KushCo (KSHB) 10-Q 9 Apr 20 2020 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	6 Months Ended
	Feb. 29, 2020	Apr. 06, 2020
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 Common Stock, Shares Outstanding		119,117,670
Document Type	10-Q
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Document Period End Date	Feb. 29, 2020
Amendment Flag	false
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Entity Small Business	true
Entity Shell Company	false
Entity Emerging Growth Company	true
Entity Ex Transition Period	true

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Feb. 29, 2020	Aug. 31, 2019
Current assets:
Cash	$ 11,378	$ 3,944
Accounts receivable, net	16,860	25,972
Inventory	26,423	43,768
Prepaid expenses and other current assets	13,920	12,209
Total current assets	68,581	85,893
Goodwill	52,267	52,267
Intangible assets, net	2,630	3,103
Property and equipment, net	9,390	11,054
Other assets	10,665	6,917
Total Assets	143,533	159,234
Current liabilities:
Accounts payable	4,743	10,907
Accrued expenses and other current liabilities	15,738	9,460
Line of credit	0	12,261
Total current liabilities	20,481	32,628
Long-term liabilities:
Notes payable	21,011	18,975
Warrant liability	849	5,444
Other non-current liabilities	5,766	833
Total long-term liabilities	27,626	25,252
Total liabilities	48,107	57,880
Commitments and contingencies (Note 12)
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, 119,118 and 90,041 shares issued and outstanding, respective	119	90
Additional paid-in capital	215,182	164,258
Accumulated deficit	(119,875)	(62,994)
Total stockholders' equity	95,426	101,354
Total liabilities and stockholders' equity	$ 143,533	$ 159,234

Condensed Consolidated Balanc_2

Condensed Consolidated Balance Sheets (Parentheticals) - $ / shares	Feb. 29, 2020	Aug. 31, 2019
Condensed 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	119,118	90,041
Common stock, shares outstanding	119,118	90,041

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Feb. 29, 2020	Feb. 28, 2019	Feb. 29, 2020	Feb. 28, 2019
Condensed Consolidated Statements of Operations
Net revenue	$ 30,143	$ 35,176	$ 65,105	$ 60,496
Cost of goods sold	39,051	30,654	66,742	52,745
Gross profit (loss)	(8,908)	4,522	(1,637)	7,751
Operating expenses:
Selling, general and administrative	27,183	18,766	48,258	31,312
Gain on disposition of assets	0		0	(1,254)
Change in fair value of contingent consideration	0	(5,602)	0	(5,208)
Restructuring costs	7,301		7,301
Total operating expenses	34,484	13,164	55,559	24,850
Loss from operations	(43,392)	(8,642)	(57,196)	(17,099)
Other income (expense):
Change in fair value of warrant liability	1,391	1,271	4,595	1,055
Change in fair value of equity investment	(696)	(1,128)	(1,091)	(592)
Interest expense	(1,619)	(491)	(3,107)	(978)
Other income (expense), net	(59)	75	(82)	120
Total other income (expense)	(983)	(273)	315	(395)
Loss before income taxes	(44,375)	(8,915)	(56,881)	(17,494)
Income tax expense	0		0
Net loss	$ (44,375)	$ (8,915)	$ (56,881)	$ (17,494)
Net loss per share:
Basic net loss per common share	$ (0.40)	$ (0.10)	$ (0.54)	$ (0.21)
Diluted net loss per common share	$ (0.40)	$ (0.12)	$ (0.54)	$ (0.22)
Weighted-average common shares outstanding
Basic weighted average number of common shares outstanding	110,008	86,772	105,823	84,305
Diluted weighted average number of common shares outstanding	110,008	87,066	105,823	84,557

Condensed Consolidated Statem_2

Condensed Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Total
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]
Net loss			(8,579)	(8,579)
Balance at Nov. 30, 2018	$ 79	107,256	(31,937)	75,398
Balance (in shares) at Nov. 30, 2018	78,559
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 option exercises	$ 1	41		42
Stock option exercises (in shares)	281
Stock-based compensation		2,297		2,297
Stock-based compensation (in shares)	5
Stock issued for acquisitions				140
Net loss				(17,494)
Balance at Feb. 28, 2019	$ 88	152,158	(40,852)	111,394
Balance (in shares) at Feb. 28, 2019	88,012
Balance at Nov. 30, 2018	$ 79	107,256	(31,937)	75,398
Balance (in shares) at Nov. 30, 2018	78,559
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock option exercises (in shares)	89
Stock-based compensation		3,178		3,178
Stock-based compensation (in shares)	125
Stock sold to investors	$ 9	41,584		41,593
Stock sold to investors (in shares)	9,077
Stock issued for acquisitions		140		140
Stock issued for acquisitions (In shares)	162
Net loss			(8,915)	(8,915)
Balance at Feb. 28, 2019	$ 88	152,158	(40,852)	111,394
Balance (in shares) at Feb. 28, 2019	88,012
Balance at Aug. 31, 2019	$ 90	164,258	(62,994)	101,354
Balance (in shares) at Aug. 31, 2019	90,041
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation	$ 0	3,189	0	3,189
Stock-based compensation (in shares)	99
Stock sold to investors	$ 17	27,362		27,379
Stock sold to investors (in shares)	17,198
Stock issued for acquisitions (In shares)	23
Net loss			(12,506)	(12,506)
Balance at Nov. 30, 2019	$ 107	194,809	(75,500)	119,416
Balance (in shares) at Nov. 30, 2019	107,361
Balance at Aug. 31, 2019	$ 90	164,258	(62,994)	101,354
Balance (in shares) at Aug. 31, 2019	90,041
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock issued for acquisitions				0
Stock issued for equity investment				2,528
Net loss				(56,881)
Balance at Feb. 29, 2020	$ 119	215,182	(119,875)	95,426
Balance (in shares) at Feb. 29, 2020	119,118
Balance at Nov. 30, 2019	$ 107	194,809	(75,500)	119,416
Balance (in shares) at Nov. 30, 2019	107,361
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation		3,141		3,141
Stock-based compensation (in shares)	89
Issuance of restricted stocks (in shares)	15
Stock sold to investors	$ 10	14,706	0	14,716
Stock sold to investors (in shares)	10,000
Stock issued for acquisitions (In shares)	0
Stock issued for equity investment	$ 2	2,526		2,528
Stock issued for equity investment (Shares)	1,653
Net loss	$ 0	0	(44,375)	(44,375)
Balance at Feb. 29, 2020	$ 119	$ 215,182	$ (119,875)	$ 95,426
Balance (in shares) at Feb. 29, 2020	119,118

Condensed Consolidated Statem_3

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Feb. 29, 2020	Feb. 28, 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ (56,881)	$ (17,494)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	2,032	1,078
Amortization of debt discount	2,503
Provision for bad debt	9,462	1,115
Provision for sales returns	116
Inventory obsolescence	1,157
Provision for inventory reserve	12,483	1,504
Loss (gain) on disposal of assets	21	(1,254)
Impairment of assets	6,901
Change in fair value of equity investment	1,091	592
Stock-based compensation	8,089	6,534
Change in fair value of warrant liability	(4,595)	(1,055)
Change in fair value of contingent consideration	0	(5,208)
Changes in operating assets and liabilities:
Accounts receivable	2,029	(3,830)
Inventory	4,863	(25,604)
Prepaid expenses and other current assets	(5,222)	(2,287)
Other non-current assets	17
Accounts payable	(6,438)	8,042
Accrued expenses and other current liabilities	3,611	3,113
Net cash used in operating activities	(18,761)	(34,754)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, equipment, and intangibles	(3,550)	(2,868)
Security deposits	0	(68)
Net cash used in investing activities	(3,550)	(2,936)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of capital leases	(62)	(47)
Proceeds from stock option exercises	0	41
Proceeds from issuance of common stock	42,095	41,593
Proceeds from line of credit	49,331	54,325
Repayments on line of credit	(61,619)	(53,747)
Net cash provided by financing activities	29,745	42,165
NET INCREASE (DECREASE) IN CASH	7,434	4,475
CASH AT BEGINNING OF YEAR	3,944	3,944
CASH AT END OF YEAR	11,378	17,942
CASH PAID FOR:
Interest	488	827
NON-CASH INVESTING AND FINANCING ACTIVITIES
Capital leases	0	240
Services prepaid for in common stock	296	697
Accrued and unpaid amounts for purchase of property & equipment	276	232
Stock issuance for acquisition of Hybrid	0	140
Shares issued in exchange for equity investment in Xtraction Services	2,528
Equity investment	$ 0	$ 1,791

