2019 using the Black Scholes model with the following assumptions: stock price $3.75 volatility 63.7%, risk-free rate 1.41%, annual dividend yield 0% and expected life 3.8 years. |
FAIR VALUE OF FINANCIAL INSTRUM
FAIR VALUE OF FINANCIAL INSTRUMENTS | 12 Months Ended |
Aug. 31, 2019 | |
FAIR VALUE OF FINANCIAL INSTRUMENTS | |
FAIR VALUE OF FINANCIAL INSTRUMENTS | NOTE 14 – FAIR VALUE OF FINANCIAL INSTRUMENTS Fair value measurements are performed in accordance with the guidance provided by ASC Topic 820, “Fair Value Measurements and Disclosures.” ASC 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or parameters are not available, valuation models are applied. ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Assets and liabilities recorded at fair value in the financial statements are categorized based upon the hierarchy of levels of judgment associated with the inputs used to measure their fair value. Hierarchical levels directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows: Level 1 – Quoted prices in active markets for identical assets or liabilities that an entity has the ability to access. Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 3 – Unobservable inputs that are supportable by little or no market activity and that are significant to the fair value of the asset or liability. The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, equity investments, accounts receivable, accounts payable and accrued liabilities, capital lease obligations and deferred revenue approximate their fair values based on their short-term nature. The carrying amount of the Company’s long-term notes payable approximates its fair value based on interest rates available to the Company for similar debt instruments and similar remaining maturities. The estimated fair value of the contingent consideration related to the Company’s business combinations is recorded using significant unobservable measures and other fair value inputs and is therefore classified as a Level 3 financial instrument. The Company accounts for its investment in Smoke Cartel at fair value. On September 21, 2018, Smoke Cartel and the Company entered into an agreement to sell the RUB web domain and inventory related to this product line and in exchange, received 1,410 shares of Smoke Cartel common stock (see Note 7 above.) The fair value of its investment as of September 21, 2018 and August 31, 2019 was based upon the closing stock price of Smoke Cartel. The investment was classified as a Level 2 financial instrument. In connection with the Company’s registered direct offering in June 2018, the Company issued warrants to purchase shares of its common stock which are accounted for as a warrant liability (see Note 13 above.) The estimated fair value of the derivative is recorded using significant unobservable measures and other fair value inputs and is therefore classified as a Level 3 financial instrument. In connection with the Company’s private placement offering in April 2019, the Company entered into a Purchase Agreement, whereby it granted to the Investor participation rights in future financing transactions up to an aggregate of 15% of such transactions (or, except for certain permitted indebtedness, up to an aggregate of 100% of debt issuances). These participation rights were recorded as a derivative liability with estimated fair value determined using significant unobservable measures and other fair value inputs and is therefore classified as a Level 3 financial instrument. The following table details the fair value measurement within the fair value hierarchy of the Company’s financial instruments, which includes the Level 2 assets and the Level 3 liabilities: Fair Value at August 31, 2019 Total Level 1 Level 2 Level 3 Assets: Equity investment $ 592 $ — $ 592 $ — Total assets $ 592 $ — $ 592 $ — Liabilities: Warrant liability $ 5,444 $ — $ — $ 5,444 Total liabilities $ 5,444 $ — $ — $ 5,444 Fair Value at August 31, 2018 Total Level 1 Level 2 Level 3 Liabilities: Contingent consideration payable $ 5,488 $ — $ — $ 5,488 Warrant liability 14,430 — — 14,430 Total liabilities $ 19,918 $ — $ — $ 19,918 The following table reflects the activity for the Company’s investment in Smoke Cartel measured at fair value using Level 2 inputs: Investment in Smoke Cartel As of August 31, 2018 $ — Acquisition of equity investment 1,791 Adjustments to estimated fair value (1,199) As of August 31, 2019 $ 592 The following table reflects the activity for the Company’s warrant derivative liability for the June 2018 registered offering measured at fair value using Level 3 inputs: Warrant Liability Balance at August 31, 2017 $ — Issuance 15,350 Adjustments to estimated fair value (920) Balance at August 31, 2018 14,430 Adjustments to estimated fair value (8,986) Balance at August 31, 2019 $ 5,444 The following table reflects the activity for the Company’s participation rights derivative liability for the April 2019 private debt offering measured at fair value using Level 3 inputs: Participation Rights Derivative Liability As of April 30, 2019 $ 1,100 Adjustments to estimated fair value (308) Reclassification to equity (792) As of August 31, 2019 $ — The following table reflects the restated activity for the Company’s contingent acquisition liabilities measured at fair value using Level 3 inputs: Contingent Consideration Payable As of August 31, 2017 10,828 Change in Fair Value 14,138 Cash Payment (1,820) Settled in shares – CMP (26,218) Acquisition of Summit 7,155 Acquisition of Hybrid Creative 1,405 As of August 31, 2018 5,488 Change in Fair Value (1,780) Cash Payment (140) Settled in shares – Summit and Hybrid (3,568) As of August 31, 2019 — The fair value of the contingent consideration is evaluated each reporting period using projected financial results, discount rates, and key inputs. Projected contingent payment amounts are discounted back to the current period using a discount rate. Financial information is based on the Company’s most recent internal operational budgets and forecasts. Changes in projected financial results may result in higher fair value measurements. Increases in discount rates and the time to payment may result in lower fair value measurements. Increases (decreases) in any of those inputs in isolation may result in a significantly lower (higher) fair value measurement. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 12 Months Ended |
Aug. 31, 2019 | |
STOCKHOLDERS' EQUITY. | |
STOCKHOLDERS' EQUITY | NOTE 15 – STOCKHOLDERS’ EQUITY Preferred Stock The authorized preferred stock is 10,000 shares with a par value of $0.001. As of August 31, 2019 and 2018, the Company has no shares of preferred stock issued or outstanding. Common Stock The authorized common stock is 265,000 shares with a par value of $0.001. As of August 31, 2019 and 2018, 90,041 and 78,273 shares were issued and outstanding, respectively. On June 7, 2018, the Company entered into the Purchase Agreement with certain accredited investors pursuant to which the Company agreed to issue and sell an aggregate of 7,500 shares of its common stock, par value $0.001 per share (the “Common Stock”) and warrants to purchase 3,750 shares of Common Stock (“Warrants”) (collectively, the “Securities”), in the Offering. Subject to certain ownership limitations, the Warrants were immediately exercisable at an exercise price equal to $5.28 per share of Common Stock. The Warrants are exercisable for five years from the date of issuance. The combined per share purchase price for a share of Common Stock and half of a Warrant was $4.80. The closing of the Offering occurred on June 12, 2018 with aggregate gross proceeds of approximately $36.0 million. The aggregate net proceeds from the Offering, after deducting the placement agent fees and other offering expenses, was approximately $33.0 million. Also, during the year ended August 31, 2018, the Company sold 5,902 shares of its common stock to investors in exchange for cash of $16.4 million. On January 15, 2019, the Company entered into a securities purchase agreement with certain accredited investors pursuant to which the Company sold an aggregate of 6,476 shares of its common stock and warrants to purchase 3,238 shares of common stock in a registered direct offering. The securities were offered by the Company pursuant to its shelf registration statement on Form S-3. Subject to certain ownership limitations, the warrants became immediately exercisable at an exercise price equal to $5.75 per share of common stock. The warrants are exercisable for five years from the date of issuance. The combined per share purchase price for a share of common stock and a half of a warrant was $5.25. The offering closed on January 18, 2019 with aggregate gross proceeds of approximately $34.0 million. The aggregate net proceeds from the offering, after deducting the placement agent fees and other estimated offering expenses, were approximately $31.2 million. Further, during the year ended August 31, 2019, the Company sold 2,601 shares of its common stock to investors in exchange for cash of $10.4 million. On September 26, 2019, the Company entered into purchase agreements with accredited investors pursuant to which the Company issued and sold an aggregate of 17,198 units (“Units”), with each unit consisting of one share of its common stock, par value $0.001 per share (the “Common Stock”) and a warrant to purchase half a share of Common Stock (each a Warrant and collectively, the “Warrants”) in a registered direct offering (the “September 2019 Offering”). The purchase price for a Unit was $1.75. The closing of the September 2019 Offering occurred on September 30, 2019 and resulted in aggregate gross proceeds of approximately $30.1 million. The aggregate net proceeds from the September 2019 Offering, after deducting the placement agent fees and other offering expenses, was approximately $27.6 million. Subject to certain ownership limitations, the Warrants were immediately exercisable at an exercise price equal to $2.25 per share of Common Stock. The Warrants are exercisable for five years from the date of issuance. Share-based Compensation The Company recorded total stock compensation expense of $13,384 and $3,586 for the years ended August 31, 2019 and 2018, respectively, in connection with the issuance of shares of common stock and options to purchase common stock. Stock compensation expense is included in selling, general and administrative expense in the Consolidated Statement of Operations. Stock Incentive Plan The Company’s 2016 Stock Incentive Plan (the “Plan”) was adopted on February 9, 2016. The Plan permits the grant of share options and shares to its employees and directors for up to 18,000 shares of common stock. The Company believes that such awards better align the interests of its employees with those of its shareholders. Option awards are generally granted with an exercise price equal to the market price of the Company’s stock at the date of grant; those option awards generally vest based on three years of continuous service and have 10‑year contractual terms. The Company estimates the fair value of share-based compensation utilizing the Black-Scholes option pricing model, which is dependent upon several variables such as the expected option term, expected volatility of its stock price over the expected option term, expected risk-free interest rate over the expected option term, and expected dividend yield rate over the expected option term. The Company believes this valuation methodology is appropriate for estimating the fair value of stock options granted to employees and directors which are subject to ASC 718. These amounts are estimates and thus may not be reflective of actual future results, nor amounts ultimately realized by recipients of these grants. The Company recognizes compensation on a straight-line basis over the requisite service period for each award. The following table summarizes the assumptions the Company utilized to record compensation expense for stock options granted during the years ended August 31, 2019 and 2018: August 31, August 31, 2019 2018 Expected term in years 3.0 3.0 Expected volatility 64% - 87 % 64% - 79 % Risk-free interest rate 1.39% - 3.01 % 1.70% - 2.94 % Expected dividend yield % % The expected term is based on management judgement and reflects expected exercise patterns. The expected volatility is based on management's analysis of historical volatility. The risk-free interest rate is based on the U.S. Treasury yields with terms equivalent to the expected term of the related option at the time of the grant. While the Company believes these estimates are reasonable, the compensation expense recorded would increase if the expected life was increased, a higher expected volatility was used, or if the expected dividend yield increased. Stock Options During the years ended August 31, 2019 and 2018, the Company issued 10,082 and 7,177 stock options, respectively, pursuant to the Company’s 2016 Stock Incentive Plan. A summary of the Company’s stock option activity during the years ended August 31, 2018 and 2019 is presented below: Weighted Weighted Average Average Remaining Aggregate Stock Exercise Contractual Intrinsic Options Price Term (years) Value Balance Outstanding, August 31, 2017 5,275 $ 1.73 8.0 $ 918 Granted 7,177 4.55 Exercised (1,145) 0.52 $ 5,952 Forfeited (1,939) 2.64 Balance Outstanding, August 31, 2018 9,368 3.85 9.1 $ 14,463 Granted 10,082 5.50 Exercised (502) 1.20 $ 2,576 Forfeited (4,187) 4.46 Balance Outstanding, August 31, 2019 14,761 $ 4.89 9.0 $ 3,192 Vested and expected to vest at August 31, 2019 12,286 $ 4.81 8.9 $ 3,110 Exercisable, August 31, 2019 3,515 $ 3.64 8.2 $ 2,818 Stock compensation expense related to stock options was $9,995 and $2,084 for the years ended August 2019 and 2018, respectively. The weighted-average grant-date fair value of options granted during the years ended August 31, 2019 and 2018, was $2.73 and $2.85, respectively. As of August 31, 2019, there was $38,712 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan. The expense is expected to be recognized over a weighted-average period of 2.2 years. Restricted Stock During the year ended August 31, 2019, the Company issued 350 shares of restricted common stock to consultants in exchange for services for a total of $1,908. During the year ended August 31, 2018, the Company issued 500 shares of restricted common stock to consultants in exchange for services for a total of $4,859. Stock compensation expense related to restricted stock awards was $3,389 and $1,502, respectively, for the years ended August 31, 2019 and 2018. As of August 31, 2019, $2,464 of total unrecognized compensation costs related to restricted stock awards is expected to be recognized over a weighted average period of 1.9 years. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Aug. 31, 2019 | |
INCOME TAXES | |
INCOME TAXES | NOTE 16 – INCOME TAXES For financial reporting purposes, income before income taxes for fiscal 2019 and 2018 includes the following components: For the Year Ended August 31, 2019 2018 Loss before income taxes $ (39,509) $ (25,900) The components of the provision for income taxes for fiscal 2019 and 2018 are as follows: For the Year Ended August 31, 2019 2018 Current Federal tax $ — $ — State tax 17 5 Foreign tax 13 — Total $ 30 $ 5 Deferred Federal tax 29 (1,190) State tax 68 (378) Total 97 (1,568) Total tax provision $ 127 $ (1,563) The income tax benefit differs from the amount computed by applying the federal income tax rate to net earnings before income taxes. The provision for income tax consists of the following: For the Year Ended August 31, 2019 2018 Federal income tax/benefit attributable to: Income tax provision at statutory rate $ (8,297) $ (6,561) State taxes, net of federal benefit (2,310) 302 Change in fair value of warrants (1,952) 233 Stock-based and other compensation 1,338 342 Change in Contingent Consideration Payable (374) 3,581 Warrants — 327 Impact of the Tax Cuts and Jobs Act — (430) Other (64) (52) Less: Change in valuation of allowance 11,786 695 Income tax expense (benefit) $ 127 $ (1,563) On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted into law, which significantly changed existing U.S. tax law and included provisions that affected our business such as reducing the U.S. federal statutory rate. The Company’s U.S. federal income statutory rate for the year ended August 31, 2019 was 21.0% compared to a blended rate of 25.3% in the prior year which represented a blending of the 35.0% statutory rate under prior law and the new 21.0% statutory rate effective January 1, 2018, prorated based on the number of days during the Company’s current fiscal year that each rate was effective. Beginning in fiscal year 2019, the Company was subject to additional provisions of the Tax Act, including limitations on the deductibility of interest expense and on the utilization of net operating loss carryforwards, among other things. The tax effects of the temporary differences that give rise to the deferred tax assets and liabilities are as follows: For the Year Ended August 31, 2019 2018 Deferred tax assets Net operating loss carry-forwards $ 9,451 $ 1,563 Stock-based compensation 2,519 144 Inventory 1,671 — Other 871 14,512 1,707 Valuation allowance (12,854) (694) 1,658 1,013 Deferred tax liabilities Depreciation, amortization and other (1,755) (1,013) (1,755) (1,013) Net deferred tax asset (liability) $ (97) $ — During fiscal years 2019 and 2018, the Company maintained a valuation allowance to reduce deferred tax assets to an amount that more likely that not will be realized. The net deferred tax liability for fiscal year 2019 represents the portion of indefinite-life intangibles that could not be used as a future source of taxable income to support the realization of deferred tax assets and is included in Long-term liabilities. As of August 31, 2019, the Company had federal net operating loss (“NOL”) carryforwards of approximately $34.1 million, of which approximately $6.5 million expire in 2038, and the remainder do not expire. As of August 31, 2019, the Company had state net operating loss carryforwards of approximately $2.5 million which expire between 2028 and 2038. The Company has not completed the evaluation of NOL utilization limitations under Internal Revenue Code, as amended (the “Code”) Section 382, change of ownership rules. If a change in ownership were to occur, the NOL’s would be limited as to the amount that could be utilized each year, based on the Code. The Company includes interest and penalties arising from the underpayment of income taxes in the statements of operations in the provision for income taxes. As of August 31, 2019 and 2018, the Company had no accrued interest or penalties related to uncertain tax positions. As of August 31, 2019, the tax years beginning with the year ended August 31, 2017 remain subject to examination by the Internal Revenue Service. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Aug. 31, 2019 | |
COMMITMENTS AND CONTINGENCIES. | |
COMMITMENTS AND CONTINGENCIES | NOTE 17 – COMMITMENTS AND CONTINGENCIES Leases The Company leases its facilities and offices under operating leases which expire on various dates through 2025. Rent expense related to these leases is recognized on a straight-line basis over the lease terms. Rent expense for the years ended August 31, 2019 and 2018 was $2,852 and $1,180,respectively. Minimum future commitments under non-cancelable operating leases and other obligations were as follows: Year ended August 31, 2020 $ 2,225 2021 2,320 2022 2,139 2023 1,509 2024 616 Thereafter 500 $ 9,309 Other Commitments In the ordinary course of business, the Company may enter into contractual purchase obligations and other agreements that are legally binding and specify certain minimum payment terms. The Company had no such agreements as of August 31, 2019. Litigation The Company may be subject to legal proceedings and claims which arise in the ordinary course of its business. Although occasional adverse decisions or settlements may occur, the Company believes that the final disposition of such matters should not have a material adverse effect on its financial position, results of operations or liquidity. During the second half of fiscal 2019, lawsuits have been filed in California federal and state court by various purported shareholders against, variously, the Company, each of the current members of the Company’s Board of Directors, and certain of our current and former officers, alleging, among other things, federal securities law violations and/or related breaches of fiduciary duties in connection with the Company’s April 2019 restatement of certain prior period financial statements. In general, the lawsuits assert the same or similar allegations, including that defendants artificially inflated the Company’s securities prices by knowingly making materially false and misleading statements and omissions to the investing public about the Company’s financial statements, business, operations, management, and internal controls. May v. KushCo Holdings, Inc., et al. Filed April 30, 2019. Case No. 8:19-cv-00798-JLS-KES, U.S. District Court for the Central District of California. This putative shareholder class action against the Company and certain of its current and former officers alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, and seeks unspecified compensatory damages and other relief on behalf of a class of purchasers of the Company’s securities between July 13, 2017 and April 9, 2019, inclusive. In July 2019, purported Company shareholders filed motions for appointment of lead counsel and lead plaintiffs. In September 2019, the Court appointed co-lead plaintiffs and co-lead counsel for the plaintiffs. The lead plaintiffs’ amended complaint is currently due in November 2019, and the defendants’ responses to the complaint are currently due in January 2020. The Company intends to vigorously defend itself against these claims. Salsberg v. Kovacevich, et al . Filed May 24, 2019. Case No. 8:19-cv-00998-JLS-KES, U.S. District Court for the Central District of California and Neysmith v. Baum, et al. Filed May 31, 2019. Case No. 8:19-cv-01070-JLS-KES, U.S. District Court for the Central District of California. This purported shareholder derivative action against certain current and former directors and officers alleges, among other things, breach of fiduciary duty, waste of corporate assets, and unjust enrichment. The Company is named as a nominal defendant and the plaintiff seeks, among other things, corporate governance reforms, and disgorgement of profits, benefits, and compensation obtained by the defendants from the alleged conduct, to be paid to the Company. In September 2019, the Court consolidated these cases. The parties are expected to stipulate to a date by which the defendants must respond to the complaint. No trial date has been set. Savage vs. Kovacevich, et al . Filed June 14, 2019. Case No. 30-2019-01077191-CU-MC-NJC, Superior Court of California, County of Orange. This purported shareholder derivative action against certain current and former directors and officers alleges, among other things, breach of fiduciary duty, waste of corporate assets, and unjust enrichment. The Company is named as a nominal defendant and the plaintiff seeks, among other things, corporate governance reforms, and unspecified damages and restitution from the defendants, to be paid to the Company. In August 2019, the Court ordered a stay of this action pursuant to a stipulation of the parties pending resolution of the May v. KushCo federal class action. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Aug. 31, 2019 | |
SUBSEQUENT EVENT | |
SUBSEQUENT EVENTS | NOTE 18 – SUBSEQUENT EVENT Management has evaluated subsequent events through November 12, 2019, the date which the consolidated financial statements were issued. Except as discussed in Notes 12 and 15, there are no items that would impact the accounting for events or transactions in the current period or require additional disclosures. |
NATURE OF BUSINESS AND SIGNIF_2
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Aug. 31, 2019 | |
Organization Consolidation And Presentation Of Financial Statements [Line Items] | |
Registered Offering | Registered Offerings On June 7, 2018, January 15, 2019 and September 26, 2019, the Company entered into securities purchase agreements with certain accredited investors in connection with its registered direct offerings. See Notes 13 and 15 for further description of these transactions. |
Consolidation of an Entity | Consolidation of an Entity In July 2018, the Company invested $1.0 million in the form of a convertible promissory note in a third-party company. The convertible promissory note provides the Company with the option to convert the principal balance of the note, at any time prior to the maturity date, into equity of this entity, representing 100% of the equity interests. As primary beneficiary, the Company consolidated this entity. |
Amendments to Articles of Incorporation or Bylaws | Amendments to Articles of Incorporation or Bylaws On August 29, 2018, KushCo Holdings, Inc. (formerly known as Kush Bottles, Inc.) filed Amended and Restated Articles of Incorporation (the “Amended and Restated Charter”) with the Secretary of State for the State of Nevada. The Amended and Restated Charter changed the Company’s name from Kush Bottles, Inc. to KushCo Holdings, Inc. The Amended and Restated Charter became effective on September 1, 2018 and was approved by the Company’s stockholders at the Company’s 2018 Annual Meeting of Stockholders on May 8, 2018. In June 2019, the Company moved its corporate headquarters from Garden Grove, California to Cypress, California. The address for the Company’s new corporate headquarters is 6261 Katella Avenue, Suite 250, Cypress, CA 90630. |
