Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Dec. 31, 2018 | Feb. 15, 2019 | |
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, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --09-30 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business Flag | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | true | |
Entity Common Stock, Shares Outstanding | 14,780,600 | |
Trading Symbol | STMH | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2,019 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Financial Position - USD ($) | Dec. 31, 2018 | Sep. 30, 2018 | [1] |
Current Assets | |||
Cash and cash equivalents | $ 3,794,092 | $ 761,351 | |
Prepaid expenses and other current assets | 1,052,590 | 993,619 | |
Notes payable subscriptions receivable | 150,000 | ||
Total current assets | 4,846,682 | 1,904,970 | |
Property and equipment, net | 8,611,857 | 8,324,799 | |
Other assets | |||
Investment in equity method investees | 1,598,764 | 1,301,166 | |
Investment in affiliates | 2,114,161 | 2,076,119 | |
Deposits and other assets | 5,995,699 | 165,663 | |
Deferred rent | 1,766,487 | 1,442,335 | |
Total other assets | 11,475,111 | 4,985,283 | |
Total Assets | 24,933,650 | 15,215,052 | |
Current liabilities | |||
Accounts payable and accrued expenses | 984,133 | 511,007 | |
Due to related parties | 33,600 | 33,600 | |
Convertible notes, net | 168,637 | 2,194,790 | |
Short term notes and advances | 1,185,741 | 1,268,073 | |
Advance from affiliate | 300,000 | ||
Advances to be contributed to venture | 3,493,055 | ||
Current portion of long-term debt | 171,844 | 169,988 | |
Total Current Liabilities | 6,337,010 | 4,177,458 | |
Long-term debt, net of short term portion | 1,871,379 | 1,912,543 | |
Total Liabilities | 8,208,389 | 6,090,001 | |
commitments and contingencies | |||
Shareholders' Equity | |||
Common stock; $0.001 par value; 300,000,000 shares authorized; 14,854,487 and 10,177,496 shares issued, issuable and outstanding as of December 31, 2018 and September 30, 2018 respectively | 15,240 | 10,582 | |
Additional paid-in capital | 31,424,366 | 19,809,215 | |
Accumulated deficit | (14,714,345) | (10,694,746) | |
Total equity | 16,725,261 | 9,125,051 | |
Total Liabilities and Shareholders' Equity | 24,933,650 | 15,215,052 | |
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 Statem_2
Condensed Consolidated Statements of Financial Position (Parenthetical) - $ / shares | Dec. 31, 2018 | Sep. 30, 2018 |
Preferred stock, shares outstanding | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 300,000,000 | 300,000,000 |
Common stock, shares issued | 14,854,487 | 10,177,496 |
Common stock, shares outstanding | 14,854,487 | 10,177,496 |
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 |
Interim Condensed Consolidated
Interim Condensed Consolidated Statement of Operations (Unaudited) - USD ($) | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Statement [Abstract] | ||
Revenues | $ 337,952 | $ 309,829 |
Consulting fee's | 74,350 | 55,450 |
Professional fee's | 441,872 | 140,598 |
General and administration | 858,782 | 432,368 |
Stock based compensation | 1,600,577 | 359,546 |
Total expenses | 2,975,581 | 987,962 |
Operating loss | (2,637,629) | (678,133) |
Other income and expenses | ||
Interest expense | (558,092) | (9,736) |
Inducement cost | (823,900) | |
Interest income | 22 | 26 |
Other income | ||
Total other income | (1,381,970) | (9,710) |
Income (Loss) from equity method investees | ||
Net loss before income taxes | (4,019,599) | (687,843) |
Provision for income taxes | ||
Net loss for the period | $ (4,019,599) | $ (687,843) |
Basic and diluted loss per common share | $ (0.29) | $ (0.10) |
Basic and diluted weighted average common shares outstanding | 13,931,370 | 6,596,074 |
Interim Condensed Consolidate_2
Interim Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Cash Flows from Operating Activities: | ||
Net loss for the period | $ (4,019,599) | $ (687,843) |
Adjustments to reconcile net loss to cash used in operations | ||
Stock-based compensation | 1,600,577 | 359,546 |
Non-cash interest | 382,896 | 3,854 |
Depreciation and amortization | 221,282 | 75,688 |
Convertible notes inducement expense | 823,900 | |
(Increase) decrease in operating assets: | ||
Prepaid expenses and other current assets | 207,012 | 77,658 |
Deferred revenue | (324,152) | (282,229) |
Increase (decrease) in operating liabilities: | ||
Accounts payable and accrued expenses | 473,125 | (52,104) |
Net Cash Flows Used In Operating Activities | (634,961) | (505,430) |
Cash Flows from Investing Activities: | ||
Fixed asset purchases | (467,523) | (530,672) |
Advances to related entities | (20,627) | |
Investment in equity method investees | (300,703) | |
Investment in affiliates | (14,310) | |
Net Cash Flows used in Investing Activities | (803,163) | (530,672) |
Financing Activities: | ||
Proceeds from advance from NVDRE | 300,000 | 2,647,031 |
Proceeds from Stem Venture funds | 3,493,055 | |
Repayments of shareholder advances | ||
Notes payable and advances proceeds | 150,000 | 200,000 |
Proceeds from convertible notes, net of fees paid | 735,000 | |
Cash paid from loan fees | (85,551) | |
Principle payments on notes payable | (121,641) | (23,301) |
Net Cash Flows Provided By Financing Activities | 4,470,863 | 2,823,730 |
Net increase in cash and cash equivalents | 3,032,739 | 1,787,628 |
Cash and cash equivalents at beginning of period | 761,351 | 391,389 |
Cash and cash equivalents at end of period | 3,794,090 | 2,179,017 |
Supplemental cash flow information | ||
Cash paid for interest | 1,882 | |
Cash paid for taxes | ||
Non-Cash Supplemental information | ||
Conversion of debt to equity | 2,575,000 | 21,780 |
Transfer of deposit to fixed assets | 40,817 | 90,000 |
Stock based compensation posted to prepaid expense | 975,000 | |
Deposit YMY stock | 450,000 | |
Deposit Yerba Oregon stock | 4,442,464 | |
Project costs paid in equity | $ 978,389 |
Incorporation and Operations an
Incorporation and Operations and Going Concern | 3 Months Ended |
Dec. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Incorporation and Operations and Going Concern | 1. Incorporation and operations and Going Concern Stem Holdings, Inc. (the “Company”) is a Nevada corporation incorporated on June 7, 2016. The Company purchases, improves, and leases properties for use in the cannabis production, distribution and sales industry as well as a cultivator providing cannabis and cannabis-infused products licensed under the laws of the states of Oregon, Nevada, Oklahoma, with six current licenses for cultivation, three for production, five for processing, one for wholesale and ten dispensary licenses. In addition, the Company also procured a hemp license under the laws of Oregon. As of December 31, 2018, the Company has acquired 3 commercial properties and leased a fourth property and has entered into leases to related entities for these four properties (see Note 10). For the quarter ended December 31, 2018 saw the near completion of buildout of these properties. The Company, through its operating subsidiaries (see below), is currently in the process of finalizing the investment in and acquisition of entities that engage directly in the production and sale of cannabis, moving from a real estate focused entity with a cannabis niche to a cannabis focused entity. The Company has incorporated 6 new subsidiaries –Stem Group Oklahoma, Inc., Stem Holdings Florida, Inc. Stem Holdings Oregon, Inc., Stem Holdings IP, Inc., Opco, LLC, and Stem Agri, LLC. The Company’s stock is publicly traded and is listed on the Canadian Securities Exchange under the symbol “STEM” and the OTCQB exchange under the symbol “STMH”. Going Concern These unaudited financial statements have been prepared on a going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. While the recreational use of cannabis is legal under the laws of certain States, where the Company is currently finalizing the acquisition of entities or investment in entities that directly produce or sell cannabis, the use and possession of cannabis is illegal under United States Federal law for any purpose, by way of Title II of the Comprehensive Drug Abuse Prevention and Control Act of 1970, otherwise known as the Controlled Substances Act of 1970 (the “ACT”). Cannabis is currently included under Schedule 1 of the Act, making it illegal to cultivate, sell or otherwise possess in the United States. On January 4, 2018 the office of the Attorney General published a memo regarding cannabis enforcement that rescinds directives promulgated under former President Obama that eased federal enforcement. In a January 8, 2018 memo, Jefferson B. Sessions, then Attorney General of the United States, indicated enforcement decisions will be left up to the U.S. Attorney’s in their respective states clearly indicating that the burden is with “federal prosecutors deciding which cases to prosecute by weighing all relevant considerations, including federal law enforcement priorities set by the Attorney General, the seriousness of the crime, the deterrent effect of federal prosecution, and the cumulative impact of particular crimes on the community.” Subsequently, in April 2018, President Trump promised to These conditions raise substantial doubt as to the Company’s ability to continue as a going concern should it complete its acquisitions and investments, which it considers likely as of the date of these financial statements. Should the United States Federal Government choose to begin enforcement of the provisions under the Act, the Company through its wholly owned subsidiaries could be prosecuted under the Act and the Company may have to immediately cease operations and/or be liquidated upon their closing of the acquisition or investment in entities that engage directly in the production and or sale of cannabis. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amount and classification of liabilities that might result from this uncertainty. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Dec. 31, 2018 | |