NATURE OF BUSINESS AND SIGNIFIC

NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES	6 Months Ended
	Feb. 29, 2020
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. (formerly known as Kush Bottles, Inc.) markets and sells a wide variety of ancillary products and services to customers operating in the regulated medical and recreational cannabis and cannabidiol (“CBD”) industries. These complementary products and services include compliant and custom packaging products; vape hardware; hydrocarbons and solvents; natural products; stainless steel tanks; custom branded anti-counterfeit and authentication labels; hemp trading services; and retail services focused on CBD mass distribution, industry education and compliance. As a leader in custom and child-resistant packaging, exclusive vape products, and unique product and service offerings, such as our stainless steel tanks, custom branded anti-counterfeit and authentication labels, and hemp trading and retail services, we combine creativity with compliance to provide the right solutions for our customers. The ability to source and deliver almost anything a customer needs makes us a one-stop-shop solutions provider. Our products primarily consist of bottles, jars, bags, tubes, containers, vape cartridges, vape batteries and accessories, labels and processing supplies, hydrocarbons, solvents, natural products, stainless steel tanks, and custom branded anti-counterfeit and authentication labels. We maintain relationships with a broad range of manufacturers, which enables us to source a plethora of products in a cost-effective manner and to pass such cost savings to our customers. This allows us to offer quick solutions to our customers and ensure that their products will be of superior grade and made with environmentally safe materials. In addition to a complete product line, we have sophisticated labeling and customization capabilities, which allow us to add significant value to our customers’ packaging design processes. Our products are utilized by local urban farmers, green house growers, processors, brand owners, and medical and recreational cannabis dispensaries. Our services consist of hemp trading, which connects buyers and sellers of hemp commodities, as well as CBD mass distribution services through our internal resources and our partnerships with leading consumer packaged goods (“CPG”) sales agencies. Our retail services division focuses on building distribution networks of compliant hemp-derived CBD brands across conventional and other retail channels, including industry education and compliance initiatives. Our services also include custom branding on packaging products, which allows our customers to turn their packaging into an effective marketing tool. Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the activity of the Company and its wholly-owned subsidiaries and have been prepared in accordance with GAAP for interim financial information pursuant to Securities and Exchange Commission (“SEC”) rules and regulations. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for annual financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included in the condensed consolidated financial statements for the interim periods presented herein, but are not necessarily indicative of operating results to be achieved for full fiscal years or other interim periods. The condensed consolidated balance sheet as of August 31, 2019 was derived from the audited financial statements as of that date but does not include all disclosures as required by GAAP. These condensed consolidated financial statements and notes should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes for the fiscal year ended August 31, 2019 and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year then ended and filed with the SEC on November 12, 2019. References to amounts in these notes to condensed consolidated financial statements are in thousands, except per share amounts, unless otherwise specified. Use of Estimates The preparation of financial statements in conformity with 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 condensed consolidated financial statements include revenue recognition, accounts receivable reserves, inventory and related reserves, 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 with a focus on serving the cannabis and CBD industries, including, the development of certain products, competition, a limited number of suppliers, integration of acquisitions, substantial indebtedness, disruptions in the U.S. and global economy and financial markets, including as a result of COVID-19, government regulations, protection of proprietary rights, and dependence on key individuals. If the Company does not successfully generate additional products and services, or if such products and services are developed but not successfully commercialized, the Company could lose revenue opportunities. Accounts Receivable Trade accounts receivable are carried at their estimated collectible amounts. Trade credit is generally extended on a short-term basis; thus, trade receivables do not bear interest. Trade accounts receivables are periodically evaluated for collectability based on past credit history and their current financial condition. The Company’s allowance for doubtful accounts was $8,342 and $1,058 as of February 29, 2020 and August 31, 2019, respectively. The increase in allowance for doubtful accounts was driven primarily by the deteriorating credit conditions in California exhibited by the Company's customers in this market, which have significantly impacted the Company's ability to collect, in part or in full, amounts owed by these customers. The Company’s sales return reserve was $593 and $477 as of February 29, 2020 and August 31, 2019, respectively, and is included in “Accounts receivable, net” on the Company’s condensed consolidated balance sheet. 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 $26,423 and $43,768 as of February 29, 2020 and August 31, 2019, respectively. The Company also makes prepayments against the future delivery of inventory classified as prepaid inventory. The Company’s prepaid inventory was $7,473 and $7,134 as of February 29, 2020 and August 31, 2019, respectively. The Company regularly reviews inventory and, when appropriate, records a provision for obsolete and excess inventory. The provision is based on actual loss experience and a forecast of product demand compared to its remaining shelf life. As of February 29, 2020, the Company had $14,442 of inventory reserve. Equity Investment in Xtraction Services On January 30, 2020, the Company partnered with Xtraction Services Holding Corp (“Xtraction Services”), a provider of equipment leasing solutions to owners and operators of cannabis and hemp companies in the United States in order to provide such solutions to the Company’s network of compliant cannabis and CBD operators. Under the terms of its agreement with Xtraction Services, the Company received 19.9% of the outstanding equity interests of Xtraction Services, on an as-converted basis, in the form of Proportionate Voting Shares (the “XS Shares”). Upon the closing of the transaction, the Company issued 1,653 of its common shares in exchange for 10,600 XS shares of Xtraction Services, the equivalent of 19.9% of Xtraction Services market capitalization on the closing date. On January 30, 2020, the value of shares issued in exchange for equity investment in Xtraction Services was $2,528. The Company’s investment in Xtraction Services is included in “Other assets” on the Company’s condensed consolidated balance sheet. Net Loss Per Share The Company computes earnings per share under Accounting Standards Codification (“ASC”) Topic 260, Earnings per Share (“ASC 260”). Basic net loss per common share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per 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 three and six months ended February 29, 2020, basic and diluted weighted average shares are the same, as the Company generated a net loss for the period. The computation for the three and six months ended February 29, 2020 does not include 14,553 options and 21,737 warrants, as their inclusion would have an anti-dilutive effect on net loss per share. For the three and six months ended February 28, 2019, net loss is adjusted for changes in fair value of warrants recorded as a liability (see Note 9 below) and weighted average diluted shares includes dilutive warrants. The computation of diluted net loss per share for the three and six months ended February 28, 2019 does not include 12,003 options and 6,988 warrants, as their inclusion would have an anti-dilutive effect on net loss per share. Revenue Recognition The Company markets and sells a wide variety of ancillary products and services to customers operating in the regulated medical and recreational cannabis and CBD industries. These complementary products and services include compliant and custom packaging products; vape hardware; hydrocarbons and solvents; natural products; stainless steel tanks; custom branded anti-counterfeit and authentication labels; hemp trading services; and retail services focused on CBD mass distribution, industry education and compliance. In accordance with ASC 606, Revenue from Contracts with Customers , 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. · Identify the performance obligations in the contract. · Determine the transaction price. · Allocate the transaction price to the performance obligations in the contract. · Recognize revenue when the Company satisfies a performance obligation. Advertising The Company conducts advertising for the promotion of its products and services. In accordance with ASC subtopic 720-35-25 (“ASC 720”), advertising costs are charged to expense when incurred. Advertising costs were $96 and $285 for the three months ended February 29, 2020 and February 28, 2019, respectively. Advertising costs were $178 and $778 for the six months ended February 29, 2020 and February 28, 2019, respectively. Recently Issued Accounting Pronouncements In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-13, Changes to Disclosure Requirements for Fair Value Measurements , which will improve the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The ASU removes, modifies, and adds certain disclosure requirements and is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is evaluating the potential impact of adoption of this standard on its consolidated financial statements. In December 2019, the FASB Issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting of Income Taxes", which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating this guidance to determine its impact it may have on its financial statements. In January 2020, the FASB issued ASU 2020-01, “Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815.” The ASU is based on a consensus of the Emerging Issues Task Force and is expected to increase comparability in accounting for these transactions. ASU 2016-01 made targeted improvements to accounting for financial instruments, including providing an entity the ability to measure certain equity securities without a readily determinable fair value at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Among other topics, the amendments clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting. For public business entities, the amendments in the ASU are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company is evaluating the potential impact of adoption of this standard on its consolidated financial statements. Other accounting standards that have been issued or proposed by the FASB that do not require adoption until a future date are not expected to have a material impact on the condensed consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.

CONCENTRATIONS OF RISK

CONCENTRATIONS OF RISK	6 Months Ended
	Feb. 29, 2020
CONCENTRATIONS OF RISK
CONCENTRATIONS OF RISK	NOTE 2 - CONCENTRATIONS OF RISK Supplier Concentrations The Company purchases inventory from various suppliers and manufacturers. For the six months ended February 29, 2020 and February 28, 2019, the Company had one vendor which accounted for approximately 33% and 37%, respectively, of total inventory purchases. As of February 29, 2020, there were two vendors in the aggregate that represented approximately 26% of accounts payable. As of February 28, 2019, there was one vendor that represented approximately 10% of accounts payable. Customer Concentrations During the six months ended February 29, 2020, no customer represented over 10% of the Company’s revenue. For the six months ended February 28, 2019, the Company had one customer that represented approximately 10% of the Company’s revenues. As of February 29, 2020, there were four customers in the aggregate that represented approximately 70% of accounts receivable. As of February 28, 2019, there was one customer that represented 21% of accounts receivable.