Basis of Presentation | Basis of Presentation The accompanying consolidated financial statements and related notes include the activity of the Company and its wholly-owned subsidiaries, have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on previously reported results of operations or retained earnings (accumulated deficit). Significant inter-company transactions and balances have been eliminated in consolidation. References to amounts in these notes to consolidated financial statements are in thousands, except per share data, unless otherwise specified. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenues and expenses during the reporting period. Significant estimates relied upon in preparing these consolidated financial statements include revenue recognition, accounts receivable reserves, inventory and related reserves, valuations and purchase price allocations related to business combinations, expected future cash flows used to evaluate the recoverability of long-lived assets, estimated fair values of long-lived assets used to record impairment charges related to intangible assets and goodwill, amortization periods, accrued expenses, stock-based compensation, and recoverability of the Company’s net deferred tax assets and any related valuation allowance. Although the Company regularly assesses these estimates, actual results could differ materially from these estimates. Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Actual results may differ from management’s estimates if past experience or other assumptions do not turn out to be substantially accurate. The Company is subject to a number of risks similar to those of other companies of similar size and having a focus of serving the cannabis industry, including, the development stage of certain products, competition, limited number of suppliers, integration of acquisitions, substantial indebtedness, government regulations, protection of proprietary rights, and dependence on key individuals. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers cash and cash equivalents to consist of cash on hand and investments having an original maturity of 90 days or less that are readily convertible into cash. The Company deploys its cash and cash equivalents with financial institutions with highly rated credit and monitors the amount on deposit at the financial institution. The Company has cash deposits held at certain institutions at August 31, 2019 of which $2,630 was in excess of Federal Deposit Insurance Corporation insured limits. There were no cash equivalents outstanding as of August 31, 2019 and 2018. |
Accounts Receivable | Accounts Receivable Trade accounts receivable are carried at their estimated collectible amounts. Trade credit is generally extended on a short-term basis and thus do not bear interest. Trade accounts receivables are periodically evaluated for collectability based on past credit history and their current financial condition. The Company maintains reserves for uncollectible accounts receivable and potential sales returns. In aggregate, such reserves reduce our gross accounts receivable to its estimated net realizable value. The Company’s allowance for doubtful accounts and sales return reserve was $1,058 and $477, respectively as of August 31, 2019 and $1,000 and $0, respectively, as of August 31, 2018. |
Inventory | Inventory Inventories are stated at the lower of cost or net realizable value using the average cost method. The Company’s inventory consists of finished goods of $43,768 and $11,814 as of August 31, 2019 and 2018, respectively. The Company establishes reserves for excess and obsolete inventory, based on prevailing circumstances and judgment based on the Company’s experience. The Company’s inventory reserve was $2,640 and $585 as of August 31, 2019 and 2018, respectively. The Company also makes prepayments against the future delivery of inventory classified as prepaid inventory. The Company’s prepaid inventory was $7,134 and $11,019 and was included in prepaid expenses and other current assets as of August 31, 2019 and 2018, respectively. |
Property and Equipment | Property and Equipment Property and equipment is recorded at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the shorter of estimated useful life of the asset or the lease term, after the asset is placed in service. The estimated useful lives of the property and equipment are generally as follows: computer software acquired for internal use, three to seven years; computer equipment, two to three years; leasehold improvements, three to 15 years or term of lease; and furniture and equipment, one to seven years. Gains and losses from the retirement or disposition of property and equipment are included in operations in the period incurred. Maintenance and repairs are expensed as incurred. Gains or losses resulting from the retirement or sale of property and equipment are recorded as operating income or expenses, respectively. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The fair value of certain of our financial instruments, including cash, accounts receivable, other current assets, accounts payable and liabilities, capital lease obligations and deferred revenue approximate their fair values because of the short-term maturity of these instruments. The carrying amount of the Company’s long-term notes payable approximates its fair value based on interest rates available to the Company for similar debt instruments and similar remaining maturities. |
Derivative Financial Instruments | Derivative Financial Instruments The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. Management evaluates all of the Company’s financial instruments, including warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is remeasured at the end of each reporting period. |
Concentration of Risk | Concentration of Risk The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, and accounts receivable. Collateral is not required for accounts receivable. The Company maintains an allowance for its doubtful accounts receivable. This allowance is based upon historical loss patterns, the number of days that billings are past due and an evaluation of the potential risk of loss associated with delinquent accounts. Receivables are written-off and charged against its recorded allowance when the Company has exhausted collection efforts without success. The Company’s losses related to collection of trade receivables have consistently been within management’s expectations. Due to these factors, no additional credit risk beyond amounts provided for collection losses, which the Company reevaluates on a monthly basis based on specific review of receivable agings and the period that any receivables are beyond the standard payment terms, is believed by management to be probable in the Company’s accounts receivable. The Company purchases products from a small number of suppliers. A change in or loss of these suppliers could cause a delay in filling customer orders and a possible loss of sales, which would adversely affect results of operations; however, management believes that suitable replacement suppliers could be obtained in such an event. |
Intangible Assets acquired through Business Combinations | Intangible Assets acquired through Business Combinations Intangible assets, domain name, trademarks and non-compete agreements that are deemed to have a definite life are amortized over their estimated useful lives and intangible assets with an indefinite life are assessed for impairment at least annually. Quarterly, the Company evaluates the estimated remaining useful life of its intangible assets and whether events or changes in circumstances warrant a revision to the remaining period of amortization. |
Impairment Assessment | Impairment Assessment The Company evaluates intangible assets and long-lived assets for possible impairment periodically and whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. This includes but is not limited to significant adverse changes in business climate, market conditions, or other events that indicate an asset's carrying amount may not be recoverable. Recoverability of these assets is measured by comparison of the carrying amount of each asset to the future undiscounted cash flows the asset is expected to generate. If the undiscounted cash flows used in the test for recoverability are less than the carrying amount of these assets, the carrying amount of such assets is reduced to fair value. The Company evaluates and tests the recoverability of its goodwill for impairment at least annually during its fourth quarter of each fiscal year or more often if and when circumstances indicate that it is more likely than not goodwill may be impaired. There was no impairment of intangible assets, long-lived assets or goodwill during the years ended August 31, 2019 and 2018. |
Valuation of Business Combinations and Acquisition of Intangible Assets | Valuation of Business Combinations and Acquisition of Intangible Assets The Company records intangible assets acquired in business combinations and acquisitions of intangible assets under the acquisition method of accounting. The Company accounts for acquisitions in accordance with ASC Topic 805, Business Combinations . Amounts paid for each acquisition are allocated to the assets acquired and liabilities assumed based on their fair values at the dates of acquisition. The Company then allocates the purchase price in excess of the fair value of the net tangible assets acquired to identifiable intangible assets, including purchased intangibles based on detailed valuations that use information and assumptions provided by management. The Company allocates any excess purchase price over the fair value of the net tangible and intangible assets acquired to goodwill. The Company uses the income approach, the relief from royalty method (both a market and income method), and the with and without method to determine the fair values of its purchased intangible assets. The Company uses the probability-weighted expected return method (an income approach) to determine the appropriate amount of contingent consideration to include in the purchase price for an acquisition. The Company bases its revenue assumptions on estimates of relevant market sizes, expected market growth rates, expected industry trends and expected product introductions by competitors. For the intangible assets acquired, the Company used risk-adjusted discount rates ranging from 19% to 26% to discount its projected cash flows. The Company believes that the estimated purchased intangible asset amounts so determined represent the fair value at the date of acquisition and do not exceed the amount a third party would pay for the projects. The Company also used the income approach (probably weighted cash flow), as described above, to determine the estimated fair value of certain identifiable intangibles assets including domain names and tradenames. Tradenames represent acquired product names that the Company intends to continue to utilize. The Company used the with and without method to ascertain the fair value of the non-competition agreement. The Company estimates and records the acquisition date fair value of contingent consideration as part of purchase price consideration for acquisitions. Additionally, each reporting period, the Company estimates the fair value of contingent consideration and recognizes any changes in the fair value in its consolidated statement of operations. The Company estimates of the fair value of contingent consideration requires subjective assumptions to be made of future operating results, discount rates and probabilities assigned to various potential operating result scenarios. Future revisions to these assumptions could materially change the Company’s estimate of the fair value of contingent consideration and, therefore, materially affect the Company’s future financial results. A portion of the contingent consideration liability is to be settled with the issuance of shares of common stock once contingent provisions set forth in respective acquisition agreements have been achieved. Upon achievement of contingent provisions, respective liabilities are relieved and offset by increases to common stock and additional paid in capital in the Company’s stockholders’ equity. The Company uses its best estimates and assumptions to accurately assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the fair value of certain tangible and intangible assets acquired and liabilities assumed, with the corresponding offset to goodwill. |
