Cover
Cover - shares | 3 Months Ended | |
Nov. 30, 2020 | Jan. 08, 2021 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Nov. 30, 2020 | |
Document Transition Report | false | |
Entity File Number | 000-55418 | |
Entity Registrant Name | KUSHCO HOLDINGS, INC. | |
Entity Incorporation, State or Country Code | NV | |
Entity Tax Identification Number | 46-5268202 | |
Entity Address, Address Line One | 6261 Katella Avenue | |
Entity Address, Address Line Two | Suite 250 | |
Entity Address, City or Town | Cypress | |
Entity Address, State or Province | CA | |
Entity Address, Postal Zip Code | 90630 | |
City Area Code | 714 | |
Local Phone Number | 462-4603 | |
Title of 12(b) Security | Common Stock, par value $0.001 per share | |
Trading Symbol | KSHB | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | true | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 132,142,375 | |
Entity Central Index Key | 0001604627 | |
Current Fiscal Year End Date | --08-31 | |
Document Fiscal Year Focus | 2021 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands | Nov. 30, 2020 | Aug. 31, 2020 |
Current assets: | ||
Cash | $ 5,663 | $ 10,476 |
Accounts receivable, net | 11,959 | 9,427 |
Inventory, net | 34,717 | 28,049 |
Prepaid expenses and other current assets | 14,449 | 9,054 |
Total current assets | 66,788 | 57,006 |
Goodwill | 52,267 | 52,267 |
Intangible assets, net | 872 | 1,000 |
Property and equipment, net | 8,224 | 8,801 |
Other assets | 9,465 | 8,582 |
Total Assets | 137,616 | 127,656 |
Current liabilities: | ||
Accounts payable | 8,497 | 4,282 |
Customer deposits | 5,319 | 3,188 |
Accrued expenses and other current liabilities | 6,723 | 8,195 |
Current portion of notes payable | 18,304 | 20,692 |
Line of credit | 4,320 | 0 |
Total current liabilities | 43,163 | 36,357 |
Long-term liabilities: | ||
Note payable | 763 | 0 |
Warrant liability | 548 | 365 |
Other non-current liabilities | 3,765 | 4,205 |
Total long-term liabilities | 5,076 | 4,570 |
Total liabilities | 48,239 | 40,927 |
Commitments and contingencies | ||
Stockholders' equity | ||
Preferred stock, value, outstanding | 0 | 0 |
Common stock, value, outstanding | 132 | 126 |
Additional paid-in capital | 234,345 | 227,253 |
Accumulated deficit | (145,100) | (140,650) |
Total stockholders' equity | 89,377 | 86,729 |
Total liabilities and stockholders' equity | $ 137,616 | $ 127,656 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parentheticals) - $ / shares | Nov. 30, 2020 | Aug. 31, 2020 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized (in shares) | 10,000,000 | 10,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 265,000,000 | 265,000,000 |
Common stock, shares issued (in shares) | 131,962,000 | 125,708,000 |
Common stock, shares outstanding (in shares) | 131,962,000 | 125,708,000 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Nov. 30, 2020 | Nov. 30, 2019 | |
Income Statement [Abstract] | ||
Net revenue | $ 26,761 | $ 34,963 |
Cost of goods sold | 21,022 | 27,692 |
Gross profit | 5,739 | 7,271 |
Operating expenses: | ||
Selling, general and administrative | 8,812 | 21,075 |
Restructuring costs | 8 | 0 |
Total operating expenses | 8,820 | 21,075 |
Loss from operations | (3,081) | (13,804) |
Other income (expense): | ||
Change in fair value of warrant liability | (183) | 3,204 |
Change in fair value of equity investment | 1,251 | (395) |
Interest expense | (1,546) | (1,488) |
Loss on extinguishment of debt | (877) | 0 |
Other income (expense), net | (14) | (23) |
Total other income (expense) | (1,369) | 1,298 |
Loss before income taxes | (4,450) | (12,506) |
Income tax expense | 0 | 0 |
Net loss | $ (4,450) | $ (12,506) |
Net loss per share: | ||
Basic net loss per common share (in dollars per share) | $ (0.03) | $ (0.12) |
Diluted net loss per common share (in dollars per share) | $ (0.03) | $ (0.12) |
Weighted-average common shares outstanding | ||
Basic weighted average number of common shares outstanding (in shares) | 127,201 | 101,638 |
Diluted weighted average number of common shares outstanding (in shares) | 127,201 | 101,638 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) $ in Thousands | Total | Common Stock | Additional Paid-in Capital | Accumulated Deficit |
Beginning balance at Aug. 31, 2019 | $ 101,354 | $ 90 | $ 164,258 | $ (62,994) |
Beginning balance (in shares) at Aug. 31, 2019 | 90,041 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Stock-based compensation | 3,189 | 3,189 | ||