RELATED-PARTY TRANSACTIONS

RELATED-PARTY TRANSACTIONS	6 Months Ended
	Feb. 29, 2020
RELATED-PARTY TRANSACTIONS
RELATED-PARTY TRANSACTIONS	NOTE 3 – RELATED-PARTY TRANSACTIONS The Company sells certain products and supplies to two related parties. Sales recognized during the three months ended February 29, 2020 and February 28, 2019 from the related parties totaled $320 and $49, respectively. Sales recognized during the six months ended February 29, 2020 and February 28, 2019 from the related parties totaled $1,186 and $59, respectively. Total accounts receivable from related parties was $1,207 and $465 as of February 29, 2020 and August 31, 2019, respectively. Further, the Company rents certain warehouse equipment from a related party. During the three months ended February 29, 2020 and February 28, 2019, total purchases of $74 and $94, respectively, were made from the related party. During the six months ended February 29, 2020 and February 28, 2019, total purchases of $231 and $98, respectively, were made from the related party.

PROPERTY AND EQUIPMENT

PROPERTY AND EQUIPMENT	6 Months Ended
	Feb. 29, 2020
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT	NOTE 4 - PROPERTY AND EQUIPMENT The major classes of fixed assets consist of the following: February 29, August 31, 2020 2019 Machinery and equipment $ 5,352 $ 4,430 Vehicles 540 603 Office Equipment 3,253 3,232 Leasehold improvements 1,589 3,296 Construction in progress 1,054 1,930 11,784 13,491 Accumulated Depreciation (2,394) (2,437) $ 9,390 $ 11,054 Depreciation expense was $834 and $303 for the three months ended February 29, 2020 and February 28, 2019, respectively. Depreciation expense was $1,559 and $568 for the six months ended February 29, 2020 and February 28, 2019, respectively.

INTANGIBLE ASSETS

INTANGIBLE ASSETS	6 Months Ended
	Feb. 29, 2020
INTANGIBLE ASSETS
INTANGIBLE ASSETS	NOTE 5 - INTANGIBLE ASSETS Intangible assets consist of the following: Weighted Average As of February 29, 2020 As of August 31, 2019 Estimated Gross Gross Useful Carrying Accumulated Net Carrying Accumulated Net Description Life Value Amortization Amount Value Amortization Amount Trade name 6 years 2,600 (1,228) 1,372 2,600 (1,011) 1,589 Non-compete agreement 4 years 2,370 (1,112) 1,258 2,370 (856) 1,514 $ 4,970 $ (2,340) $ 2,630 $ 4,970 $ (1,867) $ 3,103 Amortization expense was $236 and $245 for the three months ended February 29, 2020 and February 28, 2019, respectively. Amortization expense was $473 and $510 for the six months ended February 29, 2020 and February 28, 2019, respectively. The following table summarizes the remaining estimated amortization of definite-lived intangible assets as of February 29, 2020: For the year ended August 31, 2020 (remaining six months) $ 474 2021 881 2022 747 2023 528 $ 2,630

ACCRUED EXPENSES AND OTHER CURR

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES	6 Months Ended
	Feb. 29, 2020
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES	NOTE 6 - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities consist of the following: February 29, August 31, 2020 2019 Customer deposits $ 3,812 $ 2,992 Accrued compensation 3,742 3,485 Sales tax payable 757 1,047 Lease liability 1,952 — Other accrued expenses 5,475 1,936 $ 15,738 $ 9,460

LEASES

LEASES	6 Months Ended
	Feb. 29, 2020
LEASES
LEASES	NOTE 7 – LEASES The Company adopted ASC 842 “Leases” (“ASC 842”) effective September 1, 2019 utilizing the modified retrospective approach for adoption for all leases that existed at or are commenced after the date of initial application with an option to use certain practical expedients. The package of practical expedients allowed the Company to not reassess: (i) whether any expired or existing contracts are or contain leases, (ii) lease classification for any expired or existing leases, and (iii) initial direct costs for any expired or existing leases. The Company also used (i) hindsight when evaluating contractual lease options, (ii) the practical expedient that allows lessees to treat lease and non-lease components of leases as a single lease component, (iii) the portfolio approach which allows similar leased assets to be grouped and accounted for together, and (iv) the short-term lease for leases with a term of 12 months or less. The adoption of ASC 842 had a material impact on the condensed consolidated balance sheet due to the recognition of Right of Use (“ROU”) assets and lease liabilities. The adoption of this ASC did not have a material impact on the consolidated statement of operations or the consolidated statement of cash flows. The Company did not recognize a material cumulative effect adjustment to the opening balance sheet retained earnings on September 1, 2019. Because the modified retrospective approach was elected, the ASU was not applied to periods prior to adoption and did not have an impact on previously reported results. At adoption, the Company recognized operating lease ROU assets and lease liabilities that reflect the present value of the future payments. As the rate implicit in the lease could not be determined for any of the Company’s leases, an estimated incremental borrowing rate of 10.7%, which reflects the interest rate the Company would pay to borrow funds over a similar term and in a similar economic environment, was used to determine the present value of lease payments. Based on the impact of ASC 842 on the lease population, the Company recorded $7.6 million in lease liabilities and $6.8 million for ROU assets based upon the lease liabilities adjusted for deferred rent. ROU assets are included in “Other assets” and lease liabilities are included in “Accrued expenses and other current liabilities” and “Other non-current liabilities” on the Company’s condensed consolidated balance sheet. The Company determines if an arrangement is a lease at inception. The Company leases its facilities and certain office equipment under operating leases which expire on various dates through 2026. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. When readily determinable, the Company uses the implicit rate in determining the present value of lease payments. The ROU asset also includes any fixed lease payments, including in-substance fixed lease payments and excludes lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Lease term is determined at lease commencement and includes any non-cancellable period for which the Company has the right to use the underlying asset, together with any options to extend that the Company is reasonably certain to exercise. Lease Liabilities Lease liabilities as of February 29, 2020 consist of the following: Current portion of lease liabilities $ 1,952 Long term lease liabilities, net of current portion 5,766 Total lease liabilities $ 7,718 Aggregate lease maturities as of February 29, 2020 are as follows: Year ended August 31, 2020 (remaining six months) $ 1,245 2021 2,383 2022 2,306 2023 1,676 2024 787 Thereafter 579 Total minimum lease payments 8,976 Less imputed interest (1,258) Total lease liabilities $ 7,718 Rent expense was $768 and $1,690, respectively, for the three and six months ended February 29, 2020. At February 29, 2020, the leases had a weighted average remaining lease term of 3.9 years and a weighted average discount rate of 9.6%. Rent expense for the three and six months ended February 28, 2019 was $732 and $1,506, respectively, under ASC 840, the predecessor to ASC 842.

DEBT

DEBT	6 Months Ended
	Feb. 29, 2020
DEBT
DEBT	NOTE 8 – DEBT Monroe Revolving Credit Facility On August 21, 2019, the Company and its subsidiaries (collectively, the “Borrowers”) entered into a secured asset based Revolving Credit Facility (the “Monroe Revolving Credit Facility”), with an aggregate amount not to exceed $35.0 million outstanding at any time, with Monroe Capital Management Advisors, LLC (“Monroe”), as collateral agent and administrative agent, and the various lenders party thereto. The Monroe Revolving Credit Facility also includes an accordion feature that permits the Company to increase the available revolving commitments under the Monroe Revolving Credit Facility by up to an additional $15.0 million, subject to satisfaction of certain conditions. The Monroe Revolving Credit Facility has a 5-year term which matures 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 contains customary representations and warranties, affirmative and negative covenants, including a financial covenant requiring certain minimum availability, and events of default. As of February 29, 2020, there was no balance outstanding on the facility. As of August 31, 2019, the outstanding balance on the facility was $12.3 million. 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 February 29, 2020, unamortized debt issuance costs of $2,347 is included in “Other assets.” Interest expense and amortization of debt discount, associated with the Monroe Revolving Credit Facility during the three months ended February 29, 2020 amounted to $159 and $154, respectively. Interest expense and amortization of debt discount, associated with the Monroe Revolving Credit Facility during the six months ended February 29, 2020 amounted to $455 and $308, respectively. Monroe Warrants On August 21, 2019, the Company entered into a Subscription Agreement with Monroe, pursuant to which the Company issued to Monroe a Warrant to purchase up to 500 shares of its common stock (the “Monroe Warrant”) 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. Amortization expense for the three and six months ended February 29, 2020 was $50 and $99, respectively. 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 issued and sold a senior note (the “Original Note”) to the Investor 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 was a senior unsecured obligation, and unless earlier redeemed, was scheduled to mature on October 30, 2020. The Original Note did 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 to 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 shares of its common stock at an exercise price of $4.25. The warrant has an expiration date of August 21, 2024 and has not been exercised as of February 29, 2020. As of August 21, 2019, the warrants were reclassified from a derivative liability to equity with a corresponding adjustment to additional paid-in capital. 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 the Company amended the New Senior Note (as amended, 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 and the aggregate principal amount of the Amended Senior Note was increased to approximately $24.0 million and the original issue discount was increased 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.