Net Income (Loss) Per Share | Net Income (Loss) Per Share The Company computes net income (loss) per common share under ASC Topic 260, Earnings per Share (“ASC 260”). Basic net income (loss) per common share is computed by dividing net earnings by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per common share is computed by dividing net earnings by the sum of (a) the weighted average number of shares of common stock outstanding during the period and (b) the potentially dilutive securities outstanding during the period. Stock options are potentially dilutive securities; and the number of dilutive options is computed using the treasury stock method. For the year ended August 31, 2019, net loss is adjusted for changes in fair value of warrants recorded as a liability (see Note 13) and weighted average diluted shares includes dilutive warrants. The following table sets forth the calculation of basic and diluted net income (loss) per common share. August 31, August 31, 2019 2018 Net loss $ (39,636) $ (24,337) Less: Decrease in fair value of warrants (8,986) — Net loss available to common shareholders $ (48,622) $ (24,337) Weighted average common shares outstanding: Basic 84,880 65,336 Net effect of dilutive warrants 16 — Diluted 84,896 65,336 Net loss per common share per share: Basic $ (0.47) $ (0.37) Diluted $ (0.57) $ (0.37) For the year ended August 31, 2018, basic and diluted weighted average shares are the same as the Company generated a net loss for the period and potentially dilutive securities are excluded because they have an anti-dilutive impact. The computation of diluted net loss per share for the year ended August 31, 2019 does not include 4,579 options and 2,045 warrants because their inclusion would have an anti-dilutive effect on net loss per share. The computation of diluted net loss per share for the year ended August 31, 2018 does not include 646 options and 822 warrants because their inclusion would have an anti-dilutive effect on net loss per share. |
Revenue Recognition | Revenue Recognition The Company adopted ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), using the modified retrospective method. As a practical expedient allowed under ASC 606, the Company applied the new guidance only to contracts that were not completed as of the date of initial application. The Company did not record any cumulative effect adjustment to retained earnings as of September 1, 2019 and did not record any material adjustment to gross revenue for the fiscal year ended August 31, 2019 as a result of applying the guidance in ASC 606. The Company markets and sells packaging products, vaporizers, hydrocarbon gases, solvents, accessories and branding solutions to customers operating in the regulated medical and recreational cannabis industries. The Company expenses fulfillment costs as incurred because the amortization period would be less than one year in accordance with the ASC 606 practical expedient. In accordance with ASC 606, the Company applies the following steps to recognize revenue for the sale of products that reflects the consideration to which the Company expects to be entitled to receive in exchange for the promised goods: · Identify the contract with a customer A contract with a customer exists when the Company enters into an enforceable contract with a customer. The contract is based on either the acceptance of standard terms, or the execution of terms and conditions contracts. These contracts define each party's rights, payment terms and other contractual terms and conditions of the sale. The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience and, in some circumstances, published credit and financial information pertaining to the customer. · Identify the performance obligations in the contract Performance obligations promised in a contract are identified based on the goods that will be transferred to the customer that are both capable of being distinct and are distinct in the context of the contract, whereby the transfer of the goods is separately identifiable from other promises in the contract. The Company has concluded the sale of finished goods and related shipping and handling are accounted for as a single performance obligation. · Determine the transaction price The transaction price is determined based on the consideration to which the Company will be entitled to receive in exchange for transferring goods to the customer. The Company estimates the amount of potential refunds at each reporting period using a portfolio approach of historical data, adjusted for changes in expected customer experience, including seasonality and changes in economic factors. Discounts provided to customers are accounted for as an element of the transaction price and as a reduction to revenue. Discounts were $822 and $465 for the years ended August 31, 2019 and 2018, respectively. Revenue is presented net of taxes collected from customers and remitted to governmental authorities. · Allocate the transaction price to the performance obligations in the contract The Company’s products are sold at their standalone selling price. · Recognize revenue when the Company satisfies a performance obligation Revenue is recognized when control of the finished goods is transferred to the customer. Control of the finished goods is transferred at a point in time, upon delivery to the customer. The period of time between the satisfaction of the performance obligation and when payment is due from the customer is not significant. Sales returns are estimated based on historical facts and circumstances. In the following table, product sales are disaggregated as follows for the years ended August 31, 2019 and 2018: August 31, August 31, 2019 2018 Manufacturing $ 147,498 $ 51,967 Services 1,456 108 Total Revenue $ 148,954 $ 52,075 |
Warranty Costs | Warranty Costs The Company has not had any historical warranty related expenditures from the sales of its products, which if incurred would result in the return of any defective products by customers. |
Stock-based Compensation | Stock-based Compensation The Company accounts for its stock-based awards in accordance with ASC Topic 718, Compensation (“ASC 718”), which requires fair value measurement and recognition of compensation expense for all share-based payment awards made to employees and directors, including restricted stock awards. The Company estimates the fair value of its stock options using the Black-Scholes option pricing model and its restricted stock using the stock price on the date of the approval of the award. The fair value is then expensed over the requisite service periods of the awards, which is generally the vesting period and the related amount is recognized in the consolidated statements of operations. |
Advertising | Advertising The Company conducts advertising for the promotion of its products and services. In accordance with ASC Topic 720 Other expenses (“ASC 720”), advertising costs are charged to operations when incurred. Advertising costs were $1,304 and $753 for the fiscal years ended August 31, 2019 and 2018, respectively. |
Income Taxes | Income Taxes The Company accounts for income taxes under FASB ASC Topic 740, Accounting for Income Taxes (“ASC 740”). As part of the process of preparing the consolidated financial statements, the Company is required to estimate an income tax provision (benefit) in each of the jurisdictions in which it operates. This process involves estimating the current income tax provision (benefit) together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within the consolidated balance sheets. The Company recorded a valuation allowance to reduce deferred tax assets to an amount that more likely than not will be realized. While future taxable income and ongoing prudent and feasible tax planning strategies have been considered in assessing the need for the valuation allowance, in the event the Company determines it would be able to realize deferred tax assets in the future in excess of the net recorded amount, an adjustment to the valuation allowance for the deferred tax asset would increase income in the period such determination was made. Likewise, should the Company determine it would not be able to realize all or part of the net deferred tax asset in the future, an adjustment to the valuation allowance for the deferred tax asset would be charged to income in the period such determination was made. During fiscal 2019, the Company maintained a valuation allowance to reduce deferred tax assets to an amount that more likely than not will be realized. The net deferred tax liability for fiscal year 2019 represents the portion of indefinite-life intangibles that could not be used as a future source of taxable income to support the realization of deferred tax assets. |
Segments | Segments The Company only has a single reportable segment. As defined in ASC Topic 280, Segment Reporting, operating segments are components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker, who is the chief executive officer, in deciding how to allocate resources and assess performance. Over the past few years, the Company has completed a number of acquisitions. These acquisitions have allowed the Company to expand its offerings, presence and reach in the cannabis industry. While the Company has offerings in multiple geographic locations for its products for the cannabis industry, as a result of the Company's acquisitions, the Company’s business operates in one operating segment because the majority of the Company's offerings operate similarly, and the Company’s chief operating decision maker evaluates the Company’s financial information and resources and assesses the performance of these resources on a consolidated basis. Since the Company operates in one reportable segment, all required financial segment information can be found in the consolidated financial statements. |
Recently Issued Accounting Pronouncements | Recent Accounting Pronouncements Issued but not yet adopted by the Company Fair Value Measurement (Topic 820), - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. In August 2018, the FASB issued Accounting Standards Update (“ASU”) No. 2018-13, which makes a number of changes meant to add, modify or remove certain disclosure requirements associated with the movement amongst or hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted upon issuance of the update. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements. Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. In June 2016, the FASB issued ASU 2016-13, which provides guidance on accounting for credit losses, including trade receivables. The guidance requires the application of a current expected credit loss model, which measure credit losses based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts. The guidance is effective for annual periods beginning after December 15, 2019. The guidance requires companies to apply the requirements using a modified retrospective approach. The Company is currently evaluating the potential impact of the adoption of this standard on our consolidated financial statements and required disclosures. Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. In July 2018, the FASB issued ASU 2018-07, which addresses several aspects of the accounting for nonemployee share-based payment transactions and expands the scope of ASC 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The main provisions of the update change the way nonemployee awards are measured in the financial statements. Under the simplified standards, nonemployee options will be valued once at the date of grant, as compared to at each reporting period end under ASC 505-50. At adoption, all awards without established measurement dates will be revalued one final time, and a cumulative effect adjustment to retained earnings will be recorded as the difference between the pre-adoption value and new value. Companies will be permitted to make elections to establish the expected term and either recognize forfeitures as they occur or apply a forfeiture rate. Compensation expense recognition using a graded vesting schedule will no longer be permitted. This pending content is the result of the FASB’s Simplification Initiative, to maintain or improve the usefulness of the information provided to the users of financial statements while reducing cost and complexity in financial reporting. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. The Company will adopt the ASU effective September 1, 2019 and does not expect this guidance to have a material impact on its consolidated financial statements. Earnings Per Share (Topic 260). In July 2017, the FASB issued ASU No. 2017-11, Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Non-controlling Interests with a Scope Exception”. The ASU was issued to address the complexity associated with applying GAAP for certain financial instruments with characteristics of liabilities and equity. The ASU, among other things, eliminates the need to consider the effects of down round features when analyzing convertible debt, warrants and other financing instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. The amendments are effective for fiscal years beginning after December 15, 2018 and should be applied retrospectively. The Company will adopt the ASU effective September 1, 2019 and does not expect this guidance to have a material impact on its consolidated financial statements. Leases (ASC 842). In February 2016, the FASB issued ASU No. 2016-02 to increase transparency and comparability among organizations by requiring lessees to (i) recognize right-of-use (“ROU”) assets and lease liabilities on the consolidated balance sheet to represent the right to use the leased asset for the lease term and the obligation to make lease payments and (ii) disclose key information about leasing arrangements. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the consolidated income statement. ASU 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods, with early adoption permitted. ASU 2016-02 is effective for the Company in the first quarter of fiscal 2020. The Company is currently in the process of evaluating the potential impact of adoption of this updated authoritative guidance on the consolidated financial statements. |