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 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 year ending September 30, 2019 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, 2018 filed on January 14, 2019. 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 subsidiaries, Stem Group Oklahoma, Inc., Stem Holdings Florida, Inc., Stem Holdings Oregon, Inc., Stem Holdings IP, Inc., Opco, LLC., and Stem Agri, LLC. All material intercompany accounts, transactions, and profits have been eliminated in consolidation. Our wholly owned subsidiaries had no operations, assets or liabilities as of December 31, 2018. 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 equity instruments, valuation of its properties for impairment testing and the deferral of rents. Actual results may differ from these estimates. Instruments 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 instruments 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 and our deferred rents. As of December 31, 2018, 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. As of December 31, 2018, the Company had deferrals of rent due to free rent periods of approximately $1.8 million as it completes the buildout of three of its properties, which is expected to be finalized for all of the Company properties in the upcoming quarter ended March 31, 2019, at which time the Company will derive payment of rents from all of its properties. The Company is currently in the process of acquiring the entities that it currently rents to and believes as of the date of these financial statements that it will acquire those entities (see Note 10). Geographical Concentrations As of December 31, 2018, the Company primarily rents to entities engaged in the production and sale of cannabis, which is only legal for recreational use in 10 states, with lesser legalization, such as for medical use in an additional 21 states, as of the time of these financial statements. 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 with determinate lives. 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 assets 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. 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 within the “Deposits and other assets” line item 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. Beneficial Conversion Feature The Company issued convertible notes that have conversion prices that create an embedded beneficial conversion feature on the issuance date. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portion of the note proceeds to the fair value of any attached equity instruments, if any related equity instruments were granted with the debt, on a relative fair market basis. The Company estimates the fair value of its common stock using the most recent selling price available. The intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid-in capital. The debt discount is amortized to interest expense over the life of the note using the effective interest method. 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, 2018 as the effect would be anti-dilutive (i.e. would reduce the loss per share). As of December 31, 2018, the Company has 4,685,298 shares issuable upon note conversion, options and warrants exercisable into the common stock of the Company outstanding. Advertising Costs The Company follows the policy of charging the cost of advertising to expense as incurred. Advertising expense was $ 5,903 for the three months ended December 31, 2018 and $9,380 for the three months ended December 31, 2017. 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. 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. Recent Accounting Guidance On August 29, 2018, the FASB issued ASU 2018-15 , Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract On August 28, 2018, the FASB issued ASU 2018-13, Fair Value Measurement: Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement In June 2018, the FASB issued ASU 2018-07, C ompensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers In February 2016, the FASB issued ASU No. 2016-02, Leases In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) |
Property, Plant & Equipment
Property, Plant & Equipment | 3 Months Ended |
Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant & Equipment | 3. Property, Plant & Equipment Property and equipment consisted of the following: December 31, 2018 September 30, 2018 Automobile $ 18,275 $ 18,275 Signage 19,118 19,118 Furniture and equipment 1,258,937 1,199,303 Leasehold improvements 2,894,367 2,718,519 Buildings and property improvements 4,992,600 4,719,742 Land 300,000 300,000 Software and related 58,518 58,518 Subtotal 9,541,815 9,033,475 Accumulated depreciation and amortization (929,958 ) (708,676 ) Property, plant and equipment, net $ 8,611,857 $ 8,324,799 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. In January 2018, the Company acquired certain property located at 14336 South Union Hall Road, Mulino Oregon 97042 for a total purchase price of approximately $1,555,500 which includes credits issued by the seller for prior rental payments and additional improvements on the property made by the Company. As part of the consideration for the purchase, the Company issued the seller a note for $1.2 million with a 2% interest rate and monthly payments beginning in July 2018 of $13,500 for a period of 19 months with a final balloon payment payable in January 2020 of approximately $957,000. The Company did not record a premium to the market rate of the note as it was immaterial at issuance. Depreciation and amortization expense was $221,282 for the three months ended December 31, 2018 and $75,688 for the three months ended December 31, 2017. |
Deposits and Other Assets
Deposits and Other Assets | 3 Months Ended |
Dec. 31, 2018 | |
Deposits And Other Assets | |
Deposits and Other Assets | 4. Deposits and other assets Other long-term assets consisted of the following as of: December 31, 2018 September 30, 2018 Project costs $ 1,044,639 $ 10,000 Investment in investee purchase agreement 393,750 - Deposits 114,846 155,662 Escrow shares for acquisition 4,442,464 - $ 5,995,699 $ 165,662 In October 2018, the Company entered into an Asset Purchase Agreement (“APA”) to acquire certain assets and assume certain liabilities of Yerba Oregon, LLC. The purchase price for the assets and assumption of liabilities is the greater of $4.613 million or multiples of 2018 and 2019 EBITDA of Yerba Oregon LLC, as required under the APA. Payment of the purchase price is as follows upon successful closing of the APA: $350,000 in cash at closing, a promissory note in the amount of $400,000 and the remainder in common shares of the Company based on the lesser of 85% of the average closing price of the stock as traded in the over the counter market 30 days prior to closing or $2.40 per share. The Company deposited into escrow with an attorney, upon signing the APA, 1,931,506 shares of its common stock, which were valued at $4,442,464. Closing of the APA is subject to certain requirements, including the issuance of state and local licenses, which is outside the control of the Company and the seller, which as of the date of these financial statements, had yet to be issued. Yerba Oregon, LLC operates a wholesale cannabis production and sales operation in the state of Oregon. In November and December 2018, the Company determined that Milestone’s 2 and 3 had been reached within the Multi-Party agreement (see note 10) and therefore had issued 457,191 shares of its common stock, with a valuation of $978,883, in satisfaction of the requirement to issue common shares covering 20% of the cash expended by the seller to purchase and improve the property and is currently negotiating with the owner of the property, a director of the Company, in regards to an allocation of cash and mortgage principal in satisfaction of the purchase price of $4.395 million required, which the Company expects to close on in March 2019. This is included in Project Costs. In November 2018, the Company issued 187,500 shares of its common stock, valued at $450,000, to acquire an option from the investors in YMY Ventures, LLC (see Note 6) and NVD RE (see Note 5) to (1) purchase a property comprised of a land and building near Las Vegas, NV and (2) acquire the remaining 50% of YMY Ventures, LLC held by the option issuers and (3) to acquire 37.5% of NVD RE owned by the option issuers. The Company allocated the $450,000 for the option as $56,500 to acquire the land and building and has included that amount with Project Costs, $337,500 to acquire the remaining 50% of YMY Ventures, LLC to Investment in Investee Purchase Agreement above and $56,500 to acquire the 25% of NVD RE held by the option issuers to Investment in Investee Purchase Agreement above. |