WARRANT LIABILITY

WARRANT LIABILITY	6 Months Ended
	Feb. 29, 2020
WARRANT LIABILITY
WARRANT LIABILITY	NOTE 9 - WARRANT LIABILITY In June 2018, the Company issued warrants to purchase 3,750 shares of its common stock to investors in a registered direct offering. The warrants have a term of five years from the date of issuance. 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. The estimated fair value of the outstanding warrant liabilities was $849 and $5,444 as of February 29, 2020 and August 31, 2019, respectively. Increases or decreases in fair value of the warrant liability are included as a component of “Other expense” in the accompanying condensed consolidated statements of operations for the respective period. The changes to the liability for warrants resulted in a decrease of $1,390 and $4,595 in warrant liability and a corresponding gain for the three and six months ended February 29, 2020, respectively. The changes to the liability for warrants resulted in a decrease of $1,271 and $1,055 in warrant liability and a corresponding gain for the three and six months ended February 28, 2019, respectively. The estimated fair value of the warrants was computed as of February 29, 2020 using the Black Scholes model with the following assumptions: stock price of $1.07, volatility of 83.1%, risk-free rate of 0.86%, annual dividend yield of 0% and expected life of 3.3 years.

FAIR VALUE OF FINANCIAL INSTRUM

FAIR VALUE OF FINANCIAL INSTRUMENTS	6 Months Ended
	Feb. 29, 2020
FAIR VALUE OF FINANCIAL INSTRUMENTS
FAIR VALUE OF FINANCIAL INSTRUMENTS	NOTE 10 - 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”). 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 and capital lease obligations 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 Company accounts for its investment in Smoke Cartel, Inc. (“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. The fair value of the Company’s investment as of August 31, 2019 and February 29, 2020 was based upon the closing stock price of Smoke Cartel. The investment was classified as a Level 2 financial instrument. The Company accounts for its investment in Xtraction Services at fair value. The fair value of the Company’s investment at February 29, 2020 was based upon the closing stock price of Xtraction Services. The investment was classified as a Level 1 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 9 above.) The estimated fair value of the liability is recorded using significant unobservable measures and other fair value inputs and is therefore classified as a Level 3 financial instrument. 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 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 February 29, 2020 Total Level 1 Level 2 Level 3 Assets: Equity investment $ 2,028 $ 1,923 $ 105 $ — Liabilities: Warrant liability $ 849 $ — $ — $ 849 Fair Value at August 31, 2019 Total Level 1 Level 2 Level 3 Assets: Equity investment $ 592 $ — $ 592 $ — Liabilities: Warrant liability $ 5,444 $ — $ — $ 5,444 The following table reflects the activity for the Company’s warrant liability for the June 2018 registered offering measured at fair value using Level 3 inputs: Warrant Liability As of August 31, 2019 $ 5,444 Adjustments to estimated fair value (3,204) As of November 30, 2019 $ 2,240 Adjustments to estimated fair value (1,391) As of February 29, 2020 $ 849 Warrant Liability As of August 31, 2018 $ 14,430 Adjustments to estimated fair value 216 As of November 30, 2018 $ 14,646 Adjustments to estimated fair value (1,271) As of February 28, 2019 $ 13,375 The following table reflects the activity for the Company’s contingent acquisition liabilities measured at fair value using Level 3 inputs: Contingent Consideration Payable As of August 31, 2018 $ 5,488 Change in fair value 394 As of November 30, 2018 $ 5,882 Change in fair value (5,602) Cash payments (140) Settled in shares- Hybrid (140) As of February 28, 2019 $ —

STOCKHOLDERS' EQUITY

STOCKHOLDERS' EQUITY	6 Months Ended
	Feb. 29, 2020
STOCKHOLDERS' EQUITY.
STOCKHOLDERS' EQUITY	NOTE 11 - STOCKHOLDERS' EQUITY Preferred Stock The Company’s authorized preferred stock is 10,000 shares with a par value of $0.001. As of February 29, 2020, and August 31, 2019, there were no shares of preferred stock issued or outstanding. Common Stock The Company’s authorized common stock is 265,000 shares with a par value of $0.001. As of February 29, 2020, and August 31, 2019, there were 119,118 and 90,041 shares issued and outstanding, respectively. On September 26, 2019, the Company entered into purchase agreements with certain 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 and a warrant to purchase half a share of common stock 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 $27.4 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. On February 6, 2020, the Company entered into purchase agreements with certain accredited investors pursuant to which the Company issued and sold an aggregate of 10,000 units, with each unit consisting of one share of its common stock and a warrant to purchase half a share of common stock in a registered direct offering (the “February 2020 Offering”). The purchase price for a unit was $1.60. The closing of the February 2020 Offering occurred on February 10, 2020 and resulted in aggregate gross proceeds of approximately $16.0 million. The aggregate net proceeds from the February 2020 Offering, after deducting the placement agent fees and other offering expenses, was approximately $14.6 million. Subject to certain ownership limitations, the warrants were immediately exercisable at an exercise price equal to $2.00 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-based compensation expense of $3,427 and $4,725 for the three months ended February 29, 2020 and February 28, 2019, respectively, and $8,089 and $6,534 for the six months ended February 29, 2020 and February 28, 2019, respectively, in connection with the issuance of shares of common stock and options to purchase common stock. Stock-based compensation expense is included in selling, general and administrative expense in the Condensed Consolidated Statements of Operations. On September 1, 2019, the Company adopted Accounting Standards Update 2018-07 which addresses several aspects of the accounting for nonemployee share-based payment transactions and expands the scope of ASC 718, Compensation , to include share-based payment transactions for acquiring goods and services from nonemployees. Under the simplified standard, nonemployee options will be valued once at the date of grant. At adoption, all awards without established measurement dates were revalued one final time and did not have a material impact on the condensed consolidated financial statements. Stock Incentive Plan The Company’s 2016 Stock Incentive Plan (the “Plan”) was adopted on February 9, 2016. The Plan authorizes the issuance of up to 18,000 shares of common stock in the form of stock-based awards to the Company’s employees and directors. 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 common stock at the date of grant and have 10-year contractual terms. The option awards generally vest over three years subject to the recipient’s continuous service. 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 six months ended February 29, 2020 and February 28, 2019: Six Months Ended February 29, February 28, 2020 2019 Expected term in years 5.3 - 5.9 3.0 Expected volatility 64% - 87% 72% - 87% Risk-free interest rate 1.4% - 1.7% 2.4% - 3.0% Expected dividend yield 0.0% 0.0% 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. The following table summarizes the stock option activity during the six months ended February 29, 2020: Weighted Weighted Average Average Remaining Aggregate Stock Exercise Contractual Intrinsic Options Price Term (years) Value Balance Outstanding, August 31, 2019 14,761 $ 4.89 $ 3,192 Granted 2,867 2.50 Exercised (9) 2.06 $ 14 Forfeited (3,066) 4.79 Balance Outstanding, February 29, 2020 14,553 $ 4.44 8.6 $ 6 Vested and expected to vest at February 29, 2020 12,831 4.45 8.6 $ 6 Exercisable, February 29, 2020 6,728 $ 4.47 8.2 $ 6 Stock compensation expense related to stock options was $5,845 and $3,452 for the six months ended February 29, 2020 and February 28, 2019, respectively. The weighted-average grant-date fair value of options granted during the six months ended February 29, 2020 and February 28, 2019, was $1.48 and $3.07, respectively. As of February 29, 2020, there was $19,565 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 2.0 years. Restricted Stock and Restricted Stock Units During the six months ended February 29, 2020, the Company awarded 180 shares of restricted stock to consultants in exchange for $296 of services rendered. During the six months ended February 28, 2019, the Company issued 130 shares of restricted stock to consultants in exchange for $33 of services rendered and $738 of prepaid services, for a total of $771. The prepaid services are included in prepaid expenses on the condensed consolidated balance sheet as of February 28, 2019. Stock-based compensation expense related to restricted stock awards was $2,206 and $2,720, respectively, for the six months ended February 29, 2020 and February 28, 2019. During the six months ended February 29, 2020, the Company awarded 174 shares of restricted stock units to directors for serving on the board of directors. As of February 29, 2020, $824 of total unrecognized compensation cost related to restricted stock units is expected to be recognized over a weighted average period of 1.3 years.

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES	6 Months Ended
	Feb. 29, 2020
COMMITMENTS AND CONTINGENCIES.
COMMITMENTS AND CONTINGENCIES	NOTE 12 - COMMITMENTS AND CONTINGENCIES 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 February 29, 2020. Litigation The Company may be subject to legal proceedings and claims that 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 fiscal 2019, lawsuits were filed in California federal and state court by various purported shareholders against, the Company, each of the current members of the Company’s Board of Directors, and certain of the Company’s 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 the 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, as amended (the “Exchange Act”) 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 September 2019, the Court appointed co-lead plaintiffs and co-lead counsel for the plaintiffs. The lead plaintiffs’ amended complaint was filed in November 2019. In February 2020, the Company moved to dismiss the amended complaint. 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. In December 2019, the Court ordered a stay of this action pursuant to a stipulation of the parties. Savage v. 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.