Stock-based compensation (in shares) | 99 | |||
Stock sold to investors | 27,379 | $ 17 | 27,362 | |
Stock sold to investors (in shares) | 17,198 | |||
Stock issued for acquisitions | 23 | |||
Net loss | (12,506) | (12,506) | ||
Ending balance at Nov. 30, 2019 | 119,416 | $ 107 | 194,809 | (75,500) |
Ending balance (in shares) at Nov. 30, 2019 | 107,361 | |||
Beginning balance at Aug. 31, 2020 | 86,729 | $ 126 | 227,253 | (140,650) |
Beginning balance (in shares) at Aug. 31, 2020 | 125,708 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Stock-based compensation | 3,405 | $ 1 | 3,404 | |
Stock-based compensation (in shares) | 1,566 | |||
Stock issued for conversion of debt | 3,693 | $ 5 | 3,688 | |
Stock issued for conversion of debt (in shares) | 4,688 | |||
Net loss | (4,450) | (4,450) | ||
Ending balance at Nov. 30, 2020 | $ 89,377 | $ 132 | $ 234,345 | $ (145,100) |
Ending balance (in shares) at Nov. 30, 2020 | 131,962 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Nov. 30, 2020 | Nov. 30, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net loss | $ (4,450) | $ (12,506) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 845 | 962 |
Amortization of debt discount | 1,492 | 1,181 |
Bad debt (recovery)/provision | (60) | 362 |
Bad debt recovery on note receivable | (513) | 0 |
Sales return (recovery)/provision | (150) | 45 |
Inventory reserve (recovery)/provision | (1,336) | 604 |
Loss (gain) on disposal of assets | 0 | 21 |
Change in fair value of equity investment | (1,251) | 395 |
Stock compensation expense | 2,360 | 4,662 |
Change in fair value of warrant liability | 183 | (3,204) |
Loss on extinguishment of debt | 877 | 0 |
Right-of-use assets amortization | 175 | 603 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (2,322) | (1,223) |
Inventory | (5,332) | 3,120 |
Prepaid expenses and other current assets | (4,882) | (5,858) |
Other non-current assets | (10) | (164) |
Accounts payable | 4,204 | (922) |
Customer deposits | 2,131 | 2,352 |
Accrued expenses and other current liabilities | (677) | 1,954 |
Other non-current liabilities | (388) | (482) |
Net cash used in operating activities | (9,104) | (8,098) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Purchase of property, equipment, and intangibles | (129) | (1,940) |
Net cash used in investing activities | (129) | (1,940) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Financing cost paid in connection with extinguishment of debt | (98) | 0 |
Repayment of capital leases | 0 | (27) |
Proceeds from issuance of common stock | 0 | 27,379 |
Proceeds from line of credit | 30,962 | 25,112 |
Repayments on line of credit | (26,444) | (31,651) |
Net cash provided by financing activities | 4,420 | 20,813 |
NET INCREASE (DECREASE) IN CASH | (4,813) | 10,775 |
CASH AT BEGINNING OF PERIOD | 10,476 | 3,944 |
CASH AT END OF PERIOD | 5,663 | 14,719 |
CASH PAID FOR: | ||
Interest | 35 | 351 |
NON-CASH INVESTING AND FINANCING ACTIVITIES | ||
Services prepaid for in common stock | 0 | 171 |
Accrued and unpaid amounts for purchase of property & equipment | 11 | 103 |
Stock issued for amendment of debt agreement | $ 3,693 | $ 0 |
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Nov. 30, 2020 | |
Accounting Policies [Abstract] | |
SIGNIFICANT ACCOUNTING POLICIES | SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the activity of KushCo Holdings, Inc. (the “Company”) and its wholly-owned subsidiaries and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information pursuant to Securities and Exchange Commission (“SEC”) rules and regulations. Accordingly, they do not include all of the information and notes required by GAAP for annual financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included in the condensed consolidated financial statements for the interim periods presented herein, but are not necessarily indicative of operating results to be achieved for full fiscal years or other interim periods. The condensed consolidated balance sheet as of August 31, 2020 was derived from the audited financial statements as of that date but does not include all disclosures as required by GAAP. These condensed consolidated financial statements and notes should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes for the fiscal year ended August 31, 2020 and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year