Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Dec. 31, 2017 | Feb. 12, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | Stem Holdings, Inc. | |
Entity Central Index Key | 1,697,834 | |
Document Type | 10-Q | |
Document Period End Date | Dec. 31, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --09-30 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 7,503,694 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2,018 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Financial Position - USD ($) | Dec. 31, 2017 | Sep. 30, 2017 | [1] |
Current Assets | |||
Cash and cash equivalents | $ 2,179,017 | $ 391,389 | |
Prepaid expenses | 28,808 | 106,466 | |
Subscriptions receivable | 100,000 | ||
Total current assets | 2,207,825 | 597,855 | |
Property and equipment, net | 3,825,585 | 3,258,850 | |
Other assets | |||
Due from related parties | |||
Project costs | 10,000 | 10,000 | |
Deposits | 95,318 | 185,318 | |
Deferred rent | 580,670 | 298,441 | |
Total other assets | 685,988 | 493,759 | |
Total Assets | 6,719,398 | 4,350,464 | |
LIABILITIES AND SHAREHOLDERS' EQUITY | |||
Accounts payable and accrued expenses | 49,272 | 101,377 | |
Due to related parties | 16,500 | 16,500 | |
Notes payable, net of discount | 157,706 | 47,902 | |
Total Current Liabilities | 223,478 | 165,779 | |
Shareholders’ Equity | |||
Common stock; $0.001 par value; 100,000,000 shares authorized; 7,411,984 and 6,354,860 shares issued, issuable and outstanding as of December 31, 2017 and September 30, 2017 respectively | 7,503 | 6,433 | |
Additional paid-in capital | 10,010,611 | 7,012,603 | |
Accumulated deficit | (3,522,194) | (2,834,351) | |
Total equity | 6,495,920 | 4,184,685 | |
Total Liabilities and Shareholders' Equity | 6,719,398 | 4,350,464 | |
Series A Preferred Stock [Member] | |||
Shareholders’ Equity | |||
Preferred stock value | |||
Series B Preferred Stock [Member] | |||
Shareholders’ Equity | |||
Preferred stock value | |||
[1] | Derived from audited information |
Condensed Consolidated Stateme3
Condensed Consolidated Statements of Financial Position (Parenthetical) - $ / shares | Dec. 31, 2017 | Sep. 30, 2017 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 7,411,984 | 6,354,860 |
Common stock, shares outstanding | 7,411,984 | 6,354,860 |
Series A Preferred Stock [Member] | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 50,000,000 | 50,000,000 |
Preferred stock, shares outstanding | ||
Series B Preferred Stock [Member] | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 50,000,000 | 50,000,000 |
Preferred stock, shares outstanding |
Condensed Consolidated Stateme4
Condensed Consolidated Statement of Operations (Unaudited) - USD ($) | 3 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Statement [Abstract] | ||
Revenues | $ 309,829 | |
Consulting fee's | 55,450 | 6,250 |
Professional fee's | 140,598 | |
General and administration | 432,368 | 72,718 |
Impairment of advance-related party | ||
Stock based compensation | 359,546 | 468,000 |
Total expenses | 987,962 | 546,968 |
Operating loss | (678,133) | (546,968) |
Other income and expenses | ||
Interest expense | (9,736) | |
Interest income | 26 | 35 |
Total other income | (9,710) | 35 |
Net loss before income taxes | (687,843) | (546,933) |
Provision for income taxes | ||
Net loss for the period | $ (687,843) | $ (546,933) |
Basic and diluted loss per common share | $ (0.10) | $ 0.11 |
Basic and diluted weighted average common shares outstanding | 6,596,074 | 4,761,090 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | ||
Cash Flows from Operating Activities: | |||
Net loss for the period | $ (687,843) | $ (546,933) | |
Adjustments to reconcile net loss to cash used in operations | |||
Stock-based compensation | 359,546 | 468,000 | |
Non-cash interest | 3,854 | ||
Depreciation and amortization | 75,688 | 8,143 | |
(Increase) decrease in operating assets: | |||
Prepaid expenses | 77,658 | (36,750) | |
Deposits and other assets | (95,000) | ||
Deferred rent | (282,229) | ||
Increase (decrease) in operating liabilities: | |||
Accounts payable and accrued expenses | (52,104) | 6,715 | |
Net Cash Flows Used In Operating Activities | (505,430) | (195,825) | |
Cash Flows from Investing Activities: | |||
Fixed asset purchases | (530,672) | (935,163) | |
Project cost expenditures | (10,000) | ||
Advances to related entities | (68,001) | ||
Note receivable-related party | (99,000) | ||
Net Cash Flows used in Investing Activities | (530,672) | (1,112,164) | |
Financing Activities: | |||
Proceeds from issuance of common shares | 2,647,031 | 1,407,500 | |
Proceeds from notes payable | 200,000 | ||
Repayments of notes payable | (23,301) | ||
Net Cash Flows Provided By Financing Activities | 2,823,730 | 1,407,500 | |
Net increase in cash and cash equivalents | 1,787,628 | 99,511 | |
Cash and cash equivalents at beginning of period | 391,389 | [1] | 798,198 |
Cash and cash equivalents at end of period | 2,179,017 | 897,709 | |
Supplemental cash flow information | |||
Cash paid for interest | 1,882 | ||
Cash paid for taxes | |||
Non-Cash Supplemental information | |||
Purchase of fixed assets with note payable | 21,780 | ||
Transfer of deposit to fixed assets | 90,000 | ||
Project costs transferred to PP&E | $ 41,250 | ||
[1] | Derived from audited information |
Incorporation and Operations an
Incorporation and Operations and Liquidity | 3 Months Ended |
Dec. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Incorporation and Operations and Liquidity | 1. Incorporation and operations and Liquidity Stem Holdings, Inc. (the “Company”) is a Nevada corporation incorporated on June 7, 2016. The Company intends to purchase, improve, and lease properties for use in the cannabis production, distribution and sales industry beginning in the state of Oregon. In September and October 2016, the Company subleased its first production facility and acquired its first commercial location, respectively. In February 2017 and May 2017, the Company acquired its second commercial location and acquired its second production facility, respectively. The Company intends to enter into 4 leases for these properties (see Note 7). As shown in the accompanying consolidated financial statements, the Company has experienced recurring losses, and has accumulated a deficit of approximately $3,522,194 million as of December 31, 2017. For the three months ended December 31, 2017 we had a net loss of $687,843 million. In January 2018, the Company completed the purchase of the farm property in Mulino, Oregon (see Note 8), which will require the Company to invest approximately $1.525 million in its purchase in the coming years. The Company has entered into four leases with tenants in which it has committed the Company to improve those properties which will require additional funding in the amount of $2.7 million (see Note 7). In addition, the Company continues to work towards acquiring additional properties to lease to cannabis operators to grow its business. To date, the Company has raised substantial funds through private placements. After the quarter ended December 31, 2017, the Company has continued to raise funds in its private placements, raising in excess of $1.525 million as of the date of these financial statements. In addition, the Company is currently in initial discussions with potential investors to invest in the Company at significantly higher amounts. The Company also expects that its cash outflow from operation will decrease significantly in fiscal year 2018 as three of its four subleases to cannabis operators begin generating cash flow in the third quarter of the fiscal year. The Company expects its cash outflows from operations to decrease significantly after the second quarter of Fiscal 2018 and its current cash balance plus expected private placement and other investment proceeds allow it to continue operating and build out its properties. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 2. Summary of significant accounting policies Basis of preparation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The condensed consolidated financial statements included herein are unaudited. Such financial statements, in the opinion of management, contain all adjustments necessary to present fairly the financial position and results of operations as of and for the periods indicated. All such adjustments are of a normal recurring nature. These interim results are not necessarily indicative of the results to be expected for the fiscal year ending September 30, 2018 or for any other period. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, and because of this, for further information, readers should refer to the financial statements and footnotes included in its Form 10 for the fiscal year ended September 30, 2017 filed on January 16, 2018. The Company believes that the disclosures are adequate to make the interim information presented not misleading. Principals of Consolidation The accompanying consolidated financial statements include the accounts of Stem Holdings, Inc. and its wholly-owned subsidiary, Patch International, Inc. All material intercompany accounts, transactions, and profits have been eliminated in consolidation. Revenue Recognition The Company recognizes rental revenue from tenants, including rental abatements, lease incentives and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of the related leases when collectability is reasonably assured. The Company makes estimates of the collectability of its tenant receivables related to base rents, straight-line rent and other revenues. In the current fiscal year, the Company began significant rental operations. The Company considers such things as historical bad debts, tenant creditworthiness, current economic trends, facility operating performance, lease structure, developments relevant to a tenant’s business, and changes in tenants’ payment patterns in its analysis of accounts receivable and its evaluation of the adequacy of the allowance for doubtful accounts. Specifically, for straight-line rent receivables, the Company’s assessment includes an estimation of a tenant’s ability to fulfill its rental obligations over the remaining lease term. Real Estate Acquisition Valuation All assets acquired and liabilities assumed in an acquisition of real estate are measured at their acquisition date fair values. The acquisition value of land, building and improvements are included in real estate investments on the accompanying consolidated balance sheets. Acquisition pursuit costs associated with asset acquisitions are capitalized. The Company has early adopted ASU 2017-01, which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as businesses acquisitions. As a result of early adopting ASU 2017-01, real estate acquisitions did not meet the definition of a business combination and were deemed asset acquisitions, and the Company therefore capitalized its acquisition pursuit costs associated with these acquisitions. Reclassifications Certain amounts in the Company’s consolidated financial statements for prior periods have been reclassified to conform to the current period presentation. These reclassifications have not changed the results of operations of prior periods. Use of estimates The preparation of these financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Estimates and judgments used are based on management’s experience and the assumptions used are believed to be reasonable given the circumstances that exist at the time the financial statements are prepared. The significant estimates included in these financial statements are those associated with the assumptions used to value options issued to consultants and the estimated rent payment deferral period at inception of its cannabis operation subleases. Actual results may differ from these estimates. Warrants to Purchase Common Stock and Other Derivative Financial Instruments We classify as equity any contracts that require physical settlement or net-share settlement or provide us a choice of net-cash settlement or settlement in our own shares (physical settlement or net-share settlement) provided that such contracts are indexed to our own stock. We classify as assets or liabilities any contracts that require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside our control) or give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). We assess the classification of warrants issued to purchase our common stock and any other financial instrument at each reporting date to determine whether a change in classification between assets and liabilities is required. Cash and cash equivalents Cash and cash equivalents include short-term investments with original maturities of three months or less and are recorded at cost, which approximates fair market value given the short-term nature. Concentrations of Credit Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash. As of December 31, 2017, the Company had deposits in a major financial institution in excess of the FDIC insurance limit. The Company believes the risk of loss to be minimal as it maintains its cash balances at well capitalized financial institutions. Carrying value, recoverability and impairment of long-lived assets The Company follows Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC’) 360 to evaluate its long-lived assets. The Company’s long-lived assets, which include property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company does not test for impairment in the year of acquisition of properties so long as those properties are acquired from unrelated third parties. The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. If long- lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated and amortized over the newly determined remaining estimated useful lives. The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company’s overall strategy with respect to the manner or use of the acquired assets or changes in the Company’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company’s stock price for a sustained period of time; and (vi) regulatory changes. The Company evaluates assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events. Through December 31, 2017 the Company has not experienced impairment losses on its long-lived assets. Capitalization of Project Costs The Company’s policy is to capitalize all costs that are directly identifiable with a specific property, would be capitalized if the Company had already acquired the property, and when the property, or an option to acquire the property, is being actively sought after, and either funds are available or will likely become available in order to exercise their option. All amounts shown capitalized prior to acquisition of a property are included under the caption of Project Costs in the balance sheet. Income Taxes Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of currently due plus deferred taxes. Deferred tax assets and liabilities are determined based on differences between financial reporting carrying amounts and the respective tax bases of assets and liabilities and are measured using tax rates and laws that are expected to be in effect when the differences are expected to be recovered or settled. Valuation allowances are provided against deferred tax assets if it is more likely than not that the deferred tax assets will not be realized. The Company follows the