Investment in Equity Method Inv
Investment in Equity Method Investees | 3 Months Ended |
Dec. 31, 2018 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Investment in Equity Method Investees | 5. Investment in equity method investees In April 2018, the Company received a 37.5% interest in NVD RE Corp. (“NVD”) upon its issuance to NVD of a commitment to contribute $1.275 million to NVD. As of December 31, 2018, the Company had not only fully funded its commitment, but invested an additional $300,000 thousand in capital. NVD used the funds provided to date by the Company to acquire an under construction cannabis indoor grow building located near Las Vegas, Nevada and to continue the buildout of the property. The Company has no further commitment to fund the entity beyond its initial equity purchase commitment. NVD will lease its facilities upon completion to YMY Ventures, LLC (see Note 5). For the period from acquisition through December 31, 2018, NVD had only minimal startup and buildout operations, which were not apportioned to these financials statements as of December 31, 2018 due to immateriality. In the three months ended December 31, 2018, NVD obtained $300,000 in proceeds from a mortgage on its property. The funds from this mortgage were advanced to the Company. The advance is undocumented, non-interest bearing and due on demand. |
Due from Affiliates
Due from Affiliates | 3 Months Ended |
Dec. 31, 2018 | |
Related Party Transactions [Abstract] | |
Due from Affiliates | 6. Due from Affiliates In September 2018, the Company entered into an agreement to acquire 50% of the membership interest of YMY Ventures LLC (“YMY”). YMY is a startup operation located near Las Vegas, Nevada and owns a license for the production and sale of cannabis. The purchase price for the 50% interest is $750,000 with the first $375,000 paid into escrow upon signing, with the final $375,000 due upon closing, which under the agreement occurs when the license is transferred by the Nevada Department of Taxation and receipt of approval in transfer of ownership by the Division of Public and Behavioral Health of the City of North Las Vegas. As of December 31, 2018, the Company had funded the $375,000 into escrow and had provided the joint venture with additional funds primarily in the form of payments for work performed to acquire the license from the Nevada Department of Taxation in the amount of approximately $215,429. As of December 31, 2018 and the date of these financial statements, neither the license nor the transfer of membership interest had been issued or approved, however, the Company believes the license and transfer will be granted in FY 2019. In the event that no license is approved for transfer then the agreement automatically unwinds and the Company will receive the funds held in escrow and will have a claim for refund against YMY for amounts paid to obtain the license. Because of the automatic unwinding of the agreement in the event that the license grant or membership transfer are not approved, which are both outside the control of the Company and YMY, this has not been recorded as an equity method investment as of December 31, 2018, but as a due from affiliate. In the event of the failure of the license to be transferred, approximately $215,000 of the Company’s investment is at risk. In July 2018, the Company entered into an agreement to acquire a 25% interest in East Coast Packers LLC (“ECP”) for the purchase price of $1.5 million, payable in the amount of $500,000 in cash at closing and a note for $1 million. All amounts are payable to ECP. At the time of closing, ECP was a dormant Florida LLC, but owned a citrus fruit dealer license active for the 2015-2016 growing season. This qualified ECP under newly enacted legislation in the state of Florida to apply for a license to produce and sell medical cannabis. Until such time as ECP is granted a medical cannabis license, the $500,000 paid into ECP may only be expended by ECP in acquiring a medical cannabis license. As of December 31, 2018 and the date of these financial statements, no license had been granted, however, the Company believes the license will be issued in FY 2019. In the event that ECP is unable to obtain the medical license, the agreement unwinds in full, the membership interest is returned to the seller and all amounts paid in not expended on the acquisition of the license are to be refunded to the Company along with cancellation of the $1 million note. Because the issuance of the license is outside the control of the Company and ECP and because the agreement unwinds in full in the event the license is not issued, this has not been recorded as an equity method investment as of December 31, 2018, but as a due from affiliate. In the event of the failure to obtain the license the approximately $500,000 cash investment is at risk. |
Notes Payable and Advances
Notes Payable and Advances | 3 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
Notes Payable and Advances | 7. Notes Payable and Advances Equipment financing In November 2017, the Company entered into a promissory note in the amount of $21,749 from a vendor of the Company to finance the acquisition of a security electronics system in one of its properties. 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. This vendor is currently in a restructuring and is likely to go out of business. As of December 31, 2018, the Company has been notified that the vendor holding the note is in bankruptcy and during the quarter ended December 31, 2018, the Company withheld payment under the note. The obligation remains outstanding at $14,950 as of December 31, 2018. This is included in current portion of long-term debt and long-term debt line items in the balance sheet. Effective April 29, 2018, the Company entered into a 36-month premium finance agreement in consideration for a John Deere Gator Tractor in the principal amount of $15,710. The note bears no annual interest rate and requires the Company to make thirty-six monthly payments of $442 over the term of the note. As of December 31, 2018, the obligation outstanding is $12,389. No amount was recorded for the premium for the non-interest bearing feature of the note as it was immaterial. The note is secured by the equipment financed. This is included in current portion of long-term debt and long-term debt line items in the balance sheet. Effective May 29, 2018, the Company entered into a 24-month premium finance agreement in consideration for a MT85 wide track loader in the principal amount of $27,844. The note bears no annual interest rate and requires the Company to make 24 monthly payments of $1,160 over the term of the note. As of December 31, 2018, the obligation outstanding is $20,883. No amount was recorded for the premium for the non-interest bearing feature of the note as it was immaterial. The note is secured by the equipment financed. This is included in current portion of long-term debt and long-term debt line items in the balance sheet. Due to related parties As of December 31, 2018, related parties had advanced cash and equipment, on a due on demand, unsecured and undocumented basis, to the Company in the amount of $33,600. Insurance financing In February 2018, the Company entered into a 10-month premium finance agreement in partial consideration for an insurance policy in the principal amount of $252,445. The note bears an annual interest rate of 5.75% and requires the Company to make ten monthly payments of $22,105 over the term of the note. As of December 31, 2018, the obligation has been satisfied. Effective March 2, 2018, the Company entered into a 10-month premium finance agreement in partial consideration for an insurance policy in the principal amount of $14,390. The note bears an annual interest rate of 5.75% and requires the Company to make ten monthly payments of $904 over the term of the note. As of December 31, 2018, the obligation has been satisfied. Effective July 31, 2018, the Company entered into a 9-month premium finance agreement in partial consideration for an insurance policy in the principal amount of $54,701.55. The note bears an annual interest rate of 7.99% and requires the Company to make nine monthly payments of $4,435 over the term of the note. As of December 31, 2018, the obligation outstanding is $17,741. This is included in the short term notes and advances line item in the balance sheet. Short-term notes and advances In September 2018, an investor interested in the then ongoing private placement of convertible notes (see below) advanced the Company $168,000 on an unsecured basis and then entered discussions with Company regarding the form of the note. As of December 31, 2018, the Company and the investor had not come to terms and the investor did not agree to the terms of the notes. The Company has treated the amount as an unsecured advance, due on demand. As of December 31, 2018 and the date of these financial statements, no demand had been made and the Company continues to negotiate with the investor. In November 2018, a board member of the Company and several outside investors provided the Company with approximately $3.493 million in cash