RESTRUCTURING CHARGES

RESTRUCTURING CHARGES	6 Months Ended
	Feb. 29, 2020
RESTRUCTURING CHARGES
RESTRUCTURING CHARGES	NOTE 13 – RESTRUCTURING CHARGES During the second quarter of fiscal 2020, the Company adopted a comprehensive strategic plan (the “2020 Plan”) to more effectively execute the Company’s strategy of focusing its resources on more established, financially stable, and creditworthy customers (namely multi-state operators, licensed producers, and leading brands). In connection with the 2020 Plan, the Company began implementing a restructuring process that seeks to rationalize all aspects of its operations by, among other things, significantly reducing its overhead, implementing tighter expense controls, consolidating its warehouses, reducing its inventory, and drastically altering its sales strategy to focus more on these customers. The Company believes that this strategic shift and associated restructuring should result in a better forecast of demand, reduction of inventory and warehouse space, improved collections and cash flow, and potential revenue upside from these customers’ continued expansion and consolidation in the marketplace. The Company has completed, or is in the process of completing, the following restructuring activities in connection with the 2020 Plan: · Severance: The Company is in the process of implementing a more efficient and automated approach to serve a smaller more targeted group of customers, which will require substantially fewer dedicated sales representatives, project managers, warehouse personnel, and other related personnel. As part of this process, the Company determined that certain positions at the Company were no longer essential to the execution of the Company’s strategy going forward. As a result, the Company underwent reductions in force to right-size and better align its workforce with this new strategy. During the second quarter of fiscal 2020, the Company terminated 28 employees, and incurred $379 in severance-related restructuring costs. In March 2020, the Company terminated 49 employees, and incurred $400 in severance-related restructuring costs. · Facility-Related Lease Termination Costs: As a result of the Company’s decision to discontinue nearly all of its stock inventory, the Company determined that it no longer needs the vast majority of its current warehouse space, and is currently in the process of negotiating with its landlords to terminate and exit the impacted warehouses. In March 2020, the Company vacated its Las Vegas, Nevada facility, and is planning to vacate additional facilities throughout the remainder of fiscal 2020 in order to consolidate its warehouse footprint. Asset Impairment: With the Company’s planned facility closures, the Company has determined that the fair value of its fixed assets at these closing facilities is now below their carrying value, and that an impairment has occurred. The Company also determined that its product molds and tooling are no longer necessary assets, given its shift to focus exclusively on custom and best-selling stock inventory, creating an additional need for impairment. As a result, the Company recognized a total impairment charge related of approximately $3.9 million related to these fixed assets during the second quarter of its fiscal 2020. In addition, because of the Company’s decision to consolidate its warehouses, the Company determined that it will incur impairment charges to its right-of-use (“ROU”) assets. Based on internal calculations, the Company recognized impairment charges related to these assets of $3.0 million during the second quarter of its fiscal 2020. The Company expects to incur a total of $11.1 million in restructuring charges upon the completion of the plan, which represents the Company’s best estimate as of February 29, 2020. The 2020 Plan is expected to be completed by the end of fiscal 2020. The recognition of restructuring charges requires that the Company make certain judgments and estimates regarding the nature, timing and amount of costs associated with the planned reductions of workforce and facility, ROU and asset impairment costs. At the end of each reporting period, the Company will evaluate the remaining accrued balance to ensure that no excess accruals are retained, and the utilization of the provisions are for their intended purpose in accordance with developed plans. The following table reflects the movement of activity of the restructuring reserve for the three months ended February 29, 2020: Severance related Facility, ROU and costs asset impairment Total Balance at December 1, 2019 $ — $ — $ — Provisions/Additions 400 6,901 7,301 Utilized/Paid (400) (6,901) (7,301) Balance at February 29, 2020 $ — $ — $ — Expenses incurred under the 2020 Plan during the three and six months ended February 29, 2020 are included within “Restructuring costs” in the Condensed Consolidated Statements of Operations.

NATURE OF BUSINESS AND SIGNIF_2

NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Policies)	6 Months Ended
	Feb. 29, 2020
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Business	Nature of Business KushCo Holdings, Inc. (formerly known as Kush Bottles, Inc.) markets and sells a wide variety of ancillary products and services to customers operating in the regulated medical and recreational cannabis and cannabidiol (“CBD”) industries. These complementary products and services include compliant and custom packaging products; vape hardware; hydrocarbons and solvents; natural products; stainless steel tanks; custom branded anti-counterfeit and authentication labels; hemp trading services; and retail services focused on CBD mass distribution, industry education and compliance. As a leader in custom and child-resistant packaging, exclusive vape products, and unique product and service offerings, such as our stainless steel tanks, custom branded anti-counterfeit and authentication labels, and hemp trading and retail services, we combine creativity with compliance to provide the right solutions for our customers. The ability to source and deliver almost anything a customer needs makes us a one-stop-shop solutions provider. Our products primarily consist of bottles, jars, bags, tubes, containers, vape cartridges, vape batteries and accessories, labels and processing supplies, hydrocarbons, solvents, natural products, stainless steel tanks, and custom branded anti-counterfeit and authentication labels. We maintain relationships with a broad range of manufacturers, which enables us to source a plethora of products in a cost-effective manner and to pass such cost savings to our customers. This allows us to offer quick solutions to our customers and ensure that their products will be of superior grade and made with environmentally safe materials. In addition to a complete product line, we have sophisticated labeling and customization capabilities, which allow us to add significant value to our customers’ packaging design processes. Our products are utilized by local urban farmers, green house growers, processors, brand owners, and medical and recreational cannabis dispensaries. Our services consist of hemp trading, which connects buyers and sellers of hemp commodities, as well as CBD mass distribution services through our internal resources and our partnerships with leading consumer packaged goods (“CPG”) sales agencies. Our retail services division focuses on building distribution networks of compliant hemp-derived CBD brands across conventional and other retail channels, including industry education and compliance initiatives. Our services also include custom branding on packaging products, which allows our customers to turn their packaging into an effective marketing tool.
Basis of Presentation	Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the activity of the Company and its wholly-owned subsidiaries and have been prepared in accordance with GAAP for interim financial information pursuant to Securities and Exchange Commission (“SEC”) rules and regulations. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for annual financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included in the condensed consolidated financial statements for the interim periods presented herein, but are not necessarily indicative of operating results to be achieved for full fiscal years or other interim periods. The condensed consolidated balance sheet as of August 31, 2019 was derived from the audited financial statements as of that date but does not include all disclosures as required by GAAP. These condensed consolidated financial statements and notes should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes for the fiscal year ended August 31, 2019 and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year then ended and filed with the SEC on November 12, 2019. References to amounts in these notes to condensed consolidated financial statements are in thousands, except per share amounts, unless otherwise specified.
Use of Estimates	Use of Estimates The preparation of financial statements in conformity with 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 condensed consolidated financial statements include revenue recognition, accounts receivable reserves, inventory and related reserves, 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 with a focus on serving the cannabis and CBD industries, including, the development of certain products, competition, a limited number of suppliers, integration of acquisitions, substantial indebtedness, disruptions in the U.S. and global economy and financial markets, including as a result of COVID-19, government regulations, protection of proprietary rights, and dependence on key individuals. If the Company does not successfully generate additional products and services, or if such products and services are developed but not successfully commercialized, the Company could lose revenue opportunities.
Accounts Receivable	Accounts Receivable Trade accounts receivable are carried at their estimated collectible amounts. Trade credit is generally extended on a short-term basis; thus, trade receivables do not bear interest. Trade accounts receivables are periodically evaluated for collectability based on past credit history and their current financial condition. The Company’s allowance for doubtful accounts was $8,342 and $1,058 as of February 29, 2020 and August 31, 2019, respectively. The increase in allowance for doubtful accounts was driven primarily by the deteriorating credit conditions in California exhibited by the Company's customers in this market, which have significantly impacted the Company's ability to collect, in part or in full, amounts owed by these customers. The Company’s sales return reserve was $593 and $477 as of February 29, 2020 and August 31, 2019, respectively, and is included in “Accounts receivable, net” on the Company’s condensed consolidated balance sheet.
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 $26,423 and $43,768 as of February 29, 2020 and August 31, 2019, respectively. The Company also makes prepayments against the future delivery of inventory classified as prepaid inventory. The Company’s prepaid inventory was $7,473 and $7,134 as of February 29, 2020 and August 31, 2019, respectively.
Equity Investment in Xtraction Services	Equity Investment in Xtraction Services On January 30, 2020, the Company partnered with Xtraction Services Holding Corp (“Xtraction Services”), a provider of equipment leasing solutions to owners and operators of cannabis and hemp companies in the United States in order to provide such solutions to the Company’s network of compliant cannabis and CBD operators. Under the terms of its agreement with Xtraction Services, the Company received 19.9% of the outstanding equity interests of Xtraction Services, on an as-converted basis, in the form of Proportionate Voting Shares (the “XS Shares”). Upon the closing of the transaction, the Company issued 1,653 of its common shares in exchange for 10,600 XS shares of Xtraction Services, the equivalent of 19.9% of Xtraction Services market capitalization on the closing date. On January 30, 2020, the value of shares issued in exchange for equity investment in Xtraction Services was $2,528. The Company’s investment in Xtraction Services is included in “Other assets” on the Company’s condensed consolidated balance sheet.
Net Loss Per Share	Net Loss Per Share The Company computes earnings per share under Accounting Standards Codification (“ASC”) Topic 260, Earnings per Share (“ASC 260”). Basic net loss per common share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per 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 three and six months ended February 29, 2020, basic and diluted weighted average shares are the same, as the Company generated a net loss for the period. The computation for the three and six months ended February 29, 2020 does not include 14,553 options and 21,737 warrants, as their inclusion would have an anti-dilutive effect on net loss per share. For the three and six months ended February 28, 2019, net loss is adjusted for changes in fair value of warrants recorded as a liability (see Note 9 below) and weighted average diluted shares includes dilutive warrants. The computation of diluted net loss per share for the three and six months ended February 28, 2019 does not include 12,003 options and 6,988 warrants, as their inclusion would have an anti-dilutive effect on net loss per share.
Revenue Recognition	Revenue Recognition The Company markets and sells a wide variety of ancillary products and services to customers operating in the regulated medical and recreational cannabis and CBD industries. These complementary products and services include compliant and custom packaging products; vape hardware; hydrocarbons and solvents; natural products; stainless steel tanks; custom branded anti-counterfeit and authentication labels; hemp trading services; and retail services focused on CBD mass distribution, industry education and compliance. In accordance with ASC 606, Revenue from Contracts with Customers , 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. · Identify the performance obligations in the contract. · Determine the transaction price. · Allocate the transaction price to the performance obligations in the contract. · Recognize revenue when the Company satisfies a performance obligation.
Advertising	Advertising The Company conducts advertising for the promotion of its products and services. In accordance with ASC subtopic 720-35-25 (“ASC 720”), advertising costs are charged to expense when incurred. Advertising costs were $96 and $285 for the three months ended February 29, 2020 and February 28, 2019, respectively. Advertising costs were $178 and $778 for the six months ended February 29, 2020 and February 28, 2019, respectively.
Recently Issued Accounting Pronouncements	Recently Issued Accounting Pronouncements In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-13, Changes to Disclosure Requirements for Fair Value Measurements , which will improve the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The ASU removes, modifies, and adds certain disclosure requirements and is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is evaluating the potential impact of adoption of this standard on its consolidated financial statements. In December 2019, the FASB Issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting of Income Taxes", which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating this guidance to determine its impact it may have on its financial statements. In January 2020, the FASB issued ASU 2020-01, “Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815.” The ASU is based on a consensus of the Emerging Issues Task Force and is expected to increase comparability in accounting for these transactions. ASU 2016-01 made targeted improvements to accounting for financial instruments, including providing an entity the ability to measure certain equity securities without a readily determinable fair value at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Among other topics, the amendments clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting. For public business entities, the amendments in the ASU are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company is evaluating the potential impact of adoption of this standard on its consolidated financial statements. Other accounting standards that have been issued or proposed by the FASB that do not require adoption until a future date are not expected to have a material impact on the condensed consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.