CMP Wellness | |
Organization Consolidation And Presentation Of Financial Statements [Line Items] | |
Business Combinations | Acquisition of CMP Wellness, LLC On May 1, 2017, the Company entered into a merger agreement with Lancer West Enterprises, Inc. a California corporation, Walnut Ventures, a California corporation, Jason Manasse, an individual, and Theodore Nicols, an individual, pursuant to which each of Lancer West Enterprises, Inc. and Walnut Ventures were merged with and into Merger Sub, with Merger Sub as the surviving corporation, resulting in the Company’s indirect acquisition of CMP Wellness, LLC, a California limited liability company, which prior to the merger, was owned 100% by Lancer West Enterprises, Inc. and Walnut Ventures. CMP Wellness, LLC is a distributor of vaporizers, cartridges and accessories. See Note 3 for a further description of the CMP Wellness acquisition. |
Acquisition of Summit Innovations, LLC | |
Organization Consolidation And Presentation Of Financial Statements [Line Items] | |
Business Combinations | Acquisition of Summit Innovations, LLC On May 2, 2018, the Company completed its acquisition of Summit Innovations, LLC (“Summit”), a leading distributor of hydrocarbon gases to the legal cannabis industry. Pursuant to the terms of the Agreement and Plan of Merger (the “Merger Agreement”), Summit merged with and into KCH Energy, LLC (“KCH”), a wholly-owned subsidiary of the Company, with KCH as the surviving entity. See Note 4 for a further description of the Summit acquisition. |
Acquisition of Hybrid Creative, LLC | |
Organization Consolidation And Presentation Of Financial Statements [Line Items] | |
Business Combinations | Acquisition of Hybrid Creative, LLC On July 11, 2018, the Company completed its acquisition of Hybrid Creative, LLC (“Hybrid”), a specialist design agency. Pursuant to the terms of the Membership Interest Purchase Agreement (Agreement”) with the members of Zach Darling Creative Associates, LLC (“ZDCA”), parent of wholly-owned subsidiary, Hybrid, the Company purchased the entire issued member interest of ZDCA. Following the acquisition, ZDCA operates as a wholly-owned subsidiary of the Company, with Hybrid continuing to operate as wholly-owned subsidiary of ZDCA. See Note 5 for a further description of the Hybrid acquisition. |
NATURE OF BUSINESS AND SIGNIF_3
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Aug. 31, 2019 | |
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of basic and diluted earnings per share | August 31, August 31, 2019 2018 Net loss $ (39,636) $ (24,337) Less: Decrease in fair value of warrants (8,986) — Net loss available to common shareholders $ (48,622) $ (24,337) Weighted average common shares outstanding: Basic 84,880 65,336 Net effect of dilutive warrants 16 — Diluted 84,896 65,336 Net loss per common share per share: Basic $ (0.47) $ (0.37) Diluted $ (0.57) $ (0.37) |
Schedule of disaggregation of revenue | August 31, August 31, 2019 2018 Manufacturing $ 147,498 $ 51,967 Services 1,456 108 Total Revenue $ 148,954 $ 52,075 |
ACQUISITION OF SUMMIT INNOVAT_2
ACQUISITION OF SUMMIT INNOVATIONS, LLC (Tables) - Acquisition of Summit Innovations, LLC | 12 Months Ended |
Aug. 31, 2019 | |
Business Acquisition [Line Items] | |
Schedule of total purchase price | May 2, 2018 Measurement Period August 31, 2018 (As initially reported) Adjustments (1) (As adjusted) Cash $ 945 $ (40) $ 905 Cash held back 500 (312) 188 Fair value of common shares issued to Summit members 3,578 — 3,578 Fair value common shares held back 3,578 (762) 2,816 Fair value contingent consideration payable in common shares 7,155 — 7,155 Total $ 15,756 $ (1,114) $ 14,642 (1) As of August 31, 2018, the Company recorded measurement period adjustments to decrease cash held back from $500 to $188, to decrease cash, net of cash acquired, from $945 to $905, and to decrease the fair value of shares held back from $3,578 to $2,816. |
Schedule of acquisition consideration | May 2, 2018 Measurement Period August 31, 2018 (As initially reported) Adjustments (1) (As adjusted) Accounts receivable, net of allowance $ 471 $ (253) $ 218 Prepaid expenses and other current assets 87 — 87 Inventory 237 — 237 Property and equipment, net 649 — 649 Accounts payable (1,377) 103 (1,274) Accrued expenses and other current liabilities (358) — (358) Notes payable (987) — (987) Total identifiable net assets (1,278) (150) (1,428) Non-compete — 620 620 Goodwill 17,034 (1,584) 15,450 Total fair value of consideration $ 15,756 $ (1,114) $ 14,642 (1) As of August 31, 2018, the Company recorded measurement period adjustments to allocate $620 to the non-compete, decrease accounts receivable, net of allowance, from $471 to $218 and decrease accounts payable from $1,377 to $1,274. |
Schedule of pro forma information | Year Ended Year Ended August 31, 2018 August 31, 2017 Unaudited Unaudited Total revenues $ 56,950 $ 19,018 Net loss $ (26,086) $ 1,458 Loss per share: Basic $ (0.40) $ (0.03) Diluted $ (0.40) $ (0.02) |
ACQUISITION OF THE HYBRID CRE_2
ACQUISITION OF THE HYBRID CREATIVE, LLC (Tables) - Acquisition of Hybrid Creative, LLC | 12 Months Ended |
Aug. 31, 2019 | |
Business Acquisition [Line Items] | |
Schedule of total purchase price | August 31, 2018 Cash $ 847 Cash held back 82 Fair value of common shares issued to Hybrid members 1,879 Fair value of contingent cash consideration 450 Estimated fair value of contingent equity consideration 920 Total estimated acquisition consideration $ 4,178 |
Schedule of acquisition consideration | The following table summarizes the allocation of the purchase price to the assets acquired and liabilities assumed: August 31, 2018 Accounts receivable, net of allowance $ 33 Prepaid expenses and other assets 6 Accounts payable (86) Accrued expenses and other current liabilities (278) Notes payable (235) Total identifiable net assets (560) Non-compete 910 Goodwill 3,828 Total fair value of consideration $ 4,178 |
Schedule of pro forma information | The impact of these items could alter the following pro forma results: Year Ended Year Ended August 31, 2018 August 31, 2017 Unaudited Unaudited Total revenues $ 53,069 $ 19,922 Net loss $ (24,865) $ 1,624 Loss per share: Basic $ (0.38) $ 0.03 Diluted $ (0.38) $ 0.03 |
SALE OF RUB (Tables)
SALE OF RUB (Tables) | 12 Months Ended |
Aug. 31, 2019 | |
SALE OF RUB | |
Schedule of gain on disposition of assets | The following sets forth the calculation of the gain on disposition of assets upon completion of the sale: Fair value of Smoke Cartel as of September 21, 2018 $ 1,791 RUB web domain and inventory sold (537) Gain on disposition of assets $ 1,254 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
Aug. 31, 2019 | |
PROPERTY AND EQUIPMENT | |
Schedule of property and equipment | The major classes of fixed assets consist of the following: August 31, August 31, 2019 2018 Machinery and equipment $ 4,430 $ 2,938 Vehicles 603 381 Office Equipment 3,232 385 Leasehold improvements 3,296 1,319 Construction in progress 1,930 — 13,491 5,023 Accumulated Depreciation (2,437) (888) $ 11,054 $ 4,135 |
INTANGIBLE ASSETS AND GOODWILL
INTANGIBLE ASSETS AND GOODWILL (Tables) | 12 Months Ended |
Aug. 31, 2019 | |
INTANGIBLE ASSETS AND GOODWILL | |
Schedule of Intangible Assets | As of August 31, 2019 As of August 31, 2018 Weighted Average Estimated Gross Gross Useful Carrying Accumulated Net Carrying Accumulated Net Description Life Value Amortization Amount Value Amortization Amount Domain name 5 years $ — $ — $ — $ 599 $ (166) $ 433 Trade name 6 years 2,600 (1,011) 1,589 2,600 (578) 2,022 Non-compete agreement 4 years 2,370 (856) 1,514 2,370 (337) 2,033 $ 4,970 $ (1,867) $ 3,103 $ 5,569 $ (1,081) $ 4,488 |
Schedule of estimated remaining amortization expense | Year ended August 31, 2020 $ 947 2021 881 2022 747 2023 528 $ 3,103 |
Schedule of goodwill | Acquisition Date Dank Bottles November 2015 $ 2,377 CMP Wellness May 2017 30,612 Summit May 2018 15,450 Hybrid August 2018 3,828 $ 52,267 |
ACCRUED EXPENSES AND OTHER CU_2
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables) | 12 Months Ended |
Aug. 31, 2019 | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | |
Schedule of Accrued expenses and other current liabilities | August 31, August 31, 2019 2018 Customer deposits $ 2,992 $ 769 Accrued compensation 3,485 993 Sales tax payable 1,047 432 Other accrued expenses 1,936 877 $ 9,460 $ 3,071 |
FAIR VALUE OF FINANCIAL INSTR_2
FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables) | 12 Months Ended |
Aug. 31, 2019 | |
FAIR VALUE OF FINANCIAL INSTRUMENTS | |
Schedule of fair value of financial instruments | Fair Value at August 31, 2019 Total Level 1 Level 2 Level 3 Assets: Equity investment $ 592 $ — $ 592 $ — Total assets $ 592 $ — $ 592 $ — Liabilities: Warrant liability $ 5,444 $ — $ — $ 5,444 Total liabilities $ 5,444 $ — $ — $ 5,444 Fair Value at August 31, 2018 Total Level 1 Level 2 Level 3 Liabilities: Contingent consideration payable $ 5,488 $ — $ — $ 5,488 Warrant liability 14,430 — — 14,430 Total liabilities $ 19,918 $ — $ — $ 19,918 |
Schedule of fair value investment in smoke cartel | Investment in Smoke Cartel As of August 31, 2018 $ — Acquisition of equity investment 1,791 Adjustments to estimated fair value (1,199) As of August 31, 2019 $ 592 |
Schedule of warrant derivative liability | Warrant Liability Balance at August 31, 2017 $ — Issuance 15,350 Adjustments to estimated fair value (920) Balance at August 31, 2018 14,430 Adjustments to estimated fair value (8,986) Balance at August 31, 2019 $ 5,444 Participation Rights Derivative Liability As of April 30, 2019 $ 1,100 Adjustments to estimated fair value (308) Reclassification to equity (792) As of August 31, 2019 $ — |
Schedule of fair value contingent acquisition liabilities | Contingent Consideration Payable As of August 31, 2017 10,828 Change in Fair Value 14,138 Cash Payment (1,820) Settled in shares – CMP (26,218) Acquisition of Summit 7,155 Acquisition of Hybrid Creative 1,405 As of August 31, 2018 5,488 Change in Fair Value (1,780) Cash Payment (140) Settled in shares – Summit and Hybrid (3,568) As of August 31, 2019 — |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 12 Months Ended |
Aug. 31, 2019 | |
STOCKHOLDERS' EQUITY. | |
Schedule of assumptions used | August 31, August 31, 2019 2018 Expected term in years 3.0 3.0 Expected volatility 64% - 87 % 64% - 79 % Risk-free interest rate 1.39% - 3.01 % 1.70% - 2.94 % Expected dividend yield % % |
Schedule of stock option activity | Weighted Weighted Average Average Remaining Aggregate Stock Exercise Contractual Intrinsic Options Price Term (years) Value Balance Outstanding, August 31, 2017 5,275 $ 1.73 8.0 $ 918 Granted 7,177 4.55 Exercised (1,145) 0.52 $ 5,952 Forfeited (1,939) 2.64 Balance Outstanding, August 31, 2018 9,368 3.85 9.1 $ 14,463 Granted 10,082 5.50 Exercised (502) 1.20 $ 2,576 Forfeited (4,187) 4.46 Balance Outstanding, August 31, 2019 14,761 $ 4.89 9.0 $ 3,192 Vested and expected to vest at August 31, 2019 12,286 $ 4.81 8.9 $ 3,110 Exercisable, August 31, 2019 3,515 $ 3.64 8.2 $ 2,818 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Aug. 31, 2019 | |
INCOME TAXES | |
Schedule of pre-tax income (loss) | For the Year Ended August 31, 2019 2018 Loss before income taxes $ (39,509) $ (25,900) |
Schedule of components of the provision for federal tax and state tax | For the Year Ended August 31, 2019 2018 Current Federal tax $ — $ — State tax 17 5 Foreign tax 13 — Total $ 30 $ 5 Deferred Federal tax 29 (1,190) State tax 68 (378) Total 97 (1,568) Total tax provision $ 127 $ (1,563) |