to be dispensed to an entity being setup by the investors with assistance from the Company, and which has yet to open a checking account, which will be primarily owned and controlled by the board member, upon that entity completing its setup and opening up of a checking account. The Company is currently treating the amounts tendered as undocumented advances, due on demand and non-interest bearing. The Company expects that the new venture will be setup in the near term and has therefore not recorded a premium or discount associated with the funds advanced as they would be immaterial. As disclosed in Note 5, the Company entered into a promissory note in the principal amount of $1 million payable to ECP as part of its investment in the LLC. The promissory is payable in five installments commencing upon the effective date (the date of grant of license to engage in cannabis operations issuable by the government of the State of Florida), over the course of 1 year, with an interest rate of 1% per annum for the first six months, then increasing to 5.5% per annum for the remainder of the note period through maturity. In the event the LLC is denied the licenses necessary to operate, the note is cancelled in full. Mortgages payable On February 28, 2018, the Company executed a $550,000 mortgage payable on the Willamette property to acquire additional funds. The mortgage bears interest at 15% per annum. Monthly interest only payments began March 1, 2018 and continue each month thereafter until paid. The entire unpaid balance is due on March 1, 2020, the maturity date of the mortgage, and is secured by the underlying property. The Company paid costs of approximately $28,000 to close on the mortgage. The mortgage terms do not allow participations by the lender in either the appreciation in the fair value of the mortgaged real estate project or the results of operations of the mortgaged real estate project. The note has been cross guaranteed by the CEO and Director of the Company. This is included in the long-term debt line item in the balance sheet. On April 4, 2018, the Company executed a $314,000 mortgage payable on the Powell property to acquire additional funds. At closing $75,000 of the proceeds was put into escrow. The mortgage bears interest at 15% per annum. Monthly interest only payments began May 1, 2018 and continue each month thereafter until paid. The entire unpaid balance is due on April 1, 2020, the maturity date of the mortgage, and is secured by the underlying property. The Company plaid costs of approximately $19,000 to close on the mortgage. The mortgage terms do not allow participations by the lender in either the appreciation in the fair value of the mortgaged real estate project or the results of operations of the mortgaged real estate project. The note has been cross guaranteed by the CEO and Director of the Company. This is included in the long-term debt line item in the balance sheet. On January 16, 2018 the Company consummated a “Contract for Sale” for a Farm Property in Mulino OR (the “Mulino Property”). The purchase price was $1,700,000 which was reduced by a rental credit of approximately $135,000 which is equivalent to nine months’ rent at $15,000 a month and an additional credit of $9,500 for additional work done on the property. In connection with the purchase of the property, the Company made a cash payment as down payment plus payment of closing costs in the amount of $370,637 and issued 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. No amount was recorded for the premium for the below market rate feature of the note as it was immaterial. The note is secured by a deed of trust on the property. The Company performed an analysis and determined that the rate obtained was below market, however, no premium was recorded as the Company determined it was immaterial. This is included in the long-term debt and current portion of long-term debt line items in the balance sheet. |
Convertible Debt
Convertible Debt | 3 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
Convertible Debt | 8. Convertible debt During the three months ended December 31, 2018, the Company issued to holders of then outstanding convertible notes, a time limited incentive in the form of a reduction in the conversion prices of the notes held to $1.80, in order to induce the holders to convert their notes. In October and November 2018, holders of $100,000 in principal of short term convertible notes, $975,000 in principal of 6 month convertible notes and $1.5 million in principal 12 month convertible notes agreed to convert the principal amounts outstanding in full and for which as of December 31, 2018, the Company had issued 958,335 shares of its common stock and had an additional 472,221 common shares issuable as of December 31, 2018 in satisfaction of the conversions. The inducement expense recorded for the three months ended December 31, 2018 was approximately $824,000. On December 27, 2018, the Company entered into an Agency Agreement with respect to a private offering of up to 10,000 special warrants of the Company (the “CD Special Warrants”) for aggregate gross proceeds of up to $10,000,000 (in Canadian funds, denoted herein as “C”) (the “Offering”). In addition, on December 27, 2018, the Company closed the first tranche of the Offering and was notified that the following week a second closing would occur, consisting in total of 3,121 CD Special Warrants at a price of C$1,000 per CD Special Warrant for aggregate gross proceeds of C$3,121,000. Proceeds received in December 2018, were primarily investors who were United States based which were $735,000 (approximately C$980,000) with the remaining proceeds (C$2,141,000) in the second tranche primarily from Canadian investors received the first week of January 2019. Each CD Special Warrant will be exchanged (with no further action on the part of the holder thereof and for no further consideration) for one convertible debenture unit of the Company (a “Convertible Debenture Unit”), on the earlier of: (i) the third business day after the date on which both (A) a receipt (the “Receipt”) for a (final) prospectus (the “Qualification Prospectus”) qualifying the distribution of the Convertible Debentures (as defined below) and Warrants (as defined below) issuable upon exercise of the CD Special Warrants has been issued by the applicable securities regulatory authorities in the Canadian jurisdictions in which purchasers of the CD Special Warrants are resident (the “Canadian Jurisdictions”), and (B) a registration statement (the “Registration Statement”) registering the resale of the common shares underlying the Convertible Debentures and Warrants has been declared effective by the U.S. Securities and Exchange Commission (the “Registration”) ; and (ii) the date that is six months following the closing of the Offering. Each Convertible Debenture Unit is comprised of C$1,000 principal amount 8.0% senior unsecured convertible debenture (each, a “Convertible Debenture”) of the Company and 167 common share purchase warrants of the Company (each, a “Warrant”). Each Warrant entitles the holder to purchase one common share of the Company (each, a “Warrant Share”) at an exercise price of C$3.90 per Warrant Share for a period of 24 months following the closing of the Offering. The Company has agreed to use its best efforts to obtain the Receipt and Registration within six months following the closing of the Offering. In the event that the Receipt and Registration have not been obtained on or before 5:00 p.m. (PST) on the date that is 120 days following the closing of the Offering, each unexercised CD Special Warrant will thereafter entitle the holder thereof to receive, upon the exercise thereof and at no additional cost, 1.05 Convertible Debenture Units per CD Special Warrant (instead of 1.0 Convertible Debenture Unit per CD Special Warrant). Until the Receipt and Registration have been obtained, securities issued in connection with the Offering (including any underlying securities issued upon conversion or exercise thereof) will be subject to a 6-month hold period from the date of issue. The brokered portion of the Offering (C$2,247,000) was completed by a syndicate of agents (collectively, the “Agents”). The Company paid the Agents a cash commission equal to 7.0% of the gross proceeds raised in the first tranche of the brokered portion of the Offering. As additional consideration, the Company issued the Agents such number of non-transferable broker convertible debenture special warrants (the “ Broker CD Special Warrants Broker Warrants As part of the offering, as of December 31, 2018, the Company had incurred fees of approximately $85,000. The Company valued the warrants granted as part of the units using the Black Scholes Merton option pricing model and determined that the value at grant was approximately $484,000. The significant assumptions used in the valuation are as follows: Fair value of underlying common shares $ 2.10 Exercise price (converted to USD) $ 2.925 Dividend yield - Historical volatility 116.9 % Risk free interest rate 2.60 % The table below shows the net amount outstanding as of December 31, 2018, after unamortized discount and loan fees under the convertible notes: Convertible Notes, Net of Discount Convertible promissory note $ 735,000 Unamortized debt discount and loan fees (566,363 ) Net amount $ 168,637 |