PROPERTY AND EQUIPMENT (Tables)

PROPERTY AND EQUIPMENT (Tables)	6 Months Ended
	Feb. 29, 2020
PROPERTY AND EQUIPMENT
Schedule of property and equipment	The major classes of fixed assets consist of the following: February 29, August 31, 2020 2019 Machinery and equipment $ 5,352 $ 4,430 Vehicles 540 603 Office Equipment 3,253 3,232 Leasehold improvements 1,589 3,296 Construction in progress 1,054 1,930 11,784 13,491 Accumulated Depreciation (2,394) (2,437) $ 9,390 $ 11,054

INTANGIBLE ASSETS (Tables)

INTANGIBLE ASSETS (Tables)	6 Months Ended
	Feb. 29, 2020
INTANGIBLE ASSETS
Schedule of Intangible assets	Weighted Average As of February 29, 2020 As of August 31, 2019 Estimated Gross Gross Useful Carrying Accumulated Net Carrying Accumulated Net Description Life Value Amortization Amount Value Amortization Amount Trade name 6 years 2,600 (1,228) 1,372 2,600 (1,011) 1,589 Non-compete agreement 4 years 2,370 (1,112) 1,258 2,370 (856) 1,514 $ 4,970 $ (2,340) $ 2,630 $ 4,970 $ (1,867) $ 3,103
Schedule of remaining estimated amortization of definite-lived intangible assets	The following table summarizes the remaining estimated amortization of definite-lived intangible assets as of February 29, 2020: For the year ended August 31, 2020 (remaining six months) $ 474 2021 881 2022 747 2023 528 $ 2,630

ACCRUED EXPENSES AND OTHER CU_2

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables)	6 Months Ended
	Feb. 29, 2020
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Schedule of accrued expenses and other current liabilities	February 29, August 31, 2020 2019 Customer deposits $ 3,812 $ 2,992 Accrued compensation 3,742 3,485 Sales tax payable 757 1,047 Lease liability 1,952 — Other accrued expenses 5,475 1,936 $ 15,738 $ 9,460

LEASES (Tables)

LEASES (Tables)	6 Months Ended
	Feb. 29, 2020
LEASES
Summary of lease liabilities	Current portion of lease liabilities $ 1,952 Long term lease liabilities, net of current portion 5,766 Total lease liabilities $ 7,718
Summary of aggregate lease maturities	Year ended August 31, 2020 (remaining six months) $ 1,245 2021 2,383 2022 2,306 2023 1,676 2024 787 Thereafter 579 Total minimum lease payments 8,976 Less imputed interest (1,258) Total lease liabilities $ 7,718

FAIR VALUE OF FINANCIAL INSTR_2

FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)	6 Months Ended
	Feb. 29, 2020
FAIR VALUE OF FINANCIAL INSTRUMENTS
Schedule of fair value of financial instruments	Fair Value at February 29, 2020 Total Level 1 Level 2 Level 3 Assets: Equity investment $ 2,028 $ 1,923 $ 105 $ — Liabilities: Warrant liability $ 849 $ — $ — $ 849 Fair Value at August 31, 2019 Total Level 1 Level 2 Level 3 Assets: Equity investment $ 592 $ — $ 592 $ — Liabilities: Warrant liability $ 5,444 $ — $ — $ 5,444
Schedule of fair value warrant liability	Warrant Liability As of August 31, 2019 $ 5,444 Adjustments to estimated fair value (3,204) As of November 30, 2019 $ 2,240 Adjustments to estimated fair value (1,391) As of February 29, 2020 $ 849 Warrant Liability As of August 31, 2018 $ 14,430 Adjustments to estimated fair value 216 As of November 30, 2018 $ 14,646 Adjustments to estimated fair value (1,271) As of February 28, 2019 $ 13,375
Schedule of fair value contingent acquisition liabilities	Contingent Consideration Payable As of August 31, 2018 $ 5,488 Change in fair value 394 As of November 30, 2018 $ 5,882 Change in fair value (5,602) Cash payments (140) Settled in shares- Hybrid (140) As of February 28, 2019 $ —

STOCKHOLDERS' EQUITY (Tables)

STOCKHOLDERS' EQUITY (Tables)	6 Months Ended
	Feb. 29, 2020
STOCKHOLDERS' EQUITY.
Schedule of assumptions used	Six Months Ended February 29, February 28, 2020 2019 Expected term in years 5.3 - 5.9 3.0 Expected volatility 64% - 87% 72% - 87% Risk-free interest rate 1.4% - 1.7% 2.4% - 3.0% Expected dividend yield 0.0% 0.0%
Schedule of stock option activity	Weighted Weighted Average Average Remaining Aggregate Stock Exercise Contractual Intrinsic Options Price Term (years) Value Balance Outstanding, August 31, 2019 14,761 $ 4.89 $ 3,192 Granted 2,867 2.50 Exercised (9) 2.06 $ 14 Forfeited (3,066) 4.79 Balance Outstanding, February 29, 2020 14,553 $ 4.44 8.6 $ 6 Vested and expected to vest at February 29, 2020 12,831 4.45 8.6 $ 6 Exercisable, February 29, 2020 6,728 $ 4.47 8.2 $ 6

RESTRUCTURING CHARGES (Tables)

RESTRUCTURING CHARGES (Tables)	6 Months Ended
	Feb. 29, 2020
RESTRUCTURING CHARGES
Schedule of movement of activity of the restructuring reserve	Severance related Facility, ROU and costs asset impairment Total Balance at December 1, 2019 $ — $ — $ — Provisions/Additions 400 6,901 7,301 Utilized/Paid (400) (6,901) (7,301) Balance at February 29, 2020 $ — $ — $ —