Schedule of net earnings before income taxes | For the Year Ended August 31, 2019 2018 Federal income tax/benefit attributable to: Income tax provision at statutory rate $ (8,297) $ (6,561) State taxes, net of federal benefit (2,310) 302 Change in fair value of warrants (1,952) 233 Stock-based and other compensation 1,338 342 Change in Contingent Consideration Payable (374) 3,581 Warrants — 327 Impact of the Tax Cuts and Jobs Act — (430) Other (64) (52) Less: Change in valuation of allowance 11,786 695 Income tax expense (benefit) $ 127 $ (1,563) |
Schedule of net deferred tax assets and liabilities | For the Year Ended August 31, 2019 2018 Deferred tax assets Net operating loss carry-forwards $ 9,451 $ 1,563 Stock-based compensation 2,519 144 Inventory 1,671 — Other 871 14,512 1,707 Valuation allowance (12,854) (694) 1,658 1,013 Deferred tax liabilities Depreciation, amortization and other (1,755) (1,013) (1,755) (1,013) Net deferred tax asset (liability) $ (97) $ — |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Aug. 31, 2019 | |
COMMITMENTS AND CONTINGENCIES. | |
Schedule of minimum future commitments under non-cancelable operating leases and other obligations | Year ended August 31, 2020 $ 2,225 2021 2,320 2022 2,139 2023 1,509 2024 616 Thereafter 500 $ 9,309 |
NATURE OF BUSINESS AND SIGNIF_4
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - Calculation of basic and diluted earnings per share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended | |
Aug. 31, 2019 | Aug. 31, 2018 | |
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES | ||
Net loss | $ (39,636) | $ (24,337) |
Less: Decrease in fair value of warrants | (8,986) | 0 |
Net loss available to common shareholders | $ (48,622) | $ (24,337) |
Weighted average common shares outstanding: | ||
Basic (in shares) | 84,880 | 65,336 |
Net effect of dilutive warrants | 16 | 0 |
Diluted (in shares) | 84,896 | 65,336 |
Net loss per common share per share: | ||
Basic (in dollars per share) | $ (0.47) | $ (0.37) |
Diluted (in dollars per share) | $ (0.57) | $ (0.37) |
NATURE OF BUSINESS AND SIGNIF_5
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - Product Sales (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Aug. 31, 2019 | Aug. 31, 2018 | |
Nature Of Business And Significant Accounting Policies [Line Items] | ||
Total Revenue | $ 148,954 | $ 52,075 |
Manufacturing | ||
Nature Of Business And Significant Accounting Policies [Line Items] | ||
Total Revenue | 147,498 | 51,967 |
Services | ||
Nature Of Business And Significant Accounting Policies [Line Items] | ||
Total Revenue | $ 1,456 | $ 108 |
NATURE OF BUSINESS AND SIGNIF_6
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - Additional Information (Details) $ in Thousands | Mar. 04, 2014shares | Aug. 31, 2019USD ($)segmentshares | Aug. 31, 2018USD ($)shares | Jul. 23, 2018USD ($) |
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES | ||||
Cash, Uninsured Amount | $ 2,630 | |||
Allowance for doubtful accounts | 1,058 | $ 1,000 | ||
Provision for sales returns | 477 | 0 | ||
Amount of investment of promissory note payable to third party | $ 1,000 | |||
Percentage of equity interests | 100.00% | |||
Inventory finished goods | 43,768 | 11,814 | ||
Inventory reserve | 2,640 | 585 | ||
Prepaid Inventory | $ 7,134 | 11,019 | ||
Property plant and equipment depreciation methods | straight-line method | |||
Risk-adjusted discount rates | 19% to 26 | |||
Number of operating segment | segment | 1 | |||
Number of Reportable Segments | segment | 1 | |||
Sales discount on goods | $ 822 | 465 | ||
Advertising costs | $ 1,304 | $ 753 | ||
Options | ||||
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES | ||||
Shares excluded from calculation of earnings per share | shares | 4,579 | 646 | ||
Warrants | ||||
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES | ||||
Shares excluded from calculation of earnings per share | shares | 2,045 | 822 | ||
Leasehold improvements | ||||
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES | ||||
Property plant and equipment estimated useful lives | three to 15 years or term of lease | |||
Computer software | ||||
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES | ||||
Property plant and equipment estimated useful lives | three to seven years | |||
Computer equipment | ||||
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES | ||||
Property plant and equipment estimated useful lives | two to three years | |||
Furniture and equipment | ||||
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES | ||||
Property plant and equipment estimated useful lives | one to seven years | |||
Kim International Corporation | ||||
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES | ||||
Shares exchanged | shares | 10,000 | |||
Shares exchanged for common stock | shares | 32,400 |
ACQUISITION OF CMP WELLNESS (De
ACQUISITION OF CMP WELLNESS (Details) - USD ($) $ in Thousands | Jul. 16, 2018 | May 09, 2018 | May 01, 2017 | Aug. 31, 2019 | Aug. 31, 2018 | Apr. 30, 2018 | Aug. 31, 2017 |
Business Acquisition [Line Items] | |||||||
Number of stock issued to investor in exchange for cash | 2,601 | 5,902 | |||||
Estimated fair value contingent equity consideration | $ 10,764 | ||||||
Contingent consideration payable | $ 5,488 | ||||||
Lancer West Enterprises, Inc And Walnut Ventures | |||||||
Business Acquisition [Line Items] | |||||||
Percentage of ownership interest owned | 100.00% | ||||||
CMP Wellness | |||||||
Business Acquisition [Line Items] | |||||||
Unsecured promissory note principal amount | $ 771 | $ 771 | |||||
Number of restricted stock issued | 7,800 | ||||||
Estimated fair value contingent cash consideration | $ 1,905 | ||||||
Amount of working capital adjustments | 104 | ||||||
Unsecured promissory notes payable increase (decrease) | $ 667 | ||||||
Estimated fair value contingent equity consideration | $ 11,683 | ||||||
Contingent consideration payable | $ 1,905 | ||||||
Number of common stock issued associated with the contingent equity consideration | 3,741 | ||||||
Number of common stock issued associated with holdback shares | 500 | ||||||
CMP Wellness | As initially reported | |||||||
Business Acquisition [Line Items] | |||||||
Cash consideration, aggregated in cash | $ 1,500 | ||||||
Estimated fair value contingent cash consideration | 1,735 | ||||||
Contingent consideration payable | $ 1,735 | ||||||
Number of common stock issued associated with the contingent equity consideration | 4,741 |
ACQUISITION OF SUMMIT INNOVAT_3
ACQUISITION OF SUMMIT INNOVATIONS, LLC - Additional Information (Details) - Acquisition of Summit Innovations, LLC $ / shares in Units, $ in Thousands | May 02, 2018USD ($)$ / sharesshares |
Business Acquisition [Line Items] | |
Cash consideration, aggregated in cash | $ | $ 905 |
Cash held back | $ | $ 188 |
Share consideration held back period | 15 months |
Closing price | $ / shares | $ 5.59 |
Common Stock | |
Business Acquisition [Line Items] | |
Number of shares issued for purchase consideration (in shares) | 1,280 |
Number of shares held back | 640 |
Common Stock | Earn-out Consideration | |
Business Acquisition [Line Items] | |
Maximum earn out consideration of common stock shares to be entitled to members | 1,280 |
ACQUISITION OF SUMMIT INNOVAT_4
ACQUISITION OF SUMMIT INNOVATIONS, LLC - Total Purchase Price (Details) - Acquisition of Summit Innovations, LLC - USD ($) $ in Thousands | Aug. 31, 2018 | May 02, 2018 |
Business Acquisition [Line Items] | ||
Cash | $ 905 | |
Cash held back | 188 | |
Fair value of common shares issued to Summit members | 3,578 | |
Fair value common shares held back | 2,816 | |
Fair value contingent consideration payable in common shares | 7,155 | |
Total | 14,642 | |
As initially reported | ||
Business Acquisition [Line Items] | ||
Cash | $ 945 | |
Cash held back | 500 | |
Fair value of common shares issued to Summit members | 3,578 | |
Fair value common shares held back | 3,578 | |
Fair value contingent consideration payable in common shares | 7,155 | |
Total | $ 15,756 | |
Measurement Period Adjustments | ||
Business Acquisition [Line Items] | ||
Cash | (40) | |
Cash held back | (312) | |
Fair value of common shares issued to Summit members | 0 | |
Fair value common shares held back | (762) | |
Fair value contingent consideration payable in common shares | 0 | |
Total | $ (1,114) |
ACQUISITION OF SUMMIT INNOVAT_5
ACQUISITION OF SUMMIT INNOVATIONS, LLC - Acquisition consideration (Details) - USD ($) $ in Thousands | Aug. 31, 2019 | Aug. 31, 2018 | May 02, 2018 |
Business Acquisition [Line Items] | |||
Goodwill | $ 52,267 | $ 52,267 | |
Acquisition of Summit Innovations, LLC | |||
Business Acquisition [Line Items] | |||
Accounts receivable, net of allowance | 218 | ||
Prepaid expenses and other current assets | 87 | ||
Inventory | 237 | ||
Property and equipment, net | 649 | ||
Accounts payable | (1,274) | ||
Accrued expenses and other current liabilities | (358) | ||
Notes payable | (987) | ||
Total identifiable net assets | (1,428) | ||
Non-compete | 620 | ||
Goodwill | 15,450 | ||
Total fair value of consideration | 14,642 | ||
Acquisition of Summit Innovations, LLC | As initially reported | |||
Business Acquisition [Line Items] | |||
Accounts receivable, net of allowance | $ 471 | ||
Prepaid expenses and other current assets | 87 | ||
Inventory | 237 | ||
Property and equipment, net | 649 | ||
Accounts payable | (1,377) | ||
Accrued expenses and other current liabilities | (358) | ||
Notes payable | (987) | ||
Total identifiable net assets | (1,278) | ||
Non-compete | 0 | ||
Goodwill | 17,034 | ||
Total fair value of consideration | $ 15,756 | ||
Acquisition of Summit Innovations, LLC | Measurement Period Adjustments | |||
Business Acquisition [Line Items] | |||
Accounts receivable, net of allowance | (253) | ||
Prepaid expenses and other current assets | 0 | ||
Inventory | 0 | ||
Property and equipment, net | 0 | ||
Accounts payable | 103 | ||
Accrued expenses and other current liabilities | 0 | ||
Notes payable | 0 | ||
Total identifiable net assets | (150) | ||
Non-compete | 620 | ||
Goodwill | (1,584) | ||
Total fair value of consideration | $ (1,114) |
ACQUISITION OF SUMMIT INNOVAT_6
ACQUISITION OF SUMMIT INNOVATIONS, LLC - Pro Forma Information (Details) - Acquisition of Summit Innovations, LLC - USD ($) $ / shares in Units, $ in Thousands | Aug. 13, 2019 | Aug. 31, 2019 | Aug. 31, 2018 | Aug. 31, 2017 |
Business Acquisition [Line Items] | ||||
Total revenues | $ 56,950 | $ 19,018 | ||
Net loss | $ (26,086) | $ 1,458 | ||
Loss per share: | ||||
Basic (in dollars per share) | $ (0.40) | $ (0.03) | ||
Diluted (in dollars per share) | $ (0.40) | $ (0.02) | ||
Number of common stock issued associated with the contingent equity consideration | 1,147 | |||
Number of common stock issued associated with holdback shares | 200 |
ACQUISITION OF THE HYBRID CRE_3
ACQUISITION OF THE HYBRID CREATIVE, LLC - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands | Jul. 11, 2018 | Aug. 31, 2018 |
Business Acquisition [Line Items] | ||
Contingent earn out consideration realized | $ 5,488 | |
Acquisition of Hybrid Creative, LLC | ||
Business Acquisition [Line Items] | ||
Cash consideration, aggregated in cash | $ 847 | $ 847 |
Cash held back | $ 82 | |
Common stock from share consideration held back (in shares) | 162 | |
Aggregate shares common stock (in shares) | 360 | |
Closing price | $ 5.22 | |
Acquisition of Hybrid Creative, LLC | Common Stock | ||
Business Acquisition [Line Items] | ||
Common stock from share consideration held back (in shares) | 213 | |
Acquisition of Hybrid Creative, LLC | Earn-out Consideration | ||
Business Acquisition [Line Items] | ||
Contingent earn out consideration realized | $ 485 |
ACQUISITION OF THE HYBRID CRE_4
ACQUISITION OF THE HYBRID CREATIVE, LLC - Total Purchase Price (Details) - USD ($) $ in Thousands | Jul. 11, 2018 | May 01, 2017 | Aug. 31, 2018 |
Business Acquisition [Line Items] | |||
Estimated fair value contingent equity consideration | $ (10,764) | ||
Acquisition of Hybrid Creative, LLC | |||
Business Acquisition [Line Items] | |||
Cash | $ 847 | $ 847 | |
Cash held back | 82 | ||
Fair value of common shares issued to Hybrid members | 1,879 | ||
Fair value of contingent cash consideration | 450 | ||
Estimated fair value contingent equity consideration | 920 | ||
Total estimated acquisition consideration | $ 4,178 |
ACQUISITION OF THE HYBRID CRE_5
ACQUISITION OF THE HYBRID CREATIVE, LLC - Acquisition Consideration (Details) - USD ($) $ in Thousands | Aug. 31, 2019 | Aug. 31, 2018 |
Business Acquisition [Line Items] | ||
Goodwill | $ 52,267 | $ 52,267 |
Acquisition of Hybrid Creative, LLC | ||
Business Acquisition [Line Items] | ||
Accounts receivable, net of allowance | 33 | |
Prepaid expenses and other assets | 6 | |
Accounts payable | (86) | |
Accrued expenses and other current liabilities | (278) | |
Notes payable | (235) | |
Total identifiable net assets | (560) | |
Non-compete | 910 | |
Goodwill | 3,828 | |
Total fair value of consideration | $ 4,178 |
ACQUISITION OF THE HYBRID CRE_6