Shareholders' Equity
Shareholders' Equity | 3 Months Ended |
Dec. 31, 2018 | |
Equity [Abstract] | |
Shareholders' Equity | 9. Shareholders’ Equity 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. Preferred shares The Company has two series of preferred shares designated with no preferred shares issued and outstanding as of December 31, 2018. Common shares On July 13, 2018, a meeting of the stockholders of the Company took place, and the stockholders adopted a resolution authorizing the Board of Directors, in its sole discretion, to amend the Company’s Articles of Incorporation to increase the number of authorized shares of Company Common Stock from 100,000,000 to 300,000,000. 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. Common Stock issuances for compensation: As part of the fees associated with the 10,000 Special Convertible Note Unit offering, the Company agreed to issue the brokers 16,666 shares of its common stock. In the three months ended December 31, 2018 the Company entered into several consulting agreements, and as part of these agreements agreed to issue a total of 350,000 shares of common stock in payment for consulting services to be provided to the Company over the following 12 months. The Company capitalized the amounts to prepaid expense and is amortizing the expense over the period of the respective agreement as part of stock based compensation on the statement of operations. Through December 31, 2018, approximately $178,000 was amortized to stock based compensation in the statement of operations. As of December 31, 2018 the Company amended a consulting agreement and agreed to issue a total of 41,667 shares of common stock in payment for the continuance of his consulting services provided to the Company over the following 18 months. The Company capitalized the amounts to prepaid expense and is amortizing the expense over the period of the agreement. Through December 31, 2018, approximately $30,000 was amortized to stock based compensation expense in the statement of operations. For the quarter ended December 31, 2018, the Company granted 194,233 shares of common stock to certain employees and consultants. The Company recorded stock-based compensation for this period in the amount of $388,466 for these issuances which is included as part of stock based compensation in the statement of operations. Option Issuances for compensation: During the three months ended December 31, 2018, the Company amended a previously issued consulting agreement, and as part of that agreement for professional services, agreed to issue a total of 75,000 options to purchase the common stock of the Company with having an exercise price of $1.80 per share and a term of 4 years. Pursuant to the agreement, all 75,000 options vested upon issuance. In addition, the agreement reduced the exercise price of the previously issued options under the original agreement down to $1.80 per share from the original exercise price of $2.40 per share. In total, the Company recorded option-based consulting expense of $144,750 as a result of these options. The significant assumptions used to value the options granted in the three months ended December 31, 2018 are as follows: Fair value of underlying common shares $ 2.40 Exercise price $ 1.80 Dividend yield 0.0 % Historical volatility 116.90 % Risk free interest rate 2.96 % Warrants issued for compensation On December 27, 2018, the Company entered into an Agency Agreement with respect to a private offering of up to 10,000 special warrants of the Company (the “CD Special Warrants”) for aggregate gross proceeds of up to $10,000,000 (in Canadian funds, denoted herein as “C”) (the “Offering”). As part of the agreement, each Convertible Debenture Unit is comprised of C$1,000 principal amount 8.0% senior unsecured convertible debenture (each, a “Convertible Debenture”) of the Company and 167 common share purchase warrants of the Company (each, a “Warrant”). Each Warrant entitles the holder to purchase one common share of the Company (each, a “Warrant Share”) at an exercise price of C$3.90 per Warrant Share for a period of 24 months following the closing of the Offering. As of December 31, 2018, a total of 2,585 units were sold equivocating to 431,695 warrants. In the quarter ended December 31, 2018 the Company issued a consultant a warrant to acquire 50,000 shares of its common stock as part of the compensation package within the consulting agreement. The warrant was issued with an exercise price of $2.40 per share and a term of 3 years. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 10. Commitments and contingencies As noted earlier in Note 1, the Company, through entities it invests in and is negotiating to acquire (see below) will be in the near future engaging in a business that constitutes an illegal act under the laws of the United States Federal Government. This raises several possible issues which may impact the Company’s overall operations, not the least of which are related to traditional banking and other key operational risks. Since cannabis remains illegal on the federal level, and most traditional banks are federally insured, those financial institutions will not service cannabis businesses. In states where medical or recreational marijuana is legal, dispensary owners, manufacturers, and anybody who “touches the plant”, continue to face a host of operational hurdle. While local, state-chartered banks and credit unions now accept cannabis commerce, there remains a reluctance by traditional banks to do business with them. Aside from a huge inconvenience and the need to find creative ways to manage financial flow, payroll logistics, and payment of taxes, this also poses tremendous risks to controls as a result of operating a lucrative business in cash. This lack of access to traditional banking may inhibit industry growth. Despite the uncertainties surrounding the Federal government’s position on legalized marijuana, the Company does not believe these risks will have a substantive impact on its planned operations in the near term. 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. On February 22, 2018, both parties executed a lease addendum that adds contiguous property for 12,322 square feet. The term commences November 1, 2017 and continues through November 31, 2026 at a rate of $3,525 a month that escalates after the first year. The Company subleases this property to a related party (see disclosures below under “Springfield Suites”). As of December 31, 2018, the total subrental income to be received by the Company over the life of the sublease is approximately $8.9 million. In March 2018, the Company entered into a 3-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 $3,024 per month with yearly increases thereafter. All taxes, maintenance and utilities are billed separately. During the three months ended December 31, 2018, the Company incurred total rent expense of $82,564. As of December 31, 2018, the Company has recorded a long-term asset for the straight lining of rent under the rental leases to the cannabis operators of approximately $1,766,487. As of the date of these financial statements, the Company is in negotiations to acquire the entities that lease its properties (see below). 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 regard to certain properties owned by the persons and entities affiliated with the parties of the Agreement so long as certain targets are met. Certain shareholders of the Company have organized entities that operate directly in the cannabis industry, and the Company leases its properties to these entities. In addition, the Multi Party Agreement has requirements for the purchase of certain properties from the related parties to the agreement upon certain milestones being reached (see Note 12). 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. At the time of these financial statements, the Company was in negotiations with these entities to amend the multiparty agreement in order to acquire the Company’s prior to removal of cannabis from Schedule 1 of the Act. The Company believes the acquisition of these entities will become probable in the near future in FY 2019. On July 16, 2018, the Company began trading its common stock under the ticker symbol “STEM” on the Canadian Securities Exchange (the “ CSE Property Rental Agreements All of the income leases below are to entities that are related to the Company through common ownership. 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 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 to 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 September 2019, and thus payments will commence in January 2020. 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 to 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 May 2019, and thus expects payments to begin in September 2019. 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. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Dec. 31, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | 12. Subsequent events From January 1, 2019 through the date of these financial statements, the Company issued shares of its common stock in satisfaction of compensation provisions within certain consulting agreements. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Dec. 31, 2018 | |