guidance of FASB ASC 740-10 which relates to the Accounting for Uncertainty in Income Taxes, which seeks to reduce the diversity in practice associated with the accounting and reporting for uncertainty in income tax positions. This interpretation prescribes a comprehensive model for financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. Fair value of financial instruments As defined in the authoritative guidance, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To estimate fair value, the Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable. The authoritative guidance establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (“Level 1” measurements) and the lowest priority to unobservable inputs (“Level 3” measurements). The three levels of the fair value hierarchy are as follows: Level 1 — Observable inputs such as quoted prices in active markets at the measurement date for identical, unrestricted assets or liabilities. Level 2 — Other inputs that are observable, directly or indirectly, such as quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. Level 3 — Unobservable inputs for which there is little or no market data and which the Company makes its own assumptions about how market participants would price the assets and liabilities. In instances in which multiple levels of inputs are used to measure fair value, hierarchy classification is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Earnings per share The Company presents basic and diluted per share amounts (“EPS”) data for its common shares. Basic EPS is calculated by dividing the profit or loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period. Diluted loss per share is calculated based on the weighted-average number of outstanding common shares plus the effect of dilutive potential common shares, using the treasury stock method. The Company’s calculation of diluted net loss per share excludes potential common shares as of December 31, 2017 as the effect would be anti-dilutive (i.e. would reduce the loss per share). As of December 31, 2017, the Company had issued 841,666 options and warrants exercisable into the common stock of the Company outstanding (see Note 6). Advertising Costs The Company follows the policy of charging the cost of advertising to expense as incurred. Advertising expense was $ 9,380 for the quarter ended December 31, 2017 and nil for 2016. Emerging Growth Company The Company has elected to be an emerging growth company as defined under the Jumpstart Our Business Startups Act of 2012 (“Jobs Act”). Included with this election, the Company has also elected to use the provisions within the Jobs Act that allow companies that go public to continue to use the private company adoption date rules for new accounting policies. Should the Company obtain revenues in excess of $1 billion on an annual basis, have its non-affiliated market capitalization increase to over $700 million as of the last day of its second quarter, or raise in excess of $1 billion in public offerings of its equity or instruments directly convertible into its equity, it will forfeit its status under the Jobs Act as an emerging growth company. Property and Equipment Property and equipment is stated at cost less accumulated depreciation and is depreciated using the straight-line method over the assets’ estimated useful life as follows: Buildings 20 years Leasehold improvements Shorter of term of lease or economic life of improvement Furniture and equipment 5 years Signage 5 years Software and related 5 years Normal maintenance and repairs for equipment are charged to expense as incurred, while significant improvements are capitalized. Because the Company completed the acquisition of the Mulino Farm property (see Note 11) in January 2018, the Company has treated the improvements made to the property through December 31, 2017 as if they were building improvements. Related parties Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. |
Property, Plant & Equipment
Property, Plant & Equipment | 3 Months Ended |
Dec. 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant & Equipment | 3. Property, Plant & Equipment At December 31, 2017 property and equipment consisted of the following: Automobile $ 18,275 Signage 19,118 Furniture and equipment 207,278 Leasehold improvements 866,190 Buildings and property improvements 2,867,438 Software and related 52,190 Subtotal 4,030,489 Accumulated depreciation and amortization (204,904 ) Property, plant and equipment, net 3,825,585 (1) Because the Company closed on the acquisition of the Mulino property (see Note 9) in January 2018, the Company has treated the costs to improve the property as building improvements and not as project costs as of December 31, 2017. On November 1, 2016, the Company acquired certain real property located at 1027 Willamette Street, Eugene, OR 97401 (the “Property”) for a total cash purchase price plus closing costs of approximately $918,000. On February 6, 2017, the Company acquired certain real property located at 7827 SE Powell Blvd, Portland, OR 97206 (the “Property”) for a total purchase price plus closing costs of approximately $656,498. As part of the consideration for closing on the property, the Company issued a short term note payable to the seller in the Amount of approximately $304,000. The note is non-interest bearing and requires four monthly payments of $75,000 plus a final payment for the remaining amount due immediately thereafter plus fees. Due to the short-term nature of the note, the Company has not imputed any interest as it would be immaterial to the results for the period. The Company and note holder have come to an agreement to reduce by $75,000 the balance due under the note, due to the Seller breaching certain sections of the Purchase and Sale Agreement dated November 15, 2016. As of December 31, 2017, the balance owed on the note was approximately $4,000 Depreciation and amortization expense was $75,688 for the three months ended December 31, 2017 and $8,134 for 2016. |
2016 Stock Plan
2016 Stock Plan | 3 Months Ended |
Dec. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
2016 Stock Plan | 4. 2016 Stock Plan In 2016, the Company adopted a plan to allow the Company to compensate prospective and current employees, directors and consultants through the issuance of equity instruments of the Company. The plan has an effective life of 10 years. The plan is administered by the board of directors of the Company until such time as the board transfers responsibility to a committee of the board. The plan is limited to issuing common shares of the Company up to 15% of the total shares then outstanding. No limitations exist on any other instruments issuable under the plan. In the event of a change in control of the Company, all unvested instruments issued under the plan become immediately vested. |
Notes Payable
Notes Payable | 3 Months Ended |
Dec. 31, 2017 | |
Debt Disclosure [Abstract] | |