ACQUISITION OF THE HYBRID CREATIVE, LLC - Pro Forma Information (Details) - Acquisition of Hybrid Creative, LLC - USD ($) | Feb. 08, 2019 | Aug. 31, 2018 | Aug. 31, 2017 | Feb. 28, 2019 |
Business Acquisition [Line Items] | ||||
Total revenues | $ 53,069 | $ 19,922 | ||
Net loss | $ (24,865) | $ 1,624 | ||
Loss per share: | ||||
Basic (in dollars per share) | $ (0.38) | $ 0.03 | ||
Diluted (in dollars per share) | $ (0.38) | $ 0.03 | ||
Number of common stock issued associated with holdback shares | 162 | |||
Fair value contingent consideration payable in common shares | $ 0 |
CONCENTRATIONS OF RISK - Additi
CONCENTRATIONS OF RISK - Additional Information (Details) | 12 Months Ended | |
Aug. 31, 2019item | Aug. 31, 2018itemcustomer | |
Purchase | Supplier Concentration Risk | ||
Concentration Risk [Line Items] | ||
Number of vendors | 1 | 2 |
Concentration risk description | one vendor accounted for approximately 40% of total inventory purchases | two vendors accounted for approximately 56% of total inventory purchases |
Concentration risk, percentage | 40.00% | 56.00% |
Revenue | ||
Concentration Risk [Line Items] | ||
Number of customer | customer | 0 | |
Revenue | Customer Concentration Risk | ||
Concentration Risk [Line Items] | ||
Concentration risk description | No customer accounted for 10% or more of the Company's net revenues for the fiscal year ended August 31, 2018. | |
Number of customer | 2 | |
Revenue | Customer Concentration Risk | Customers 1 | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 14.00% | |
Revenue | Customer Concentration Risk | Customers 2 | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 10.00% | |
Accounts Receivable | Customer Concentration Risk | Customers 1 | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 18.00% | |
Accounts Receivable | Customer Concentration Risk | Customers 2 | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 1.00% |
SALE OF RUB - Additional Inform
SALE OF RUB - Additional Information (Details) - Smoke Cartel, Inc. - USD ($) shares in Thousands, $ in Thousands | Sep. 21, 2018 | Aug. 31, 2019 |
Product Information [Line Items] | ||
Equity investments | $ 592 | |
Common stock issued for consideration to sell web domain and inventory related to Roll-uh-Bowl ("RUB") product line | 1,410 |
SALE OF RUB - Gain on Dispositi
SALE OF RUB - Gain on Disposition of Assets (Details) - USD ($) $ in Thousands | Sep. 21, 2018 | Aug. 31, 2019 |
Product Information [Line Items] | ||
Gain on disposition of assets | $ 1,254 | |
Smoke Cartel, Inc. | ||
Product Information [Line Items] | ||
Fair value of Smoke Cartel as of September 21, 2018 | $ 1,791 | |
RUB web domain and inventory sold | (537) | |
Gain on disposition of assets | $ 1,254 |
RELATED PARTY TRANSACTIONS - Ad
RELATED PARTY TRANSACTIONS - Additional Information (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Aug. 31, 2019 | Aug. 31, 2018 | |
RELATED-PARTY TRANSACTIONS | ||
Total rent payments | $ 35 | $ 215 |
Sales recognized from related parties | 1,224 | 254 |
Total accounts receivable from related parties | 465 | |
Total payments made to related party | $ 285 | $ 72 |
PROPERTY AND EQUIPMENT - Major
PROPERTY AND EQUIPMENT - Major classes of fixed assets (Details) - USD ($) $ in Thousands | Aug. 31, 2019 | Aug. 31, 2018 |
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 13,491 | $ 5,023 |
Accumulated Depreciation | (2,437) | (888) |
Property and equipment, net | 11,054 | 4,135 |
Machinery and equipment | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 4,430 | 2,938 |
Vehicles | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 603 | 381 |
Office Equipment | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 3,232 | 385 |
Leasehold improvements | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 3,296 | $ 1,319 |
Construction in progress | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 1,930 |
PROPERTY AND EQUIPMENT - Additi
PROPERTY AND EQUIPMENT - Additional Information (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Aug. 31, 2019 | Aug. 31, 2018 | |
PROPERTY AND EQUIPMENT | ||
Depreciation expense | $ 1,549 | $ 401 |
INTANGIBLE ASSETS AND GOODWIL_2
INTANGIBLE ASSETS AND GOODWILL - Intangible assets (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Aug. 31, 2019 | Aug. 31, 2018 | |
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Value | $ 4,970 | $ 5,569 |
Accumulated Amortization | (1,867) | (1,081) |
Net Amount | $ 3,103 | $ 4,488 |
Domain name | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Weighted average estimated useful life | 5 years | 5 years |
Gross Carrying Value | $ 0 | $ 599 |
Accumulated Amortization | 0 | (166) |
Net Amount | $ 0 | $ 433 |
Trade name | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Weighted average estimated useful life | 6 years | 6 years |
Gross Carrying Value | $ 2,600 | $ 2,600 |
Accumulated Amortization | (1,011) | (578) |
Net Amount | $ 1,589 | $ 2,022 |
Non-compete agreement | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Weighted average estimated useful life | 4 years | 4 years |
Gross Carrying Value | $ 2,370 | $ 2,370 |
Accumulated Amortization | (856) | (337) |
Net Amount | $ 1,514 | $ 2,033 |
INTANGIBLE ASSETS AND GOODWIL_3
INTANGIBLE ASSETS AND GOODWILL - Amortization expense (Details) - USD ($) $ in Thousands | Aug. 31, 2019 | Aug. 31, 2018 |
Year ended August 31, | ||
2020 | $ 947 | |
2021 | 881 | |
2022 | 747 | |
2023 | 528 | |
Net Amount | $ 3,103 | $ 4,488 |
INTANGIBLE ASSETS AND GOODWIL_4
INTANGIBLE ASSETS AND GOODWILL - Goodwill (Details) - USD ($) $ in Thousands | Aug. 31, 2019 | Aug. 31, 2018 |
Goodwill [Line Items] | ||
Carrying amount of goodwill | $ 52,267 | $ 52,267 |
Dank Bottles | ||
Goodwill [Line Items] | ||
Carrying amount of goodwill | 2,377 | |
CMP Wellness | ||
Goodwill [Line Items] | ||
Carrying amount of goodwill | 30,612 | |
Summit | ||
Goodwill [Line Items] | ||
Carrying amount of goodwill | 15,450 | |
Hybrid | ||
Goodwill [Line Items] | ||
Carrying amount of goodwill | $ 3,828 |
INTANGIBLE ASSETS AND GOODWIL_5
INTANGIBLE ASSETS AND GOODWILL - Additional Information (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Aug. 31, 2019 | Aug. 31, 2018 | |
INTANGIBLE ASSETS AND GOODWILL | ||
Amortization expense | $ 952 | $ 822 |
ACCRUED EXPENSES AND OTHER CU_3
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details) - USD ($) $ in Thousands | Aug. 31, 2019 | Aug. 31, 2018 |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | ||
Customer deposits | $ 2,992 | $ 769 |
Accrued compensation | 3,485 | 993 |
Sales tax payable | 1,047 | 432 |
Other accrued expenses | 1,936 | 877 |
Accrued expenses and other current liabilities | $ 9,460 | $ 3,071 |
DEBT - Gerber Revolving Line (D
DEBT - Gerber Revolving Line (Details) - USD ($) $ in Thousands | Nov. 09, 2018 | Mar. 08, 2018 | Nov. 16, 2017 | Aug. 31, 2019 | Aug. 31, 2018 | Nov. 06, 2017 |
Line of Credit Facility [Line Items] | ||||||
Interest expense | $ 2,523 | $ 276 | ||||
Loan and Security Agreement (the "Loan Agreement") | Secured revolving credit facility (the "Revolving Line") | Gerber Finance Inc., as lender ("Gerber") | Kim International Corporation | ||||||
Line of Credit Facility [Line Items] | ||||||
Maximum borrowing capacity | $ 8,000 | $ 4,000 | $ 2,000 | |||
Percentage of threshold maximum borrowing capacity | 85.00% | |||||
Maturity date | Nov. 6, 2019 | |||||
Margin added in interest rate | 3.00% | |||||
Letters of credit, maximum percentage of inventory | 40.00% | |||||
Letters of credit, maximum percentage of accounts receivable | 50.00% | |||||
Revolving line of credit facility description | the face amount of any outstanding letters of credit, at any time outstanding cannot exceed the lesser of (i) 25% of the value of certain inventory (increasing to 40% upon receipt of certain landlord waivers) and (ii) 50% of certain accounts receivable. | |||||
Interest expense | $ 1,108 | $ 224 |
DEBT - Monroe Revolving Credit
DEBT - Monroe Revolving Credit Facility (Details) - USD ($) | Aug. 31, 2019 | Aug. 21, 2019 | Aug. 31, 2019 |
Line of Credit Facility [Line Items] | |||
Closing costs incurred | $ 2,602,000 | ||
Amortization of debt discount | $ 1,243,000 | ||
Monroe Revolving Credit Facility | |||
Line of Credit Facility [Line Items] | |||
Maximum borrowing capacity | $ 35,000,000 | ||
Additional borrowing capacity | $ 15,000,000 | ||
Interest rate determination, base rate, one (as a percent) | 5.25% | ||
Interest rate determination, additional rate, one (as a percent) | 5.50% | ||
Interest rate determination, base percent for LIBOR (as a percent) | 100.00% | ||
Interest rate determination, base rate, two (as a percent) | 8.50% | ||
Interest rate determination, base value for LIBOR | $ 1 | ||
Interest rate determination, additional rate, two (as a percent) | 1.00% | ||
Interest Rate (as a percent) | 10.70% | 10.70% | |
Debt instrument, term | 5 years | ||
Closing costs incurred | $ 2,602,000 | ||
Unamortized deferred closing costs | 2,585,000 | $ 2,585,000 | |
Outstanding amount | $ 12,261,000 | 12,261,000 | |
Interest expense | 44,000 | ||
Amortization of debt discount | $ 17,000 | ||
Federal Funds Rate | Monroe Revolving Credit Facility | |||
Line of Credit Facility [Line Items] | |||
Interest rate determination, Basis spread on variable rate ( as a percent) | 0.50% | ||
Interest rate determination, Additional percent for LIBOR (as a percent) | 1.00% |
DEBT - Monroe Warrants (Details
DEBT - Monroe Warrants (Details) - USD ($) $ / shares in Units, $ in Thousands | Aug. 31, 2019 | Aug. 21, 2019 | Aug. 31, 2018 |
Line of Credit Facility [Line Items] | |||
Common Stock, Par Value | $ 0.001 | $ 0.001 | |
Monroe Subscription Agreement | |||
Line of Credit Facility [Line Items] | |||
Warrants issued | 500 | ||
Common Stock, Par Value | $ 0.001 | ||
Warrants exercise price | $ 4.250 | ||
Term of warrants | 5 years | ||
Fair value of warrants | $ 989 |
DEBT - Long-Term Debt (Details)
DEBT - Long-Term Debt (Details) - USD ($) $ / shares in Units, $ in Thousands | Apr. 29, 2019 | Nov. 08, 2019 | Sep. 26, 2019 | Aug. 21, 2019 |
Subsequent Events | ||||
Line of Credit Facility [Line Items] | ||||
Warrants exercise price | $ 2.25 | |||
Exchange Agreement | ||||
Line of Credit Facility [Line Items] | ||||
Warrants issued | 650,000 | |||
Warrants exercise price | $ 4.25 | |||
Fair value of warrants | $ 792 | |||
Second Exchange Agreement | Subsequent Events | ||||
Line of Credit Facility [Line Items] | ||||
Aggregate principal amount | $ 24,000 | |||
Issue Discount | $ 1,500 | |||
Private placement offering (the "Private Placement") | Securities Purchase Agreement (the "Purchase Agreement") | ||||
Line of Credit Facility [Line Items] | ||||
Aggregate principal amount | $ 21,300 | |||
Issue Discount | 1,300 | |||
Gross proceeds from private placement | $ 20,000 |
DEBT - Promissory Notes Payable
DEBT - Promissory Notes Payable (Detail Textuals) - CMP Wellness - USD ($) $ in Thousands | Aug. 31, 2018 | Apr. 30, 2018 | May 01, 2017 |
Debt Instrument [Line Items] | |||
Unsecured promissory note | $ 771 | $ 771 | |
Amount of working capital adjustments | 104 | ||
Unsecured promissory notes payable increase (decrease) | $ 667 | ||
Unsecured promissory notes | |||
Debt Instrument [Line Items] | |||
Unsecured promissory note | $ 771 | ||
Amount of working capital adjustments | 104 | ||
Unsecured promissory notes payable increase (decrease) | $ 667 | ||
Maturity date of promissory notes | May 1, 2018 | ||
Interest rate | 1.15% |
WARRANT LIABILITY (Details)
WARRANT LIABILITY (Details) - Derivative Warrant Liability $ in Thousands | 12 Months Ended | ||
Aug. 31, 2019USD ($)$ / shares | Aug. 31, 2018USD ($) | Jun. 30, 2018USD ($)$ / sharesshares | |
Credit Derivatives [Line Items] | |||
Warrants issued | shares | 3,750 | ||
Estimated fair value of outstanding warrant liabilities | $ 5,444 | $ 14,430 | $ 15,350 |
Term of warrants | 5 years | ||
Changes in derivative liability | $ 8,986 | $ 920 | |
Stock price | |||
Credit Derivatives [Line Items] | |||
Measurement input | $ / shares | 3.75 | 5.56 | |
Volatility | |||
Credit Derivatives [Line Items] | |||
Measurement input | 63.7 | 78.1 | |
Risk-free rate | |||
Credit Derivatives [Line Items] | |||
Measurement input | 1.41 | 2.74 | |
Annual dividend yield | |||
Credit Derivatives [Line Items] | |||
Measurement input | 0 | 0 | |
Expected life | |||
Credit Derivatives [Line Items] | |||
Term of warrants | 3 years 9 months 18 days | 5 years |
FAIR VALUE OF FINANCIAL INSTR_3
FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - Recurring - USD ($) $ in Thousands | Aug. 31, 2019 | Aug. 31, 2018 | Aug. 31, 2017 |
Assets: | |||
Equity investment | $ 592 | ||
Total assets | 592 | ||
Liabilities | |||
Contingent consideration payable | $ 5,488 | ||
Warrant liability | 5,444 | 14,430 | |
Total liabilities | 5,444 | 19,918 | |
Level 1 | |||
Assets: | |||
Equity investment | 0 | ||
Total assets | 0 | ||
Liabilities | |||
Contingent consideration payable | 0 | ||
Warrant liability | 0 | 0 | |