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 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 year ending September 30, 2019 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, 2018 filed on January 14, 2019. 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 subsidiaries, Stem Group Oklahoma, Inc., Stem Holdings Florida, Inc., Stem Holdings Oregon, Inc., Stem Holdings IP, Inc., Opco, LLC., and Stem Agri, LLC. All material intercompany accounts, transactions, and profits have been eliminated in consolidation. Our wholly owned subsidiaries had no operations, assets or liabilities as of December 31, 2018. |
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 equity instruments, valuation of its properties for impairment testing and the deferral of rents. Actual results may differ from these estimates. |
Instruments to Purchase Common Stock and Other Derivative Financial Instruments | Instruments 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 instruments 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 and our deferred rents. As of December 31, 2018, 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. As of December 31, 2018, the Company had deferrals of rent due to free rent periods of approximately $1.8 million as it completes the buildout of three of its properties, which is expected to be finalized for all of the Company properties in the upcoming quarter ended March 31, 2019, at which time the Company will derive payment of rents from all of its properties. The Company is currently in the process of acquiring the entities that it currently rents to and believes as of the date of these financial statements that it will acquire those entities (see Note 10). |
Geographical Concentrations | Geographical Concentrations As of December 31, 2018, the Company primarily rents to entities engaged in the production and sale of cannabis, which is only legal for recreational use in 10 states, with lesser legalization, such as for medical use in an additional 21 states, as of the time of these financial statements. |
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 with determinate lives. 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 assets 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. |
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 within the “Deposits and other assets” line item 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. |
Beneficial Conversion Feature | Beneficial Conversion Feature The Company issued convertible notes that have conversion prices that create an embedded beneficial conversion feature on the issuance date. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portion of the note proceeds to the fair value of any attached equity instruments, if any related equity instruments were granted with the debt, on a relative fair market basis. The Company estimates the fair value of its common stock using the most recent selling price available. The intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid-in capital. The debt discount is amortized to interest expense over the life of the note using the effective interest method. |
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, 2018 as the effect would be anti-dilutive (i.e. would reduce the loss per share). As of December 31, 2018, the Company has 4,685,298 shares issuable upon note conversion, options and warrants exercisable into the common stock of the Company outstanding. |
Advertising Costs | Advertising Costs The Company follows the policy of charging the cost of advertising to expense as incurred. Advertising expense was $ 5,903 for the three months ended December 31, 2018 and $9,380 for the three months ended December 31, 2017. |
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. |
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. |
Recent Accounting Guidance | Recent Accounting Guidance On August 29, 2018, the FASB issued ASU 2018-15 , Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract On August 28, 2018, the FASB issued ASU 2018-13, Fair Value Measurement: Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement In June 2018, the FASB issued ASU 2018-07, C ompensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers In February 2016, the FASB issued ASU No. 2016-02, Leases In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Dec. 31, 2018 | |
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, 2018 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property, Plant and Equipment | Property and equipment consisted of the following: December 31, 2018 September 30, 2018 Automobile $ 18,275 $ 18,275 Signage 19,118 19,118 Furniture and equipment 1,258,937 1,199,303 Leasehold improvements 2,894,367 2,718,519 Buildings and property improvements 4,992,600 4,719,742 Land 300,000 300,000 Software and related 58,518 58,518 Subtotal 9,541,815 9,033,475 Accumulated depreciation and amortization (929,958 ) (708,676 ) Property, plant and equipment, net $ 8,611,857 $ 8,324,799 |
Deposits and Other Assets (Tabl
Deposits and Other Assets (Tables) | 3 Months Ended |
Dec. 31, 2018 | |
Deposits And Other Assets | |
Schedule of Other Long-term Assets | Other long-term assets consisted of the following as of: December 31, 2018 September 30, 2018 Project costs $ 1,044,639 $ 10,000 Investment in investee purchase agreement 393,750 - Deposits 114,846 155,662 Escrow shares for acquisition 4,442,464 - $ 5,995,699 $ 165,662 |
Convertible Debt (Tables)
Convertible Debt (Tables) | 3 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of Assumptions Value Warrant Granted | The significant assumptions used in the valuation are as follows: Fair value of underlying common shares $ 2.10 Exercise price (converted to USD) $ 2.925 Dividend yield - Historical volatility 116.9 % Risk free interest rate 2.60 % |
Schedule of Convertible Notes Outstanding After Unamortized Discount | The table below shows the net amount outstanding as of December 31, 2018, after unamortized discount and loan fees under the convertible notes: Convertible Notes, Net of Discount Convertible promissory note $ 735,000 Unamortized debt discount and loan fees (566,363 ) Net amount $ 168,637 |
Shareholders' Equity (Tables)
Shareholders' Equity (Tables) | 3 Months Ended |
Dec. 31, 2018 | |
Equity [Abstract] | |
Schedule of Assumptions Used | The significant assumptions used to value the options granted in the three months ended December 31, 2018 are as follows: Fair value of underlying common shares $ 2.40 Exercise price $ 1.80 Dividend yield 0.0 % Historical volatility 116.90 % Risk free interest rate 2.96 % |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Accounting Policies [Abstract] | ||
Rent | $ 1,800,000 | |
Number of anti-dilutive securities excluded for calculation | 4,685,298 | |
Advertising expense | $ 5,903 | $ 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, or raise in excess of $1 billion in public offerings of its equity or instruments directly convertible into its equity | |
Proceeds From Public Offering | $ 1,000,000,000 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Schedule of Estimated Useful Life of Assets (Details) | 3 Months Ended |
Dec. 31, 2018 | |
Buildings [Member] | |
Asset's estimated useful life | 20 years |
Leasehold Improvements [Member] | |
Asset's estimated 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 | Nov. 01, 2016 | Jul. 31, 2018 | Jan. 31, 2018 | Dec. 31, 2018 | Dec. 31, 2017 |
Property, plant and equipment, cost | $ 656,498 | $ 918,000 | ||||
Acquisition of purchase price | $ 1,555,500 | |||||
Debt instrument face amount | $ 1,200,000 | |||||
Debt interest percentage | 2.00% | |||||
Monthly payments | $ 13,500 | |||||
Depreciation and amortization expense | $ 221,282 | $ 75,688 | ||||
January 2020 [Member] | ||||||
Debt annual payment payable | $ 957,000 |
Property, Plant & Equipment - S
Property, Plant & Equipment - Schedule of Property, Plant and Equipment (Details) - USD ($) | Dec. 31, 2018 | Sep. 30, 2018 | |
Subtotal | $ 9,541,815 | $ 9,033,475 | |
Accumulated depreciation and amortization | (929,958) | (708,676) | |
Property, plant and equipment, net | 8,611,857 | 8,324,799 | [1] |
Automobile [Member] | |||
Subtotal | 18,275 | 18,275 | |
Signage [Member] | |||
Subtotal | 19,118 | 19,118 | |
Furniture and Equipment [Member] | |||
Subtotal | 1,258,937 | 1,199,303 | |
Leasehold Improvements [Member] | |||
Subtotal | 2,894,367 | 2,718,519 | |
Buildings and Property Improvements [Member] | |||
Subtotal | 4,992,600 | 4,719,742 | |
Land [Member] | |||
Subtotal | 300,000 | 300,000 | |
Software and Related [Member] | |||
Subtotal | $ 58,518 | $ 58,518 | |
[1] | Derived from audited information |
Deposits and Other Assets (Deta
Deposits and Other Assets (Details Narrative) | Feb. 06, 2017USD ($) | Nov. 01, 2016USD ($) | Dec. 31, 2018USD ($)shares | Nov. 30, 2018USD ($)shares | Oct. 31, 2018USD ($)Integer$ / sharesshares | Jan. 31, 2018USD ($) |
Promissory note | $ 1,200,000 | |||||
Purchase price of property | $ 656,498 | $ 918,000 | ||||
YMY Ventures LLC and NVD RE Corp [Member] | ||||||
Number of shares issued to acquire options | shares | 187,500 | |||||
Value of shares issued to acquire options | $ 450,000 | |||||