Notes Payable | 5. Notes Payable As of February 2017, the Company entered into a 10-month premium finance agreement in partial consideration for an insurance policy in the principal amount of $212,500. The note bears an annual interest rate of 5.81% and requires the Company to make monthly payments of $21,820 over the term of the note. As of December 31, 2017, the obligation was fully repaid. In November 2017, the Company entered into a promissory note in the amount of $21,749 from a vendor of the Company. The promissory note bears an interest rate of 18% per annum and also contains a 10% servicing fee. The note matures 24 months after issuance, and is secured by certain security electronics purchased with proceeds of the note. The Company issued a $100,000 promissory note dated December 7, 2017 to accredited investor which matures March 6, 2018 and has an annual rate of interest at 24%. Both principal and interest is due at maturity. The promissory note ranks senior to all obligations not designated as a primary obligation by the Company. As an inducement to issue the promissory note, the Company granted the holder warrants to acquire 20,833 shares of the Company’s common stock. The warrant has an exercise price of $2.40 per underlying common share and are exercisable for 2 years from the anniversary date of issuance (see Note 6). The Company issued a $100,000 promissory note dated December 1, 2017 to accredited investor which matures March 1, 2018 and has an annual rate of interest at 24%. Both principal and interest is due at maturity. The promissory note ranks senior to all obligations not designated as a primary obligation by the Company. As an inducement to issue the promissory note, the Company granted the holder warrants to acquire 20,833 shares of the Company’s common stock. The warrant has an exercise price of $2.40 per underlying common share and are exercisable for 2 years from the anniversary date of issuance (see Note 6). |
Shareholders' Equity
Shareholders' Equity | 3 Months Ended |
Dec. 31, 2017 | |
Equity [Abstract] | |
Shareholders' Equity | 6. Shareholders’ Equity Preferred shares The Company has no preferred shares issued and outstanding as of December 31, 2017. Common shares The holders of common shares are not entitled to receive dividends at this time, however, are entitled to one vote per share at meetings of the Company. The Company received subscriptions in private placement offerings completed for the following shares in the quarter ended December 31, 2017: ● For the quarter ended December 31, 2017, 1,057,124 common shares were issued at $2.40 per share to unaffiliated investors raising gross cash proceeds of $2,537,098. 362,458 shares of common stock were issuable as of December 31, 2017. During the quarter ended December 31, 2017, the Company began the process of registering shares of common stock for trading under the securities laws of Canada. As part of that process, certain founders were notified that they had to contribute additional amounts for their shares. In the quarter ended December 31, 2017, two founders contributed an additional $9,933 towards their founders shares as part of the requirements of the securities regulators of Canada. Subscription receivable On September 27, 2017, the Company received a subscription for 41,667 shares in the amount of $100,000. The funds were received by the Company in October 2017. Options During the quarter ended December 31, 2017, the Company entered into a renewed consulting agreement, and as part of that agreement for professional services, agreed to issue a total of 100,000 options to purchase the common stock of the Company, with an exercise price of $2.40 per share and a term of 4 years. Pursuant to the agreement 50,000 shares vested immediately, options to acquire 25,000 shares will vest 6 months subsequent to the effective date, and the remaining option to acquire 25,000 shares vests 1 year after the effective date. During the quarter ended December 31, 2017, the Company granted options to acquire 50,000 shares of its common stock to a consultant. The grant has an exercise price of $2.40 per share and a term of 4 years. All of the option shares vested on the date of the grant. The fair values of the options granted during the quarter ended December 31, 2017 were determined using the Black-Scholes option pricing model with the following weighted-average assumptions: Risk-free interest rate: 2.00 % Expected term: 4 years Expected dividend yield: 0.00 % Expected volatility: 176.7 % The options issued in the quarter ended December 31, 2017 noted above were valued at inception at $2.22 per share. Warrants The fair values of the warrants granted during the term of the agreement in connection with promissory notes issued (see Note 5) were determined using the Black-Scholes option pricing model with the following weighted-average assumptions: Risk-free interest rate: 2.00 % Expected term: 4 years Expected dividend yield: 0.00 % Expected volatility: 176.7 % The valuation of the warrants was $92,499 which has been recorded as a debt discount and is being amortized over the life of the loans on a straight-line basis to interest expense. As of December 31, 2017, $88,645 remained unamortized. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 7. Commitments and contingencies In July 2016, the Company entered into a 10-year lease for a commercial building from an unrelated third party in Springfield, Oregon. At the time the original lease was entered into, the Company had expected to close on significant subscriptions from its private placement. However, when those did not immediately materialize, the Company entered into an agreement with the landlord to cancel the lease and in addition, paid the landlord $15,000 not to rent out the property until such time the Company could enter into a new lease. In September 2016, the Company entered into a new 10-year lease with the landlord that commenced in November 2016. The lease requires the Company to pay a base rental fee of $7,033 plus an additional estimated $315 per month in real estate taxes in which the base rental fee escalates each year by approximately 2%. All taxes (including reconciling real estate taxes), maintenance and utilities are included at the end of each year as a one-time payment. In addition, the Company also remitted $14,000 for a security deposit to the landlord. No amounts have been recorded for deferred rent in these financial statements as the amount was deemed immaterial by the Company. The Company has subleased this space pursuant to a 10-year lease. In August 2016, the Company and certain shareholders of the Company entered into a “Multi Party” Agreement, in which the Company became obligated to lease or acquire three separate real estate assets, and separately, if certain events occur, additional real estate assets held by entities related to those shareholders. The Agreement also gives the Company the right of first refusal in regards to certain properties owned by the persons and entities affiliated with the parties of the Agreement so long as certain targets are met. Should the Company obtain in excess of $10,000,000 through a combination of its private placements and its merger with Patch Holdings, Inc. (see Note 5), it is required to purchase certain real estate properties owned by entities affiliated with certain of its shareholders. In addition, if the Company obtains in excess of $13 million through a combination of private placements and its merger with Patch Holdings, Inc., the cannabis affiliates become obligated to purchase preferred stock of the Company in an amount equivalent to 50% of their post-tax net operating income. Certain shareholders of the Company have begun organizing entities that will operate directly in the cannabis industry, and the Company leases its properties to these entities. The Multi Party Agreement also requires that in the event that the US Government amends Title 21 of the United States Code, otherwise known as the Controlled Substances Act, to remove cannabis as a Schedule I drug, and the Company raises more than $10 million in equity and merger funding, the Company is required to enter into agreements to acquire those related entities and issue such equity that the shareholders of the related entities obtain 75% of the then issued and outstanding equity of the Company, regardless of the profitability or financial condition of the related