NATURE OF BUSINESS AND SIGNIF_3

NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) $ in Thousands	Jan. 30, 2020	Feb. 29, 2020	Feb. 28, 2019	Feb. 29, 2020	Feb. 28, 2019	Aug. 31, 2019
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Allowance for doubtful accounts		$ 8,342		$ 8,342		$ 1,058
Sales return reserve		593		593		477
Inventory finished goods		26,423		26,423		43,768
Prepaid inventory		7,473		7,473		$ 7,134
Inventory reserve		14,442		14,442
Shares issued in exchange for equity investment in Xtraction Services		2,528		2,528
Advertising costs		$ 96	$ 285	$ 178	$ 778
Common Stock
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Shares issued for exchange	1,653	1,653
Shares issued in exchange for equity investment in Xtraction Services		$ 2
Xtraction Services
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Percentage of equity interests received	19.90%
Shares exchanged for common stock	10,600
Shares issued in exchange for equity investment in Xtraction Services	$ 2,528
Options
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Exclusion of shares that have an anti-dilutive effect on net loss per share		14,553	12,003
Warrant
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Exclusion of shares that have an anti-dilutive effect on net loss per share				21,737	6,988

CONCENTRATIONS OF RISK (Details

CONCENTRATIONS OF RISK (Details)	6 Months Ended
	Feb. 29, 2020itemcustomer	Feb. 28, 2019itemcustomer
Purchase | Supplier Concentration Risk
Concentration Risk [Line Items]
Number of vendors | item	1	1
Concentration risk description	one vendor which accounted for approximately 33% and 37%, respectively, of total inventory purchases	one vendor which accounted for approximately 33% and 37%, respectively, of total inventory purchases
Concentration risk, percentage	33.00%	37.00%
Revenue | Customer Concentration Risk
Concentration Risk [Line Items]
Concentration risk, percentage	10.00%	10.00%
Number of customer | customer	0	1
Accounts Receivable | Customer Concentration Risk
Concentration Risk [Line Items]
Concentration risk, percentage	70.00%	21.00%
Number of customer | customer	4	1
Accounts Payable | Supplier Concentration Risk
Concentration Risk [Line Items]
Number of vendors | item	2	1
Concentration risk, percentage	26.00%	10.00%

RELATED PARTY TRANSACTIONS (Det

RELATED PARTY TRANSACTIONS (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Feb. 29, 2020	Feb. 28, 2019	Feb. 29, 2020	Feb. 28, 2019	Aug. 31, 2019
RELATED-PARTY TRANSACTIONS
Sales recognized from related parties	$ 320	$ 49	$ 1,186	$ 59
Total accounts receivable from related parties	1,207		1,207		$ 465
Total payments made to related party	$ 74	$ 94	$ 231	$ 98

PROPERTY AND EQUIPMENT (Details

PROPERTY AND EQUIPMENT (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Feb. 29, 2020	Feb. 28, 2019	Feb. 29, 2020	Feb. 28, 2019	Aug. 31, 2019
PROPERTY AND EQUIPMENT
Property and equipment, gross	$ 11,784		$ 11,784		$ 13,491
Accumulated Depreciation	(2,394)		(2,394)		(2,437)
Property and equipment, net	9,390		9,390		11,054
Depreciation expense	834	$ 303	1,559	$ 568
Machinery and equipment
PROPERTY AND EQUIPMENT
Property and equipment, gross	5,352		5,352		4,430
Vehicles
PROPERTY AND EQUIPMENT
Property and equipment, gross	540		540		603
Office Equipment
PROPERTY AND EQUIPMENT
Property and equipment, gross	3,253		3,253		3,232
Leasehold improvements
PROPERTY AND EQUIPMENT
Property and equipment, gross	1,589		1,589		3,296
Construction in progress
PROPERTY AND EQUIPMENT
Property and equipment, gross	$ 1,054		$ 1,054		$ 1,930

PROPERTY AND EQUIPMENT - Additi

PROPERTY AND EQUIPMENT - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Feb. 29, 2020	Feb. 28, 2019	Feb. 29, 2020	Feb. 28, 2019
PROPERTY AND EQUIPMENT
Depreciation expense	$ 834	$ 303	$ 1,559	$ 568

INTANGIBLE ASSETS - Intangible

INTANGIBLE ASSETS - Intangible assets (Details) - USD ($) $ in Thousands	6 Months Ended
	Feb. 29, 2020	Aug. 31, 2019
Acquired Finite-Lived Intangible Assets [Line Items]
Gross Carrying Value	$ 4,970	$ 4,970
Accumulated Amortization	(2,340)	(1,867)
Net Amount	$ 2,630	3,103
Trade name
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average estimated useful life	6 years
Gross Carrying Value	$ 2,600	2,600
Accumulated Amortization	(1,228)	(1,011)
Net Amount	$ 1,372	1,589
Non-compete agreement
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average estimated useful life	4 years
Gross Carrying Value	$ 2,370	2,370
Accumulated Amortization	(1,112)	(856)
Net Amount	$ 1,258	$ 1,514

INTANGIBLE ASSETS - Amortizatio

INTANGIBLE ASSETS - Amortization expense (Details) - USD ($) $ in Thousands	Feb. 29, 2020	Aug. 31, 2019
Year ended August 31,
2020 (remaining six months)	$ 474
2021	881
2022	747
2023	528
Net Amount	$ 2,630	$ 3,103

INTANGIBLE ASSETS - Additional

INTANGIBLE ASSETS - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Feb. 29, 2020	Feb. 28, 2019	Feb. 29, 2020	Feb. 28, 2019
INTANGIBLE ASSETS
Amortization expense	$ 236	$ 245	$ 473	$ 510

ACCRUED EXPENSES AND OTHER CU_3

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details) - USD ($) $ in Thousands	Feb. 29, 2020	Aug. 31, 2019
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Customer deposits	$ 3,812	$ 2,992
Accrued compensation	3,742	3,485
Sales tax payable	757	1,047
Lease liability	1,952	0
Other accrued expenses	5,475	1,936
Accrued expenses and other current liabilities	$ 15,738	$ 9,460

LEASES (Details)

LEASES (Details) - USD ($) $ in Thousands	Feb. 29, 2020	Feb. 28, 2019
Lessee, Lease, Description [Line Items]
Weighted average discount rate		9.60%
Lease liabilities	$ 7,718
ASU 2016-02 | Restatement
Lessee, Lease, Description [Line Items]
Weighted average discount rate	10.70%
Lease liabilities	$ 7,600
ROU assets	$ 6,800

LEASES - Lease liabilities (Det

LEASES - Lease liabilities (Details) $ in Thousands	Feb. 29, 2020USD ($)
Lease Liabilities
Current portion of lease liabilities	$ 1,952
Long term lease liabilities, net of current portion	5,766
Total lease liabilities	$ 7,718

LEASES - Aggregate lease maturi

LEASES - Aggregate lease maturities (Details) $ in Thousands	Feb. 29, 2020USD ($)
Aggregate lease maturities
2020 (remaining nine months)	$ 1,245
2021	2,383
2022	2,306
2023	1,676
2024	787
Thereafter	579
Total minimum lease payments	8,976
Less imputed interest	(1,258)
Total lease liabilities	$ 7,718

LEASES - Additional Information

LEASES - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Feb. 29, 2020	Feb. 28, 2019	Feb. 29, 2020	Feb. 28, 2019
LEASES
Rent expense	$ 768		$ 1,690
Weighted average remaining lease term		3 years 10 months 24 days		3 years 10 months 24 days
Weighted average discount rate		9.60%		9.60%
Rent expense under ASC 840		$ 732		$ 1,506

DEBT - Monroe Revolving Credit

DEBT - Monroe Revolving Credit Facility (Details) - USD ($) $ in Thousands	Aug. 21, 2019	Feb. 29, 2020	Feb. 29, 2020	Aug. 31, 2019
Line of Credit Facility [Line Items]
Amortization of debt discount			$ 2,503
Monroe Revolving Credit Facility
Line of Credit Facility [Line Items]
Maximum borrowing capacity	$ 35,000
Additional borrowing capacity	$ 15,000
Outstanding amount		$ 0	0	$ 12,300
Closing costs incurred			$ 2,602
Debt instrument, term	5 years		5 years
Unamortized debt issuance costs		2,347	$ 2,347
Interest expense		159	455
Amortization of debt discount		$ 154	$ 308

DEBT - Monroe Warrants (Details

DEBT - Monroe Warrants (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	6 Months Ended
	Feb. 29, 2020	Feb. 29, 2020	Aug. 31, 2019	Aug. 21, 2019
Line of Credit Facility [Line Items]
Common stock, par value	$ 0.001	$ 0.001	$ 0.001
Monroe Subscription Agreement
Line of Credit Facility [Line Items]
Warrants issued				500
Warrants exercise price				$ 4.25
Term of warrants				5 years
Amortization expense	$ 50	$ 99

DEBT - Long-term Debt (Details)

DEBT - Long-term Debt (Details) - USD ($) $ / shares in Units, $ in Millions	Apr. 29, 2019	Nov. 08, 2019	Aug. 21, 2019
Exchange Agreement
Line of Credit Facility [Line Items]
Warrants issued			650
Warrants exercise price			$ 4.25
Second Exchange Agreement
Line of Credit Facility [Line Items]
Aggregate principal amount		$ 24
Issue discount		$ 1.5
Private placement offering (the "Private Placement") | Securities Purchase Agreement (the "Purchase Agreement")
Line of Credit Facility [Line Items]
Aggregate principal amount	$ 21.3
Issue discount	1.3
Proceeds from private placement	$ 20