Description on other assets acquired | (1) purchase a property comprised of a land and building near Las Vegas, NV and (2) acquire the remaining 50% of YMY Ventures, LLC held by the option issuers and (3) to acquire 37.5% of NVD RE owned by the option issuers. | |||||
Payments to acquire land and building with project cost | $ 56,500 | |||||
Asset Purchase Agreement [Member] | ||||||
Purchase price for assets and assumption of liabilities | $ 4,613,000 | |||||
Payment of acquired cash | 350,000 | |||||
Promissory note | $ 400,000 | |||||
Debt instrument, description | The Company based on the lesser of 85% of the average closing price of the stock as traded in the over the counter market 30 days prior to closing or $2.40 per share. | |||||
Debt instrument lesser percentage | 85.00% | |||||
Debt instrument trading days | Integer | 30 | |||||
Debt instrument trading days per shares | $ / shares | $ 2.40 | |||||
Number of common stock for assets purchase | shares | 1,931,506 | |||||
Value on purchase of common stock for assets | $ 4,442,464 | |||||
Multi-Party Agreement [Member] | ||||||
Number of common stock issued during period | shares | 457,191 | 457,191 | ||||
Value on common stock issued during period | $ 978,883 | $ 978,883 | ||||
Percentage on shares coverage on requirement of shares issued | 20.00% | 20.00% | ||||
Purchase price of property | $ 4,395,000 | $ 4,395,000 | ||||
Investee Purchase Agreement [Member] | YMY Ventures LLC [Member] | ||||||
Payments to acquire subsidiaries | $ 337,500 | |||||
Percentage on acquiring subsidiaries | 50.00% | |||||
Investee Purchase Agreement [Member] | NVD RE Corp. [Member] | ||||||
Payments to acquire subsidiaries | $ 56,500 | |||||
Percentage on acquiring subsidiaries | 25.00% |
Deposits and Other Assets - Sch
Deposits and Other Assets - Schedule of Other Long-term Assets (Details) - USD ($) | Dec. 31, 2018 | Sep. 30, 2018 | |
Deposits And Other Assets | |||
Project costs | $ 1,044,639 | $ 10,000 | |
Investment in investee purchase agreement | 393,750 | ||
Deposits | 114,846 | 155,662 | |
Escrow shares for acquisition | 4,442,464 | ||
Deposits and other assets | $ 5,995,699 | $ 165,663 | [1] |
[1] | Derived from audited information |
Investment in Equity Method I_2
Investment in Equity Method Investees (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | ||
Apr. 30, 2018 | Dec. 31, 2018 | Sep. 30, 2018 | [1] | |
Investment in equity method | $ 1,598,764 | $ 1,301,166 | ||
NVD RE Corp [Member] | ||||
Equity interest percentage | 37.50% | |||
Payments to acquire equity investment | $ 1,275,000 | |||
Investment in equity method | 300,000 | |||
Proceeds from mortgage property | $ 300,000 | |||
[1] | Derived from audited information |
Due from Affiliates (Details Na
Due from Affiliates (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | ||
Sep. 30, 2018 | Jul. 31, 2018 | Dec. 31, 2018 | Jan. 31, 2018 | |
Debt instrument face amount | $ 1,200,000 | |||
YMY Ventures LLC [Member] | ||||
Acquisition, percentage | 50.00% | |||
Purchase price of business | $ 750,000 | |||
Payments to acquire license | $ 215,429 | |||
Investments | 215,000 | |||
YMY Ventures LLC [Member] | First Due [Member] | ||||
Purchase price of business | 375,000 | |||
YMY Ventures LLC [Member] | Final Due [Member] | ||||
Purchase price of business | $ 375,000 | |||
YMY Ventures LLC [Member] | Escrow [Member] | ||||
Purchase price of business | $ 375,000 | |||
East Coast Packers LLC [Member] | ||||
Acquisition, percentage | 25.00% | |||
Purchase price of business | $ 1,500,000 | |||
Payments to acquire license | 500,000 | |||
Purchase price payable in cash | 500,000 | |||
Debt instrument face amount | 1,000,000 | |||
Cancellation of debt | $ 1,000,000 |
Notes Payable and Advances (Det
Notes Payable and Advances (Details Narrative) - USD ($) | Jul. 31, 2018 | May 29, 2018 | Apr. 29, 2018 | Apr. 04, 2018 | Mar. 02, 2018 | Feb. 28, 2018 | Jan. 16, 2018 | Nov. 30, 2017 | Nov. 30, 2018 | Jul. 31, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2018 | Jan. 31, 2018 | |
Debt instrument face amount | $ 1,200,000 | ||||||||||||||
Debt instrument interest percentage | 2.00% | ||||||||||||||
Debt monthly payments | $ 13,500 | ||||||||||||||
Due to related party | $ 33,600 | $ 33,600 | [1] | ||||||||||||
Escrow deposit | 4,442,464 | ||||||||||||||
Cash payment | $ 467,523 | $ 530,672 | |||||||||||||
Willamette Property [Member] | |||||||||||||||
Mortgage payable | $ 550,000 | 28,000 | |||||||||||||
Mortgage payable, interest rate | 15.00% | ||||||||||||||
Mortgage payable final due date | Mar. 1, 2020 | ||||||||||||||
Description of collateral | The note has been cross guaranteed by the CEO and Director of the Company. | ||||||||||||||
Powell Property [Member] | |||||||||||||||
Mortgage payable | $ 314,000 | $ 19,000 | |||||||||||||
Mortgage payable, interest rate | 15.00% | ||||||||||||||
Mortgage payable final due date | Apr. 1, 2020 | ||||||||||||||
Description of collateral | The note has been cross guaranteed by the CEO and Director of the Company. | ||||||||||||||
Escrow deposit | $ 75,000 | ||||||||||||||
East Coast Packers LLC [Member] | |||||||||||||||
Debt instrument face amount | $ 1,000,000 | 1,000,000 | |||||||||||||
Outside Investor [Member] | |||||||||||||||
Cash to be dispensed | $ 3,493,000 | ||||||||||||||
Private Placement [Member] | Investor [Member] | |||||||||||||||
Unsecured convertible notes | 168,000 | ||||||||||||||
Contract for Sale [Member] | |||||||||||||||
Debt maturity date | Jan. 31, 2020 | ||||||||||||||
Promissory note amount | $ 1,200,000 | ||||||||||||||
Contract for Sale [Member] | July 2018 [Member] | |||||||||||||||
Monthly payments | $ 13,500 | ||||||||||||||
Monthly installments interest rate | 2.00% | ||||||||||||||
Contract for Sale [Member] | Mulino Property [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 | $ 370,637 | ||||||||||||||
Promissory Note [Member] | |||||||||||||||
Debt instrument face amount | $ 21,749 | ||||||||||||||
Debt instrument interest percentage | 18.00% | ||||||||||||||
Debt servicing fee percentage | 10.00% | ||||||||||||||
Debt maturity period description | Matures 24 months after issuance | ||||||||||||||
Notes payable | $ 14,950 | ||||||||||||||
Promissory Note [Member] | East Coast Packers LLC [Member] | |||||||||||||||
Debt instrument face amount | $ 1,000,000 | ||||||||||||||
Debt instrument interest percentage | 1.00% | ||||||||||||||
Increase in interest percentage | 5.50% | ||||||||||||||
Debt instrument, interest rate terms | The promissory is payable in five installments commencing upon the effective date (the date of grant of license to engage in cannabis operations issuable by the government of the State of Florida), over the course of 1 year, with an interest rate of 1% per annum for the first six months, then increasing to 5.5% per annum for the remainder of the note period through maturity. | ||||||||||||||
Notes Payable [Member] | 36-Month Premium Finance Agreement [Member] | |||||||||||||||
Debt instrument face amount | $ 15,710 | ||||||||||||||
Notes payable | $ 12,389 | ||||||||||||||
Debt monthly payments | $ 442 | ||||||||||||||
Notes Payable One [Member] | 24-Month Premium Finance Agreement [Member] | |||||||||||||||
Debt instrument face amount | $ 27,844 | ||||||||||||||
Notes payable | $ 20,883 | ||||||||||||||
Debt monthly payments | $ 1,160 | ||||||||||||||
Notes Payable Two [Member] | 10-Month Premium Finance Agreement [Member] | |||||||||||||||
Debt instrument face amount | $ 252,445 | ||||||||||||||
Debt instrument interest percentage | 5.75% | ||||||||||||||
Debt monthly payments | $ 22,105 | ||||||||||||||
Notes Payable Three [Member] | 10-Month Premium Finance Agreement [Member] | |||||||||||||||
Debt instrument face amount | $ 14,390 | ||||||||||||||
Debt instrument interest percentage | 5.75% | ||||||||||||||
Debt monthly payments | $ 904 | ||||||||||||||
Notes Payable Four [Member] | 9-Month Premium Finance Agreement [Member] | |||||||||||||||
Debt instrument face amount | $ 54,702 | $ 54,702 | |||||||||||||
Debt instrument interest percentage | 7.99% | 7.99% | |||||||||||||
Notes payable | $ 17,741 | ||||||||||||||
Debt monthly payments | $ 4,435 | ||||||||||||||
[1] | Derived from audited information |
Convertible Debt (Details Narra
Convertible Debt (Details Narrative) | Dec. 27, 2019USD ($)shares | Dec. 27, 2019CAD ($) | Dec. 31, 2018USD ($)$ / sharesshares | Dec. 31, 2018CAD ($)shares | Dec. 27, 2019CAD ($)$ / sharesshares | Nov. 30, 2018USD ($) | Oct. 31, 2018USD ($) | Jan. 31, 2018 |
Debt conversion price | $ / shares | $ 1.80 | |||||||
Convertible debenture | $ 735,000 | |||||||
Number of shares issued insatisfaction of conversion | shares | 958,335 | 958,335 | ||||||
Number of shares issuable in satisfaction of conversion | shares | 472,221 | 472,221 | ||||||
Inducement expense | $ 824,000 | |||||||
Convertible debenture, interest percentage | 2.00% | |||||||
Offering fees | 85,000 | |||||||
Fair value of options grant | 484,000 | |||||||
Common Shares [Member] | ||||||||
Finance fee | $ 50,000 | |||||||
First Tranche [Member] | ||||||||
Cash commission percentage | 7.00% | 7.00% | ||||||
Investor [Member] | ||||||||
Aggregate gross proceeds of warrants | $ 735,000 | |||||||
CAD [Member] | ||||||||
Finance fee | $ 100,000 | |||||||
Shares issued price per share | $ / shares | $ 3 | |||||||
CAD [Member] | Cash [Member] | ||||||||
Finance fee | $ 50,000 | |||||||