entities at the time of their acquisition. In February 2017, the Company entered into a 1-year lease for the occupancy of the Company’s corporate office located in Boca Raton, Florida. The lease requires the Company to pay a base rental fee of $785.00 per month. All taxes, maintenance and utilities are included. In addition, the Company also remitted $785 for a security deposit to the landlord. In February 2017, the Company entered into an advisory agreement with an unrelated third party with a term of 12 months. As part of that agreement, the third party agreed to provide assistance for the Company with respect to eligibility for becoming quoted on the OTCQB/OTCQX and advising and assisting the Company in complying with its ongoing OTCQB/OTCQX disclosure obligation under current federal and state securities laws. These services to the Company are exchanged for a $10,000 upfront payment, and $5,000 payment upon the acceptance on OTCQB/OTCQX. In November 2017, the Company entered into a consulting agreement with an unrelated third party with a term of 12 months. As part of that agreement, the third party agreed to provide assistance for the Company with respect to business affairs relating to business consolidations and financing. As consideration for these services, the Company has agreed to issue to the consultant options to acquire up to 100,000 shares of common stock of the Company. Property Rental Agreements 1027 Willamette In July 2017, the Company entered into an operating lease agreement with a marijuana dispensary (the “Lessee”) to move into the Company’s acquired property located at 1027 Willamette Street in Eugene, Oregon. The lease agreement is for a base term of ten years (see note below) and a monthly rent obligation of $13,800, subject to annual increases of 3% per year, plus an amount for additional rent based on final buildout costs incurred by the Company. The lease is a double net lease with maintenance and real property taxes to be paid by the Tenant and insurance costs paid by the Company. The Company provided the tenant with one month of free rent. Upon the expiration of the term of ten years, the Lessee has the option to renew the lease agreement for one five-year term, on the same terms as provided in the lease agreement. Springfield Suites In July 2017, the Company entered into a lease agreement for its property and warehouse building located at 800 N 42 nd Upon the expiration of the term of ten years, the Lessee has the option to renew the lease agreement for five-year term, on the same terms as provided in the lease agreement. 14336 S. Union Hall Road, Mulino In July 2017, the Company entered into a lease agreement for its property located at 14336 South Union Hall Road in Mulino, Oregon. The lease agreement is for a term of ten years (see note below) and a monthly rent obligation of $18,750, subject to annual increases of 3% per year plus an amount for additional rent based on final buildout costs incurred by the Company. The lease is a double net lease with maintenance and real property taxes shall be paid by the Tenant and insurance costs paid by the Company. Rent payments will begin at the of the first growing season, which the Company currently estimates will occur in April 2018, and thus payments will commence in May 2018. The Company expects to treat such period as a free rental period for accounting purposes. At the time rental payments begin, the total of base rent and additional rent will not be less than $1.00 per foot for light assisted greenhouse and $.25 per usable square foot for un-light assisted greenhouse or outdoor grow space. Upon the expiration of the term of ten years, the Lessee has the option to renew the lease agreement for five-year term, on the same terms as provided in the lease agreement. 7827 SE Powell In July 2017, the Company entered into a lease agreement for its acquired property located at 7827 SE Powell Blvd. in Portland, Oregon. The lease agreement is for a term of ten years and a monthly rent obligation of $6,523, subject to annual increases of 3% per year. Maintenance and real property taxes shall be paid by the Tenant and insurance paid by the Company. Additional rents will be added to pay landlord back for tenant improvements by the end of the first term of the lease, payments will include annual interest at 12% compounded monthly. Rent payments commence on the date the growing season ends, which the Company currently estimates will occur in April 2018, and thus expects payments to begin in May 2018. The Company has treated this period as a free rental period for accounting purposes. Upon the expiration of the term of ten years, the Lessee has the option to renew the lease agreement for five-year term, on the same terms as provided in the lease agreement. During the three months ended December 31, 2017, the Company incurred total rent expense of $77,717. As of December 31, 2017, the Company has recorded a long-term asset for the straight lining of rent under the rental leases to the cannabis operators of approximately $580,670. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Dec. 31, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | 8. Subsequent events Subsequent to December 31, 2017, and up to the date of this filing, we have raised $1,525,980 as part of our continuing private placement at $2.40 per share. As of the date of this filing, we have issued 91,710 shares on account of these sales and are committed to issue an additional 544,115 shares. The Company entered into a “Contract for Sale” for a Farm Property in Mulino OR (the “Mulino Property”), pursuant to which the seller will sell the premises to the Company upon the completion of the Company’s due diligence investigations and completion of the closing conditions precedent to each party’s obligations under the Contract for Sale. The purchase price is $1,700,000 which will be reduced by a rental credit of approximately $135,000, which is equivalent to nine months’ rent at $15,000 a month. In addition, the Seller has granted the Company a credit to be reflected upon closing in the amount $9,500 for improvements made by the Company to the property. In connection with the purchase of the property, the Company will make a cash payment in the amount of $362,254 and will issue a promissory note in the amount of $1,200,000 with a maturity of January 2020. The Company will pay monthly installments of principal and interest (at a rate of 2% per annum) in the amount of $13,500, commencing in July 2018 through the maturity date (January 2020), at which time the entire unpaid principal balance and any remaining accrued interest shall be due and payable in full. In April 2017, in order for the Company to make use of the premises pending closing of the purchase of the property, the Company agreed to lease the premises from the seller for a term commencing April 5, 2017 and expiring on the earlier of: (i) the termination of the Contract for Sale by either party thereto in accordance with its terms; and (ii) October 5, 2017. The lease requires the Company to pay a base rental fee of $15,000 for the first nine months with no lease deposit required. All taxes accruing during the lease term (including real estate taxes and personal property taxes) are the responsibility of the Company. In January 2018, the Company closed on the purchase. |
Summary of Significant Accoun14