Total liabilities | 0 | 0 | |
Level 2 | |||
Assets: | |||
Equity investment | 592 | ||
Total assets | 592 | ||
Liabilities | |||
Contingent consideration payable | 0 | ||
Warrant liability | 0 | 0 | |
Total liabilities | 0 | 0 | |
Level 3 | |||
Assets: | |||
Equity investment | 0 | ||
Total assets | 0 | ||
Liabilities | |||
Contingent consideration payable | 5,488 | ||
Warrant liability | 5,444 | 14,430 | $ 0 |
Total liabilities | $ 5,444 | $ 19,918 |
FAIR VALUE OF FINANCIAL INSTR_4
FAIR VALUE OF FINANCIAL INSTRUMENTS - Investment in Smoke Cartel (Details) - Smoke Cartel, Inc. $ in Thousands | 12 Months Ended |
Aug. 31, 2019USD ($) | |
Investment in Smoke Cartel | |
As of August 31, 2019 | $ 592 |
Level 2 | |
Investment in Smoke Cartel | |
As of August 31, 2018 | 0 |
Acquisition of equity investment | 1,791 |
Adjustments to estimated fair value | (1,199) |
As of August 31, 2019 | $ 592 |
FAIR VALUE OF FINANCIAL INSTR_5
FAIR VALUE OF FINANCIAL INSTRUMENTS - Activity for Warrant derivative Liability (Details) - Recurring - USD ($) $ in Thousands | 4 Months Ended | 12 Months Ended | |
Aug. 31, 2019 | Aug. 31, 2019 | Aug. 31, 2018 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Balance Beginning | $ 14,430 | ||
Balance Ending | $ 5,444 | 5,444 | $ 14,430 |
Level 3 | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Balance Beginning | 14,430 | 0 | |
Issuance | 15,350 | ||
Adjustments to estimated fair value | (308) | (8,986) | (920) |
Balance Ending | $ 5,444 | $ 5,444 | $ 14,430 |
FAIR VALUE OF FINANCIAL INSTR_6
FAIR VALUE OF FINANCIAL INSTRUMENTS - Activity for Participation rights derivative Liability (Details) - Level 3 - Recurring - USD ($) $ in Thousands | 4 Months Ended | 12 Months Ended | |
Aug. 31, 2019 | Aug. 31, 2019 | Aug. 31, 2018 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
As of April 30, 2019 | $ 1,100 | ||
Adjustments to estimated fair value | (308) | $ (8,986) | $ (920) |
Reclassification to equity | (792) | ||
As of August 31, 2019 | $ 0 | $ 0 |
FAIR VALUE OF FINANCIAL INSTR_7
FAIR VALUE OF FINANCIAL INSTRUMENTS - Contingent acquisition liabilities (Details) - Contingent consideration - USD ($) $ in Thousands | 12 Months Ended | |
Aug. 31, 2019 | Aug. 31, 2018 | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Beginning balance | $ 5,488 | $ 10,828 |
Change in Fair Value | (1,780) | 14,138 |
Cash payment | (140) | (1,820) |
Acquisition of Summit | 7,155 | |
Acquisition of Hybrid Creative | 1,405 | |
Settled in shares | (3,568) | (26,218) |
Ending balance | $ 0 | $ 5,488 |
FAIR VALUE OF FINANCIAL INSTR_8
FAIR VALUE OF FINANCIAL INSTRUMENTS - Additional Information (Details) - shares | 1 Months Ended | |
Apr. 30, 2019 | Sep. 21, 2018 | |
Securities Purchase Agreement (the "Purchase Agreement") | ||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
Percentage Of Investor Participation Rights | 15.00% | |
Percentage Of Debt Issuances | 100.00% | |
Smoke Cartel, Inc. | ||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
Common stock issued for consideration to sell a web domain and inventory related to the Company's Roll-uh-Bowl ("RUB") product line | 1,410 |
STOCKHOLDERS' EQUITY - Schedule
STOCKHOLDERS' EQUITY - Schedule of assumptions used (Details) | 12 Months Ended | |
Aug. 31, 2019 | Aug. 31, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected term in years | 3 years | 3 years |
Expected dividend yield | 0.00% | 0.00% |
Minimum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected volatility | 64.00% | 64.00% |
Risk-free interest rate | 1.39% | 1.70% |
Maximum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected volatility | 87.00% | 79.00% |
Risk-free interest rate | 3.01% | 2.94% |
STOCKHOLDERS' EQUITY - Stock op
STOCKHOLDERS' EQUITY - Stock option activity (Details) - USD ($) | 12 Months Ended | |||
Aug. 31, 2019 | Aug. 31, 2018 | Aug. 31, 2017 | Aug. 31, 2016 | |
Stock Options | ||||
Balance Outstanding | 14,761 | 9,368 | 5,275 | |
Granted | 10,082 | 7,177 | ||
Exercised | (502) | (1,145) | ||
Forfeited | (4,187) | (1,939) | ||
Balance Outstanding | 14,761 | 9,368 | 5,275 | |
Vested and expected to vest | 12,286 | |||
Exercisable | 3,515 | |||
Weighted Average Exercise Price | ||||
Balance Outstanding | $ 4.89 | $ 3.85 | $ 1.73 | |
Granted | 5.50 | 4.55 | ||
Exercised | 1.20 | 0.52 | ||
Forfeited | 4.46 | 2.64 | ||
Balance Outstanding | 4.89 | $ 3.85 | $ 1.73 | |
Vested and expected to vest | $ 4.81 | |||
Exercisable | $ 3.64 | |||
Weighted Average Remaining Contractual Term Outstanding | 9 years | 9 years 1 month 6 days | 8 years | |
Vested and expected to vest | 8 years 10 months 24 days | |||
Weighted Average Remaining Contractual Term Exercisable | 8 years 2 months 12 days | |||
Aggregate Intrinsic Value, Balance Outstanding | $ 3,192 | $ 14,463 | $ 918 | |
Aggregate Intrinsic Value, Exercised | 2,576 | $ 5,952 | ||
Aggregate Intrinsic Value, Vested and expected to vest | $ 3,110 | |||
Aggregate Intrinsic Value Exercisable | $ 2,818 |
STOCKHOLDERS' EQUITY - Addition
STOCKHOLDERS' EQUITY - Additional Information 1 (Details) - USD ($) $ / shares in Units, $ in Millions | Sep. 30, 2019 | Sep. 26, 2019 | Jan. 18, 2019 | Jan. 15, 2019 | Jun. 12, 2018 | Jun. 07, 2018 | Aug. 31, 2019 | Aug. 31, 2018 |
Stockholders Equity [Line Items] | ||||||||
Preferred stock, shares authorized | 10,000 | 10,000 | ||||||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 | ||||||
Preferred stock, shares issued | 0 | 0 | ||||||
Preferred stock, shares outstanding | 0 | 0 | ||||||
Common stock, shares authorized | 265,000 | 265,000 | ||||||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 | ||||||
Common stock, shares issued | 90,041 | 78,273 | ||||||
Common stock, shares outstanding | 90,041 | 78,273 | ||||||
Number of stock issued to investor in exchange for cash | 2,601 | 5,902 | ||||||
Value of stock issued to investor in exchange for cash | $ 10.4 | $ 16.4 | ||||||
Gross proceeds from the Offering | $ 34 | |||||||
Proceeds From Issuance Or Sale Of Equity Net | $ 31.2 | |||||||
Combined per share purchase price for a share of Common Stock and half of a Warrant | $ 5.25 | |||||||
Gross proceeds from offering | $ 36 | |||||||
Net proceeds after deducting placement agent fees and estimated offering expense | $ 33 | |||||||
Number of stock issued to investor in exchange for cash | 2,601 | 5,902 | ||||||
Value of stock issued to investor in exchange for cash | $ 10.4 | $ 16.4 | ||||||
Securities Purchase Agreement (the "Purchase Agreement") | Certain accredited investors (the "Purchasers") | ||||||||
Stockholders Equity [Line Items] | ||||||||
Common stock, par value (in dollars per share) | $ 0.001 | |||||||
Number of shares sold for aggregate gross proceeds | 6,476 | |||||||
Issuance of common stock and warrants for cash, net of offering costs (in shares) | 7,500,000 | |||||||
Number of warrants issued | 3,238 | 3,750 | ||||||
Warrants exercise price | $ 5.75 | $ 5.28 | ||||||
Combined per share purchase price for a share of Common Stock and half of a Warrant | $ 4.80 | |||||||
Term of warrant exercisable | 5 years | |||||||
Subsequent Events | ||||||||
Stockholders Equity [Line Items] | ||||||||
Common stock, par value (in dollars per share) | $ 0.001 | |||||||
Gross proceeds from the Offering | $ 30.1 | |||||||
Proceeds From Issuance Or Sale Of Equity Net | $ 27.6 | |||||||
Warrants exercise price | $ 2.25 | |||||||
Number of units sold to investors | 17,198 | |||||||
Number of common shares per stock unit issued | 1 | |||||||
Purchase price per unit | $ 1.75 | |||||||
Term of warrants | 5 years |
STOCKHOLDERS' EQUITY - Additi_2
STOCKHOLDERS' EQUITY - Additional Information 2 (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Aug. 31, 2019 | Aug. 31, 2018 | |
STOCKHOLDERS' EQUITY. | ||
Stock compensation expense | $ 13,384 | $ 3,586 |
STOCKHOLDERS' EQUITY - Additi_3
STOCKHOLDERS' EQUITY - Additional Information 3 (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |||
Aug. 31, 2019 | Aug. 31, 2018 | Aug. 31, 2017 | Aug. 31, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Weighted average remaining contractual term | 9 years | 9 years 1 month 6 days | 8 years | |
Number of shares issued | 10,082 | 7,177 | ||
Weighted-average grant-date fair value of options granted | $ 2.73 | $ 2.85 | ||
Stock option | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock compensation expense | $ 9,995 | $ 2,084 | ||
2016 Stock Incentive Plan (the Plan) | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Number of shares issued | 18,000 | |||
Share-based payment award vesting period | 3 years | |||
Weighted average remaining contractual term | 10 years | |||
Number of shares issued | 10,082 | 7,177 | ||
Unrecognized compensation cost related to non-vested share | $ 38,712 | |||
Weighted-average period, cost expected to be recognized | 2 years 2 months 12 days |
STOCKHOLDERS' EQUITY - Additi_4
STOCKHOLDERS' EQUITY - Additional Information 4 (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Aug. 31, 2019 | Aug. 31, 2018 | |
Restricted Stock | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Value of stock issued to investor in exchange for services | $ 1,908 | |
Stock compensation expense | 3,389 | $ 1,502 |
Unrecognized compensation cost related to non-vested share | $ 2,464 | |
Weighted-average period, cost expected to be recognized | 1 year 10 months 24 days | |
2016 Stock Incentive Plan (the Plan) | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Weighted-average period, cost expected to be recognized | 2 years 2 months 12 days | |
2016 Stock Incentive Plan (the Plan) | Restricted Stock | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of stock issued to investor in exchange for services | 350 | 500 |
Value of stock issued to investor in exchange for services | $ 4,859 |
INCOME TAXES - Income before In
INCOME TAXES - Income before Income taxes (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Aug. 31, 2019 | Aug. 31, 2018 | |
INCOME TAXES | ||
Loss before income taxes | $ (39,509) | $ (25,900) |
INCOME TAXES - Components of th
INCOME TAXES - Components of the provision for Income taxes (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Aug. 31, 2019 | Aug. 31, 2018 | |
Federal Income Tax Expense (Benefit), Continuing Operations [Abstract] | ||
Federal tax | $ 0 | $ 0 |
State tax | 17 | 5 |
Foreign tax | 13 | 0 |
Total | 30 | 5 |
Deferred | ||
Federal tax | 29 | (1,190) |
State tax | 68 | (378) |
Total | 97 | (1,568) |
Total tax provision | $ 127 | $ (1,563) |
INCOME TAXES - Provision for In
INCOME TAXES - Provision for Income tax (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Aug. 31, 2019 | Aug. 31, 2018 | |
Federal income tax/benefit attributable to: | ||
Income tax provision at statutory rate | $ (8,297) | $ (6,561) |
State taxes, net of federal benefit | (2,310) | 302 |
Change in fair value of warrants | (1,952) | 233 |
Stock-based and other compensation | 1,338 | 342 |
Change in Contingent Consideration Payable | (374) | 3,581 |
Warrants | 0 | 327 |
Impact of the Tax Cuts and Jobs Act | 0 | (430) |
Other | (64) | (52) |
Less: Change in valuation of allowance | 11,786 | 695 |
Income tax expense (benefit) | $ 127 | $ (1,563) |
INCOME TAXES - Tax effects of t
INCOME TAXES - Tax effects of the temporary differences (Details) - USD ($) $ in Thousands | Aug. 31, 2019 | Aug. 31, 2018 |
Deferred tax assets | ||
Net operating loss carry-forwards | $ 9,451 | $ 1,563 |
Stock-based compensation | 2,519 | 144 |
Inventory | 1,671 | 0 |
Other | 871 | 0 |
Deferred tax assets | 14,512 | 1,707 |
Valuation allowance | (12,854) | (694) |
Deferred tax assets, net | 1,658 | 1,013 |
Deferred tax liabilities | ||
Depreciation, amortization and other | (1,755) | (1,013) |
Net deferred tax liability | (1,755) | (1,013) |
Net deferred tax asset (liability) | $ (97) | $ 0 |
INCOME TAXES - Additional Infor
INCOME TAXES - Additional Information (Details) $ in Millions | 12 Months Ended |
Aug. 31, 2019USD ($) | |
Income Tax Disclosure [Line Items] | |
Federal net operating loss carryforward | $ 34.1 |
Federal net operating loss carryforward expire in 2038 | 6.5 |
State net operating loss carryforwards | $ 2.5 |
2018 | |
Income Tax Disclosure [Line Items] | |
Federal income tax rate | 25.30% |
2019 | |
Income Tax Disclosure [Line Items] | |
Federal income tax rate | 21.00% |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES (Details) $ in Thousands | Aug. 31, 2019USD ($) |
Minimum future commitments under non-cancelable operating leases and other obligations | |
2020 | $ 2,225 |
2021 | 2,320 |
2022 | 2,139 |
2023 | 1,509 |
2024 | 616 |
Thereafter | 500 |
Total minimum future commitments under non-cancelable operating leases | $ 9,309 |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Additional Information (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Aug. 31, 2019 | Aug. 31, 2018 | |
COMMITMENTS AND CONTINGENCIES. | ||
Rent expense | $ 2,852 | $ 1,180 |