then ended and filed with the SEC on November 10, 2020. The Company’s principal sources of liquidity at November 30, 2020 consisted of cash on hand, a line of credit and future cash anticipated to be generated from operations. The Company reported positive working capital as of November 30, 2020. However, the Company’s principal loan balances mature on April 29, 2021. The Company intends to refinance such loan balances by their stated maturity. The Company believes its current cash balances coupled with anticipated cash flow from operating activities, and its plans to refinance its borrowings will be sufficient to meet its working capital requirements for at least one year from the date the consolidated financial statements were available to be issued. References to amounts in these notes to condensed consolidated financial statements are in thousands, except per share amounts, unless otherwise specified. References herein to a particular “fiscal” year means the fiscal year that ended on August 31 of the year indicated. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenues and expenses during the reporting period. Significant estimates relied upon in preparing these condensed consolidated financial statements include revenue recognition, accounts receivable reserves, inventory and related reserves, expected future cash flows used to evaluate the recoverability of long-lived assets, estimated fair values of long-lived assets used to record impairment charges related to intangible assets and goodwill, amortization periods, accrued expenses, stock-based compensation expenses, and recoverability of the Company’s net deferred tax assets and any related valuation allowance. Although the Company regularly assesses these estimates, actual results could differ materially from these estimates. Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Actual results may differ from management’s estimates if past experience or other assumptions do not turn out to be substantially accurate. Accounts Receivable Trade accounts receivable are carried at their estimated collectible amounts. Trade credit is generally extended on a short-term basis; thus, trade receivables do not bear interest. Trade accounts receivables are periodically evaluated for collectability based on the customer's past credit history and current financial condition. The Company’s net accounts receivable balance was $11,959 and $9,427 as of November 30, 2020 and August 31, 2020, respectively. The Company’s allowance for doubtful accounts was $2,336 and $2,439 as of November 30, 2020 and August 31, 2020, respectively. The Company wrote-off $43 of customers' balances during the three month period ended November 30, 2020. The Company’s sales return reserve was $182 and $332 as of November 30, 2020 and August 31, 2020, respectively, and is included in “Accounts receivable, net” on the Company’s condensed consolidated balance sheet. Inventory Inventories are stated at the lower of cost or net realizable value using the average cost method. The Company’s inventory consists of finished goods of $43,878 and $38,546 as of November 30, 2020 and August 31, 2020, respectively. The Company also makes prepayments against the future delivery of inventory classified as prepaid inventory. The Company’s prepaid inventory was $8,304 and $3,373 as of November 30, 2020 and August 31, 2020, respectively and is included in prepaid expenses and other current assets on the accompanying balance sheets. The Company regularly reviews inventory and, when appropriate, records a provision for obsolete and excess inventory. The provision is based on actual loss experience and a forecast of product demand compared to its remaining shelf life. As of November 30, 2020, the Company had $9,161 of inventory reserve. As of August 31, 2020, the Company had $10,497 of inventory reserve. Equity Investment On January 30, 2020, the Company partnered with XS Financial Inc. (“XS Financial”), formerly Xtraction Services Holding Corp, a provider of equipment leasing solutions to owners and operators of cannabis and hemp companies in the United States in order to provide such solutions to the Company’s network of regulated cannabis and hemp-derived cannabidiol ("CBD") operators. The Company’s Chief Financial Officer, Stephen Christoffersen, has served on the board of directors for XS Financial