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Basis of Preparation | Basis of preparation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The condensed consolidated financial statements included herein are unaudited. Such financial statements, in the opinion of management, contain all adjustments necessary to present fairly the financial position and results of operations as of and for the periods indicated. All such adjustments are of a normal recurring nature. These interim results are not necessarily indicative of the results to be expected for the fiscal year ending September 30, 2018 or for any other period. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, and because of this, for further information, readers should refer to the financial statements and footnotes included in its Form 10 for the fiscal year ended September 30, 2017 filed on January 16, 2018. The Company believes that the disclosures are adequate to make the interim information presented not misleading. |
Principals of Consolidation | Principals of Consolidation The accompanying consolidated financial statements include the accounts of Stem Holdings, Inc. and its wholly-owned subsidiary, Patch International, Inc. All material intercompany accounts, transactions, and profits have been eliminated in consolidation. |
Revenue Recognition | Revenue Recognition The Company recognizes rental revenue from tenants, including rental abatements, lease incentives and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of the related leases when collectability is reasonably assured. The Company makes estimates of the collectability of its tenant receivables related to base rents, straight-line rent and other revenues. In the current fiscal year, the Company began significant rental operations. The Company considers such things as historical bad debts, tenant creditworthiness, current economic trends, facility operating performance, lease structure, developments relevant to a tenant’s business, and changes in tenants’ payment patterns in its analysis of accounts receivable and its evaluation of the adequacy of the allowance for doubtful accounts. Specifically, for straight-line rent receivables, the Company’s assessment includes an estimation of a tenant’s ability to fulfill its rental obligations over the remaining lease term. |
Real Estate Acquisition Valuation | Real Estate Acquisition Valuation All assets acquired and liabilities assumed in an acquisition of real estate are measured at their acquisition date fair values. The acquisition value of land, building and improvements are included in real estate investments on the accompanying consolidated balance sheets. Acquisition pursuit costs associated with asset acquisitions are capitalized. The Company has early adopted ASU 2017-01, which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as businesses acquisitions. As a result of early adopting ASU 2017-01, real estate acquisitions did not meet the definition of a business combination and were deemed asset acquisitions, and the Company therefore capitalized its acquisition pursuit costs associated with these acquisitions. |
Reclassifications | Reclassifications Certain amounts in the Company’s consolidated financial statements for prior periods have been reclassified to conform to the current period presentation. These reclassifications have not changed the results of operations of prior periods. |
Use of Estimates | Use of estimates The preparation of these financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Estimates and judgments used are based on management’s experience and the assumptions used are believed to be reasonable given the circumstances that exist at the time the financial statements are prepared. The significant estimates included in these financial statements are those associated with the assumptions used to value options issued to consultants and the estimated rent payment deferral period at inception of its cannabis operation subleases. Actual results may differ from these estimates. |
Warrants to Purchase Common Stock and Other Derivative Financial Instruments | Warrants to Purchase Common Stock and Other Derivative Financial Instruments We classify as equity any contracts that require physical settlement or net-share settlement or provide us a choice of net-cash settlement or settlement in our own shares (physical settlement or net-share settlement) provided that such contracts are indexed to our own stock. We classify as assets or liabilities any contracts that require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside our control) or give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). We assess the classification of warrants issued to purchase our common stock and any other financial instrument at each reporting date to determine whether a change in classification between assets and liabilities is required. |
Cash and Cash Equivalents | Cash and cash equivalents Cash and cash equivalents include short-term investments with original maturities of three months or less and are recorded at cost, which approximates fair market value given the short-term nature. |
Concentrations of Credit Risk | Concentrations of Credit Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash. As of December 31, 2017, the Company had deposits in a major financial institution in excess of the FDIC insurance limit. The Company believes the risk of loss to be minimal as it maintains its cash balances at well capitalized financial institutions. |
Carrying Value, Recoverability and Impairment of Long-lived Assets | Carrying value, recoverability and impairment of long-lived assets The Company follows Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC’) 360 to evaluate its long-lived assets. The Company’s long-lived assets, which include property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company does not test for impairment in the year of acquisition of properties so long as those properties are acquired from unrelated third parties. The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. If long- lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated and amortized over the newly determined remaining estimated useful lives. The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company’s overall strategy with respect to the manner or use of the acquired assets or changes in the Company’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company’s stock price for a sustained period of time; and (vi) regulatory changes. The Company evaluates assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events. Through December 31, 2017 the Company has not experienced impairment losses on its long-lived assets. |
Capitalization of Project Costs | Capitalization of Project Costs The Company’s policy is to capitalize all costs that are directly identifiable with a specific property, would be capitalized if the Company had already acquired the property, and when the property, or an option to acquire the property, is being actively sought after, and either funds are available or will likely become available in order to exercise their option. All amounts shown capitalized prior to acquisition of a property are included under the caption of Project Costs in the balance sheet. |
Income Taxes | Income Taxes Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of currently due plus deferred taxes. Deferred tax assets and liabilities are determined based on differences between financial reporting carrying amounts and the respective tax bases of assets and liabilities and are measured using tax rates and laws that are expected to be in effect when the differences are expected to be recovered or settled. Valuation allowances are provided against deferred tax assets if it is more likely than not that the deferred tax assets will not be realized. The Company follows the guidance of FASB ASC 740-10 which relates to the Accounting for Uncertainty in Income Taxes, which seeks to reduce the diversity in practice associated with the accounting and reporting for uncertainty in income tax positions. This interpretation prescribes a comprehensive model for financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. |