CAD [Member] | Investor [Member] | ||||||||
Aggregate gross proceeds of warrants | $ 980,000 | |||||||
CAD [Member] | Canadian Investor [Member] | Second Tranche [Member] | First Week of January 2019 [Member] | ||||||||
Aggregate gross proceeds of warrants | $ 2,141,000 | |||||||
Private Placement [Member] | Maximum [Member] | ||||||||
Aggregate gross proceeds of warrants | $ 10,000,000 | |||||||
CD Special Warrant [Member] | First Tranche [Member] | ||||||||
Cash commission percentage | 7.00% | 7.00% | ||||||
CD Special Warrant [Member] | CAD [Member] | First Tranche [Member] | ||||||||
Warrant exercise price | $ / shares | $ 1,000 | |||||||
CD Special Warrant [Member] | Private Placement [Member] | ||||||||
Warrants to purchase share of common stock | shares | 3,121 | 3,121 | ||||||
CD Special Warrant [Member] | Private Placement [Member] | CAD [Member] | ||||||||
Aggregate gross proceeds of warrants | $ 3,121,000 | |||||||
Warrant exercise price | $ / shares | $ 1,000 | |||||||
CD Special Warrant [Member] | Private Placement [Member] | Maximum [Member] | ||||||||
Warrants to purchase share of common stock | shares | 10,000 | 10,000 | ||||||
Short Term Convertible Notes [Member] | ||||||||
Convertible debenture | $ 100,000 | $ 100,000 | ||||||
6 Month Convertible Notes [Member] | ||||||||
Convertible debenture | 975,000 | 975,000 | ||||||
12 Month Convertible Notes [Member] | ||||||||
Convertible debenture | $ 1,500,000 | $ 1,500,000 | ||||||
8.0% Senior Unsecured Convertible Debenture [Member] | ||||||||
Warrants to purchase share of common stock | shares | 167 | 167 | ||||||
Convertible debenture, interest percentage | 8.00% | 8.00% | ||||||
8.0% Senior Unsecured Convertible Debenture [Member] | CAD [Member] | ||||||||
Convertible debenture | $ 1,000 | |||||||
Warrant exercise price | $ / shares | $ 3.90 | |||||||
Payment of brokered portion of offering | $ 2,247,000 |
Convertible Debt - Schedule of
Convertible Debt - Schedule of Assumptions Value Warrant Granted (Details) - Warrants Granted [Member] - Convertible Debt [Member] | 3 Months Ended |
Dec. 31, 2018$ / shares | |
Fair value of underlying common shares | $ 2.10 |
Exercise Price [Member] | |
Fair value assumptions measurement input price per share | $ 2.925 |
Dividend Yield [Member] | |
Fair value assumptions measurement input percentages | 0.00% |
Historical Volatility [Member] | |
Fair value assumptions measurement input percentages | 116.90% |
Risk Free Interest Rate [Member] | |
Fair value assumptions measurement input percentages | 2.60% |
Convertible Debt - Schedule o_2
Convertible Debt - Schedule of Convertible Notes Outstanding After Unamortized Discount (Details) - USD ($) | Dec. 31, 2018 | Sep. 30, 2018 | [1] |
Debt Disclosure [Abstract] | |||
Convertible promissory note | $ 735,000 | ||
Unamortized debt discount and loan fees | (566,363) | ||
Net amount | $ 168,637 | $ 2,194,790 | |
[1] | Derived from audited information |
Shareholders' Equity (Details N
Shareholders' Equity (Details Narrative) | Dec. 27, 2019USD ($) | Dec. 27, 2019CAD ($)$ / sharesshares | Dec. 27, 2018USD ($) | Dec. 31, 2018USD ($)$ / sharesshares | Dec. 31, 2017USD ($) | Dec. 31, 2016 | Dec. 27, 2018CAD ($)$ / sharesshares | Sep. 30, 2018shares | Jul. 13, 2018shares | Jan. 31, 2018USD ($) |
Plan description | 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. | |||||||||
Two series of preferred stock designated, shares issued | ||||||||||
Two series of preferred stock designated, shares outstanding | ||||||||||
Common stock, shares authorized | 300,000,000 | 300,000,000 | 100,000,000 | |||||||
Common stock, voting rights | One vote per share at meetings of the Company. | |||||||||
Stock based compensation expense | $ | $ 1,600,577 | $ 359,546 | ||||||||
Consulting expenses | $ | $ 441,872 | $ 140,598 | ||||||||
Debenture principal amount | $ | $ 1,200,000 | |||||||||
8.0% Senior Unsecured Convertible Debenture [Member] | ||||||||||
Number of warrants issued | 167 | |||||||||
8.0% Senior Unsecured Convertible Debenture [Member] | CAD [Member] | ||||||||||
Warrant exercise price | $ / shares | $ 3.90 | |||||||||
Private Placement [Member] | CD Special Warrant [Member] | ||||||||||
Number of warrants issued | 3,121 | |||||||||
Private Placement [Member] | CD Special Warrant [Member] | CAD [Member] | ||||||||||
Gross proceeds from warrants | $ | $ 3,121,000 | |||||||||
Warrant exercise price | $ / shares | $ 1,000 | |||||||||
Maximum [Member] | Private Placement [Member] | ||||||||||
Gross proceeds from warrants | $ | $ 10,000,000 | |||||||||
Maximum [Member] | Private Placement [Member] | CD Special Warrant [Member] | ||||||||||
Number of warrants issued | 10,000 | |||||||||
Consulting Agreement [Member] | Consulting Services [Member] | ||||||||||
Common stock issuances for compensation | 350,000 | |||||||||
Stock based compensation expense | $ | $ 178,000 | |||||||||
Consulting Agreement [Member] | Professional Services [Member] | ||||||||||
Number of common shares granted | 75,000 | |||||||||
Common stock option exercise price per share | $ / shares | $ 1.80 | |||||||||
Common stock option term | 4 years | |||||||||
Number of options vested | 75,000 | |||||||||
Consulting expenses | $ | $ 144,750 | |||||||||
Consulting Agreement [Member] | Professional Services [Member] | Maximum [Member] | ||||||||||
Common stock option exercise price per share | $ / shares | $ 2.40 | |||||||||
Consulting Agreement One [Member] | Consulting Services [Member] | ||||||||||
Common stock issuances for compensation | 41,667 | |||||||||
Stock based compensation expense | $ | $ 30,000 | |||||||||
Agency Agreement [Member] | ||||||||||
Number of warrants issued | 431,695 | |||||||||
Number of units sold | 2,585 | |||||||||
Agency Agreement [Member] | 8.0% Senior Unsecured Convertible Debenture [Member] | ||||||||||
Number of warrants issued | 167 | |||||||||
Warrant term | 24 months | |||||||||
Agency Agreement [Member] | 8.0% Senior Unsecured Convertible Debenture [Member] | CAD [Member] | ||||||||||
Debenture principal amount | $ | $ 1,000 | |||||||||
Warrant exercise price | $ / shares | $ 3.90 | |||||||||
Agency Agreement [Member] | Private Placement [Member] | CD Special Warrant [Member] | ||||||||||
Number of warrants issued | 10,000 | |||||||||
Gross proceeds from warrants | $ | $ 10,000,000 | |||||||||
Brokers [Member] | ||||||||||
Number of common stock issued | 16,666 | |||||||||
Employees and Consultants [Member] | ||||||||||
Common stock issuances for compensation | 194,233 | |||||||||
Stock based compensation expense | $ | $ 388,466 | |||||||||
Consultant [Member] | Consulting Agreement [Member] | ||||||||||
Number of warrants issued | 50,000 | |||||||||
Warrant exercise price | $ / shares | $ 2.40 | |||||||||
Warrant term | 3 years |
Shareholders' Equity - Schedule
Shareholders' Equity - Schedule of Assumptions Used (Details) - Options [Member] | 3 Months Ended |
Dec. 31, 2018$ / shares | |
Fair value of underlying common shares | $ 2.40 |
Exercise price | $ 1.80 |
Dividend yield | 0.00% |
Historical volatility | 116.90% |
Risk free interest rate | 2.96% |
Commitments and Contingencies (
Commitments and Contingencies (Details Narrative) | Feb. 22, 2018USD ($)ft² | Mar. 31, 2018USD ($) | Jul. 31, 2017USD ($)$ / shares | Sep. 30, 2016USD ($) | Aug. 31, 2016USD ($) | Dec. 31, 2018USD ($) | Sep. 30, 2018USD ($) | [1] | Jul. 31, 2016USD ($) |
Lease term | 3 years | 10 years | 10 years | ||||||
Payment for capital lease obligations | $ 15,000 | ||||||||
Base rental fees | $ 3,024 | $ 7,033 | $ 82,564 | ||||||
Real estate taxes | $ 315 | ||||||||
Percentage of base rental fees escalation | 2.00% | ||||||||
Security deposit to landlord | $ 14,000 | ||||||||
Operating lease, description | The Company has subleased this space pursuant to a 10-year lease. On February 22, 2018, both parties executed a lease addendum that adds contiguous property for 12,322 square feet. The term commences November 1, 2017 and continues through November 31, 2026 at a rate of $3,525 a month that escalates after the first year. | ||||||||
Area of land | ft² | 12,322 | ||||||||
Commitments and contingencies | $ 3,525 | ||||||||
Subrental income | 8,900,000 | ||||||||
Leases rental operating | $ 1,766,487 | ||||||||
Multi Party Agreement [Member] | |||||||||
Proceeds from private placement | $ 10,000,000 | ||||||||
Equity issued and outstanding | 75.00% | ||||||||
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 [Member] | |||||||||
Lease term | 10 years | ||||||||
Monthly payments | $ 64,640 | ||||||||
Change in lease rent percentage | 3.00% | ||||||||
Lease Agreement One [Member] | |||||||||
Lease term | 10 years | ||||||||
Operating lease, description | 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. | ||||||||
Monthly payments | $ 18,750 | ||||||||
Change in lease rent percentage | 3.00% | ||||||||
Minimum rent per foot | $ / shares | $ 1 | ||||||||
Minimum rent per foot un-light assisted greenhouse or outdoor grow space | $ / shares | $ 0.25 | ||||||||
Lease Agreement Two [Member] | |||||||||
Lease term | 10 years | ||||||||
Operating lease, description | 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. | ||||||||
Monthly payments | $ 6,523 | ||||||||
Change in lease rent percentage | 3.00% | ||||||||
Interest on lease payment percentage | 12.00% | ||||||||
[1] | Derived from audited information |