WARRANT LIABILITY (Details)

WARRANT LIABILITY (Details) - Derivative Warrant Liability	3 Months Ended		6 Months Ended
	Feb. 29, 2020USD ($)	Feb. 28, 2019USD ($)	Feb. 29, 2020USD ($)	Feb. 28, 2019USD ($)	Aug. 31, 2019USD ($)	Jun. 30, 2018USD ($)shares
Credit Derivatives [Line Items]
Warrants issued | shares						3,750
Estimated fair value of outstanding warrant liabilities	$ 849,000		$ 849,000		$ 5,444,000	$ 15,350,000
Term of warrants						5 years
Changes in derivative liability	$ (1,390,000)	$ (1,271,000)	$ (4,595,000)	$ (1,055,000)
Stock price
Credit Derivatives [Line Items]
Measurement input	1.07		1.07
Volatility
Credit Derivatives [Line Items]
Measurement input	0.831		0.831
Risk-free rate
Credit Derivatives [Line Items]
Measurement input	0.86		0.86
Annual dividend yield
Credit Derivatives [Line Items]
Measurement input	0		0
Expected life
Credit Derivatives [Line Items]
Term of warrants	3 years 3 months 18 days		3 years 3 months 18 days

FAIR VALUE OF FINANCIAL INSTR_3

FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - Recurring - USD ($) $ in Thousands	Feb. 29, 2020	Nov. 30, 2019	Aug. 31, 2019	Feb. 28, 2019	Nov. 30, 2018	Aug. 31, 2018
Assets:
Equity investment	$ 2,028		$ 592
Liabilities
Warrant liability	849		5,444
Level 1
Assets:
Equity investment	1,923		0
Liabilities
Warrant liability	0		0
Level 2
Assets:
Equity investment	105		592
Liabilities
Warrant liability	0		0
Level 3
Assets:
Equity investment	0		0
Liabilities
Warrant liability	849		5,444
Level 3 | Derivative Warrant Liability
Liabilities
Warrant liability	$ 849	$ 2,240	$ 5,444	$ 13,375	$ 14,646	$ 14,430

FAIR VALUE OF FINANCIAL INSTR_4

FAIR VALUE OF FINANCIAL INSTRUMENTS - Activity for Warrant derivative Liability (Details) - Recurring - USD ($) $ in Thousands	3 Months Ended
	Feb. 29, 2020	Nov. 30, 2019	Feb. 28, 2019	Nov. 30, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Beginning Balance		$ 5,444
Ending Balance	$ 849
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Beginning Balance		5,444
Ending Balance	849
Level 3 | Derivative Warrant Liability
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Beginning Balance	2,240	5,444	$ 14,646	$ 14,430
Adjustments to estimated fair value	(1,391)	(3,204)	(1,271)	216
Ending Balance	$ 849	$ 2,240	$ 13,375	$ 14,646

FAIR VALUE OF FINANCIAL INSTR_5

FAIR VALUE OF FINANCIAL INSTRUMENTS - Contingent acquisition liabilities (Details) - Contingent consideration - USD ($) $ in Thousands	3 Months Ended
	Feb. 28, 2019	Nov. 30, 2018
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance	$ 5,882	$ 5,488
Change in Fair Value	(5,602)	394
Cash payment	(140)
Settled in shares	(140)
Ending balance	$ 0	$ 5,882

FAIR VALUE OF FINANCIAL INSTR_6

FAIR VALUE OF FINANCIAL INSTRUMENTS - Additional Information (Details)	Sep. 21, 2018shares
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)	6 Months Ended
	Feb. 29, 2020	Feb. 28, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term in years		3 years
Expected dividend yield	0.00%	0.00%
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term in years	5 years 3 months 18 days
Expected volatility	64.00%	72.00%
Risk-free interest rate	1.40%	2.40%
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term in years	5 years 10 months 24 days
Expected volatility	87.00%	87.00%
Risk-free interest rate	1.70%	3.00%

STOCKHOLDERS' EQUITY - Stock op

STOCKHOLDERS' EQUITY - Stock option activity (Details) - USD ($)	6 Months Ended	12 Months Ended
	Feb. 29, 2020	Aug. 31, 2019
Stock Options
Balance Outstanding	14,761
Granted	2,867
Exercised	(9)
Forfeited	(3,066)
Balance Outstanding	14,553	14,761
Vested and expected to vest	12,831
Exercisable	6,728
Weighted Average Exercise Price
Balance Outstanding	$ 4.89
Granted	2.50
Exercised	2.06
Forfeited	4.79
Balance Outstanding	4.44	$ 4.89
Vested and expected to vest	4.45
Exercisable	$ 4.47
Weighted Average Remaining Contractual Term Outstanding	8 years 7 months 6 days	9 years
Vested and expected to vest	8 years 7 months 6 days
Weighted Average Remaining Contractual Term Exercisable	8 years 2 months 12 days
Aggregate Intrinsic Value, Balance Outstanding	$ 6	$ 3,192
Aggregate Intrinsic Value Granted	0
Aggregate Intrinsic Value, Exercised	14
Aggregate Intrinsic Value, Forfeited	0
Aggregate Intrinsic Value, Vested and expected to vest	6
Aggregate Intrinsic Value Exercisable	$ 6

STOCKHOLDERS' EQUITY - Addition

STOCKHOLDERS' EQUITY - Additional Information 1 (Details) - USD ($) $ / shares in Units, $ in Millions	Feb. 06, 2020	Sep. 30, 2019	Sep. 26, 2019	Feb. 29, 2020	Sep. 30, 2019	Aug. 31, 2019
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				119,118		90,041
Common stock, shares outstanding				119,118		90,041
Securities Purchase Agreement (the "Purchase Agreement")
Stockholders Equity [Line Items]
Issuance of common stock and warrants for cash, net of offering costs (in shares)	10,000		17,198
Warrants exercise price	$ 1.60	$ 2.25	$ 1.75	$ 2	$ 2.25
Term Of Warrants Exercisable				5 years	5 years
Gross proceeds from the Offering	$ 16	$ 30.1
Net Proceeds After Deducting Placement Agent Fees And Estimated Offering Expense				$ 14.6	$ 27.4

STOCKHOLDERS' EQUITY - Additi_2

STOCKHOLDERS' EQUITY - Additional Information 2 (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Feb. 29, 2020	Feb. 28, 2019	Feb. 29, 2020	Feb. 28, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock compensation expense	$ 3,427	$ 4,725	$ 8,089	$ 6,534
Common Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Issuance of restricted stocks (in shares)	15

STOCKHOLDERS' EQUITY - Additi_3

STOCKHOLDERS' EQUITY - Additional Information 3 (Details) - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended		12 Months Ended
	Feb. 29, 2020	Feb. 28, 2019	Aug. 31, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost related to non-vested share	$ 19,565
Weighted-average period, cost expected to be recognized	2 years
Weighted average remaining contractual term	8 years 7 months 6 days		9 years
Value of common shares issued on exercise of option		$ 42
Stock option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock compensation expense	$ 5,845	$ 3,452
Weighted-average grant-date fair value of options granted	$ 1.48	$ 3.07
2016 Stock Incentive Plan (the Plan)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares issued	18,000
Weighted average remaining contractual term	10 years

STOCKHOLDERS' EQUITY - Additi_4

STOCKHOLDERS' EQUITY - Additional Information 4 (Details) - USD ($) $ in Thousands	6 Months Ended
	Feb. 29, 2020	Feb. 28, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of stock issued to investor in exchange for services	180	130
Value of stock issued to investor in exchange for services	$ 296	$ 33
Stock issued during period value for current and prepaid services		771
Weighted-average period, cost expected to be recognized	2 years
Prepaid expenses
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Value of stock issued to investor in exchange for services		738
Restricted Stock Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock compensation expense	$ 2,206	$ 2,720
Unrecognized compensation cost related to non-vested share	$ 824
Weighted-average period, cost expected to be recognized	1 year 3 months 18 days
Restricted Stock Awards | Directors
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of stock issued to investor in exchange for services	174

RESTRUCTURING CHARGES (Details)

RESTRUCTURING CHARGES (Details) - USD ($)	1 Months Ended	3 Months Ended	6 Months Ended
	Mar. 31, 2020	Feb. 29, 2020	Feb. 29, 2020
RESTRUCTURING CHARGES
Number of employees terminated.	$ 49	$ 28
Severance-related restructuring costs	400,000	379,000
Impairment of fixed assets		3,900,000
Impairment charges to its right-of-use		3,000,000
Restructuring charges		11,100,000
Restructuring reserve
Beginning balance	0	0
Provisions/Additions		7,301,000	$ 7,301,000
Utilized/Paid		(7,301,000)
Ending balance		0	0
Severance related costs
Restructuring reserve
Beginning balance	0	0
Provisions/Additions		400,000
Utilized/Paid		(400,000)
Ending balance		0	0
Facility, ROU and asset impairment
Restructuring reserve
Beginning balance	$ 0	0
Provisions/Additions		6,901,000
Utilized/Paid		(6,901,000)
Ending balance		$ 0	$ 0