Fair Value of Financial Instruments | Fair value of financial instruments As defined in the authoritative guidance, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To estimate fair value, the Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable. The authoritative guidance establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (“Level 1” measurements) and the lowest priority to unobservable inputs (“Level 3” measurements). The three levels of the fair value hierarchy are as follows: Level 1 — Observable inputs such as quoted prices in active markets at the measurement date for identical, unrestricted assets or liabilities. Level 2 — Other inputs that are observable, directly or indirectly, such as quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. Level 3 — Unobservable inputs for which there is little or no market data and which the Company makes its own assumptions about how market participants would price the assets and liabilities. In instances in which multiple levels of inputs are used to measure fair value, hierarchy classification is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. |
Earnings Per Share | Earnings per share The Company presents basic and diluted per share amounts (“EPS”) data for its common shares. Basic EPS is calculated by dividing the profit or loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period. Diluted loss per share is calculated based on the weighted-average number of outstanding common shares plus the effect of dilutive potential common shares, using the treasury stock method. The Company’s calculation of diluted net loss per share excludes potential common shares as of December 31, 2017 as the effect would be anti-dilutive (i.e. would reduce the loss per share). As of December 31, 2017, the Company had issued 841,666 options and warrants exercisable into the common stock of the Company outstanding (see Note 6). |
Advertising Costs | Advertising Costs The Company follows the policy of charging the cost of advertising to expense as incurred. Advertising expense was $ 9,380 for the quarter ended December 31, 2017 and nil for 2016. |
Emerging Growth Company | Emerging Growth Company The Company has elected to be an emerging growth company as defined under the Jumpstart Our Business Startups Act of 2012 (“Jobs Act”). Included with this election, the Company has also elected to use the provisions within the Jobs Act that allow companies that go public to continue to use the private company adoption date rules for new accounting policies. Should the Company obtain revenues in excess of $1 billion on an annual basis, have its non-affiliated market capitalization increase to over $700 million as of the last day of its second quarter, or raise in excess of $1 billion in public offerings of its equity or instruments directly convertible into its equity, it will forfeit its status under the Jobs Act as an emerging growth company. |
Property and Equipment | Property and Equipment Property and equipment is stated at cost less accumulated depreciation and is depreciated using the straight-line method over the assets’ estimated useful life as follows: Buildings 20 years Leasehold improvements Shorter of term of lease or economic life of improvement Furniture and equipment 5 years Signage 5 years Software and related 5 years Normal maintenance and repairs for equipment are charged to expense as incurred, while significant improvements are capitalized. Because the Company completed the acquisition of the Mulino Farm property (see Note 11) in January 2018, the Company has treated the improvements made to the property through December 31, 2017 as if they were building improvements. |
Related Parties | Related parties Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. |
Summary of Significant Accoun15
Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Schedule of Estimated Useful Life of Assets | Property and equipment is stated at cost less accumulated depreciation and is depreciated using the straight-line method over the assets’ estimated useful life as follows: Buildings 20 years Leasehold improvements Shorter of term of lease or economic life of improvement Furniture and equipment 5 years Signage 5 years Software and related 5 years |
Property, Plant & Equipment (Ta
Property, Plant & Equipment (Tables) | 3 Months Ended |
Dec. 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property, Plant and Equipment | At December 31, 2017 property and equipment consisted of the following: Automobile $ 18,275 Signage 19,118 Furniture and equipment 207,278 Leasehold improvements 866,190 Buildings and property improvements 2,867,438 Software and related 52,190 Subtotal 4,030,489 Accumulated depreciation and amortization (204,904 ) Property, plant and equipment, net 3,825,585 |
Shareholders' Equity (Tables)
Shareholders' Equity (Tables) | 3 Months Ended |
Dec. 31, 2017 | |
Options [Member] | |
Schedule of Assumptions Used | The fair values of the options granted during the quarter ended December 31, 2017 were determined using the Black-Scholes option pricing model with the following weighted-average assumptions: Risk-free interest rate: 2.00 % Expected term: 4 years Expected dividend yield: 0.00 % Expected volatility: 176.7 % |
Warrant [Member] | |
Schedule of Assumptions Used | The fair values of the warrants granted during the term of the agreement in connection with promissory notes issued (see Note 5) were determined using the Black-Scholes option pricing model with the following weighted-average assumptions: Risk-free interest rate: 2.00 % Expected term: 4 years Expected dividend yield: 0.00 % Expected volatility: 176.7 % |
Incorporation and Operations 18
Incorporation and Operations and Liquidity (Details Narrative) - USD ($) | 3 Months Ended | |||
Dec. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2017 | [1] | |
Accumulated a deficit | $ 3,522,194 | $ 2,834,351 | ||
Net loss | 687,843 | $ 546,933 | ||
Payments to purchase of investments | 1,525,000 | |||
Estimated cost to build up properties | 2,700,000 | |||
Private Placement [Member] | Maximum [Member] | ||||
Proceeds from short term loan | $ 2 | |||
[1] | Derived from audited information |
Summary of Significant Accoun19
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Accounting Policies [Abstract] | ||
Number of options and warrants exercisable into shares of common stock | 841,666 | |
Advertising expense | $ 9,380 | |
Revenues on annual basis | $ 1,000,000,000 | |
Non-affiliated market capitalization, description | non-affiliated market capitalization increase to over $700 million as of the last day of its second quarter | |
Proceeds from public offering | $ 1,000,000,000 |
Summary of Significant Accoun20
Summary of Significant Accounting Policies - Schedule of Estimated Useful Life of Assets (Details) | 3 Months Ended |
Dec. 31, 2017 | |
Buildings [Member] | |
Asset's estimated useful life | 20 years |
Leasehold Improvements [Member] | |
Asset's useful life description | Shorter of term of lease or economic life of improvement |
Furniture and Equipment [Member] | |
Asset's estimated useful life | 5 years |
Signage [Member] | |
Asset's estimated useful life | 5 years |
Software and Related [Member] | |
Asset's estimated useful life | 5 years |
Property, Plant & Equipment (De
Property, Plant & Equipment (Details Narrative) - USD ($) | Feb. 06, 2017 | Feb. 06, 2017 | Nov. 01, 2016 | Dec. 31, 2017 | Dec. 31, 2016 |
Property plant and equipment, cost | $ 656,498 | $ 918,000 | |||
Amount due upon breach of agreement | $ 75,000 | ||||
Depreciation and amortization expense | 75,688 | $ 8,134 | |||
Seller [Member] | |||||
Short term notes payable | $ 304,000 | $ 304,000 | |||
Monthly payments | $ 75,000 | ||||
Note balance owed, amount | $ 4,000 |
Property, Plant & Equipment - S
Property, Plant & Equipment - Schedule of Property, Plant and Equipment (Details) - USD ($) | Dec. 31, 2017 | Sep. 30, 2017 | [1] |
Subtotal | $ 4,030,489 | ||
Accumulated depreciation and amortization | (204,904) | ||
Property, plant and equipment, net | 3,825,585 | $ 3,258,850 | |
Automobile [Member] | |||
Subtotal | 18,275 | ||
Signage [Member] | |||
Subtotal | 19,118 | ||
Furniture and Equipment [Member] | |||
Subtotal | 207,278 | ||
Leasehold Improvements [Member] | |||
Subtotal | 866,190 | ||
Buildings and Property Improvements [Member] | |||
Subtotal | 2,867,438 | ||
Software and Related [Member] | |||
Subtotal | $ 52,190 | ||
[1] | Derived from audited information |
2016 Stock Plan (Details Narrat
2016 Stock Plan (Details Narrative) | 3 Months Ended |
Dec. 31, 2017 | |
Effective life of plan | 10 years |
Maximum [Member] | |
Issuance of common shares percentage | 0.15 |
Notes Payable (Details Narrativ
Notes Payable (Details Narrative) - USD ($) | Dec. 07, 2017 | Dec. 01, 2017 | Feb. 28, 2017 | Nov. 30, 2017 |
Accredited Investor Member | ||||
Debt principal amount | $ 100,000 | $ 100,000 | ||
Interest rate | 24.00% | 24.00% | ||
Maturity date | Mar. 6, 2018 | Mar. 1, 2018 | ||
Warrants granted to acquire shares | 20,833 | 20,833 | ||
Warrant exercise price | $ 2.40 | $ 2.40 | ||
Warrant exercisable period | 2 years | 2 years | ||
Promissory Note [Member] | ||||
Debt principal amount | $ 21,749 | |||
Interest rate | 18.00% | |||
Debt servicing fee percentage | 10.00% | |||
10-Month Premium Finance Agreement [Member] | ||||
Debt principal amount | $ 212,500 | |||
Interest rate | 5.81% | |||
Debt monthly payments | $ 21,820 |
Shareholders' Equity (Details N
Shareholders' Equity (Details Narrative) - USD ($) | Sep. 27, 2017 | Dec. 31, 2017 | Sep. 30, 2017 | [1] |
Common stock, voting rights | One vote per share at meetings of the Company | |||
Common stock shares issued | 41,667 | |||
Stock issued during period founders contributed | $ 9,933 | |||
Subscriptions receivable | $ 100,000 | $ 100,000 | ||
Common stock option exercise price per share | $ 2.22 | |||
Debt discount | $ 92,499 | |||
Unamortized debt discount | $ 88,645 | |||
Consultant [Member] | ||||
Number of options agreed to issued to purchase the common stock | 50,000 | |||
Common stock option exercise price per share | $ 2.40 | |||
Common stock option term | 4 years | |||
Options [Member] | ||||
Number of options vested | 50,000 | |||
Options [Member] | Vest 6 Months [Member] | ||||
Number of shares acquired | 25,000 | |||
Option vesting period | 6 months | |||
Options [Member] | Vest 1 Year [Member] | ||||
Number of shares acquired | 25,000 | |||
Option vesting period | 1 year | |||
Consulting Agreement [Member] | ||||
Number of options agreed to issued to purchase the common stock | 100,000 | |||
Common stock option exercise price per share | $ 2.40 | |||
Common stock option term | 4 years | |||
Common Stock [Member] | ||||
Common stock shares issued | 362,458 | |||
Unaffiliated Investors [Member] | Common Stock [Member] | ||||
Common stock shares issued | 1,057,124 | |||
Shares issued price per share | $ 2.40 | |||
Common stock, value issued | $ 2,537,098 | |||
[1] | Derived from audited information |
Shareholders' Equity - Schedule
Shareholders' Equity - Schedule of Assumptions Used (Details) | 3 Months Ended |
Dec. 31, 2017 | |
Options [Member] | |
Risk free interest rate | 2.00% |
Expected term | 4 years |
Expected dividend Yield | 0.00% |
Expected volatility | 176.70% |
Warrant [Member] | |
Risk free interest rate | 2.00% |
Expected term | 4 years |
Expected dividend Yield | 0.00% |
Expected volatility | 176.70% |
Commitments and Contingencies (
Commitments and Contingencies (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | |||||
Nov. 30, 2017 | Jul. 31, 2017 | Feb. 28, 2017 | Sep. 30, 2016 | Aug. 31, 2016 | Jul. 31, 2016 | Dec. 31, 2017 | |
Operating lease term | 1 year | 10 years | 10 years | 10 years | |||
Payment for capital lease obligations | $ 15,000 | ||||||
Base rental fees | $ 785 | $ 7,033 | |||||
Real estate taxes | $ 315 | ||||||
Percentage of base rental fees escalation | 2.00% | ||||||
Security deposit to landlord | $ 785 | $ 14,000 | |||||
Rent expense | 77,717 | ||||||
Multi Party Agreement [Member] | |||||||
Proceeds from private placement | $ 10,000,000 | ||||||
Proceeds from equity | $ 10,000,000 | ||||||
Equity issued and outstanding | 75.00% | ||||||
Multi Party Agreement [Member] | Maximum [Member] | |||||||
Proceeds from private placement | $ 13,000,000 | ||||||
Multi Party Agreement [Member] | Preferred Stock [Member] | |||||||
Equivalent percentage | 50.00% | ||||||
Advisory Agreement [Member] | |||||||
Lease term | 12 months | ||||||
Upfront payment | $ 10,000 | ||||||
Payment upon acceptance | $ 5,000 | ||||||
Consulting Agreement [Member] | Unrelated Third Party [Member] | |||||||
Lease term | 12 months | ||||||
Consulting Agreement [Member] | Maximum [Member] | Consultants [Member] | |||||||
Number of common stock shares issued for service | 100,000 | ||||||
Operating Lease Agreement [Member] | Marijuana Dispensary [Member] | |||||||
Lease term | 10 years | ||||||
Monthly payments | $ 13,800 | ||||||
Change in lease rent percentage | 3.00% | ||||||
Lease Agreement [Member] | Springfield Suites [Member] | |||||||
Lease term | 10 years | ||||||
Monthly payments | $ 64,640 | ||||||
Change in lease rent percentage | 3.00% | ||||||
Minimum rent per foot | $ 1 | ||||||
Minimum rent per foot un-light assisted greenhouse or outdoor grow space | $ 0.25 | ||||||
Lease Agreement One [Member] | |||||||
Lease term | 10 years | ||||||
Monthly payments | $ 18,750 | ||||||
Change in lease rent percentage | 3.00% | ||||||
Minimum rent per foot | $ 1 | ||||||
Minimum rent per foot un-light assisted greenhouse or outdoor grow space | $ 0.25 | ||||||
Lease Agreement Two [Member] | |||||||
Lease term | 10 years | ||||||
Monthly payments | $ 6,523 | ||||||
Change in lease rent percentage | 3.00% | ||||||
Interest on lease payment percentage | 12.00% |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - USD ($) | Sep. 27, 2017 | Feb. 28, 2017 | Sep. 30, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2017 | [1] |
Number of shares issued for private placement | 41,667 | ||||||
Cash payment | $ 530,672 | $ 935,163 | |||||
Base rental fees | $ 785 | $ 7,033 | |||||
Deferred rent | $ 580,670 | $ 298,441 | |||||
Subsequent Event [Member] | |||||||
Number of shares issued for private placement | 91,710 | ||||||
Shares issued price per share | $ 2.40 | ||||||
Proceeds from private placement | $ 1,525,980 | ||||||
Sale of stock, number of shares issued in transaction | 544,115 | ||||||
Subsequent Event [Member] | Contract for Sale [Member] | |||||||
Promissory note amount | $ 1,200,000 | ||||||
Maturity date | Jan. 31, 2020 | ||||||
Subsequent Event [Member] | Contract for Sale [Member] | July 2018 [Member] | |||||||
Monthly payments | $ 13,500 | ||||||
Monthly installments interest rate | 2.00% | ||||||
Subsequent Event [Member] | Contract for Sale [Member] | Landlord [Member] | |||||||
Purchase price of premises | $ 1,700,000 | ||||||
Rental credit | 135,000 | ||||||
Monthly payments | 15,000 | ||||||
Amount granted for improvement of property | 9,500 | ||||||
Cash payment | 362,254 | ||||||
Base rental fees | $ 15,000 | ||||||
[1] | Derived from audited information |