since May 2019. Under the terms of its agreement with XS Financial, upon the closing of the transaction, the Company issued 1,653 of its common shares in exchange for 10,600 proportionate voting shares of XS Financial (the “XS Shares”), the equivalent of 19.9% of XS Financials' market capitalization on the closing date. On January 30, 2020, the value of the Company's shares issued in exchange for the equity investment in XS Financial was $2,528. The Company’s investment in XS Financial is included in “Other assets” on the Company’s condensed consolidated balance sheets. The fair value of Company's investment in XS Financial was $2,321 as of November 30, 2020. The fair value of Company's investment in XS Financial was $1,225 as of August 31, 2020. Net Loss Per Share The Company computes earnings per share under Accounting Standards Codification (“ASC”) Topic 260, Earnings per Share (“ASC 260”). Basic net loss per common share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the sum of (a) the weighted average number of shares of common stock outstanding during the period and (b) the potentially dilutive securities outstanding during the period. Stock options and warrants are potentially dilutive securities; and the number of dilutive options is computed using the treasury stock method. For the three months ended November 30, 2020 and 2019, basic and diluted weighted average shares are the same, as the Company generated a net loss for the period. The computation for the three months ended November 30, 2020 does not include 10,782 options and 21,737 warrants, as their inclusion would have an anti-dilutive effect on net loss per share. The computation of diluted net loss per share for the three months ended November 30, 2019 does not include 14,407 options and 16,737 warrants, as their inclusion would have an anti-dilutive effect on net loss per share. Revenue Recognition The Company markets and sells a wide variety of ancillary products and services to customers operating in the regulated medical and recreational cannabis and CBD industries. These complementary products and services include bottles, jars, bags, tubes, containers, vape cartridges, vape batteries and accessories, labels and processing supplies, solvents, natural products, stainless steel tanks, custom branded anti-counterfeit and authentication labels, and services focused on building distribution networks of compliant hemp-derived CBD brands across conventional and other retail channels, including convenience, pet care, and beauty channels. In accordance with ASC 606, Revenue from Contracts with Customers , the Company applies the following steps to recognize revenue for the sale of products that reflects the consideration to which the Company expects to be entitled to receive in exchange for the promised goods: • Identify the contract with a customer. • Identify the performance obligations in the contract. • Determine the transaction price. • Allocate the transaction price to the performance obligations in the contract. • Recognize revenue when the Company satisfies a performance obligation. Advertising The Company conducts advertising for the promotion of its products and services. In accordance with ASC subtopic 720-35-25 (“ASC 720”), advertising costs are charged to expense when incurred. Advertising costs were $3 and $81 for the three months ended November 30, 2020 and November 30, 2019, respectively. Share-based Compensation The Company recorded total stock-based compensation expense of $2,360 and $4,662 for the three months ended November 30, 2020 and November 30, 2019, respectively, in connection with the issuance of shares of common stock and options to purchase common stock. Stock-based compensation expense is included in selling, general and administrative expense in the Company's condensed consolidated statements of operations. Recently Issued Accounting Pronouncements In August 2020, the FASB issued ASU 2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40).” ASU 2020-06 reduces the number of models used to account for convertible instruments, amends diluted EPS calculations for convertible instruments, and amends the requirements for a contract (or embedded derivative) that is potentially settled in an entity's own shares to be classified in equity. The amendments add certain disclosure requirements to increase transparency and decision-usefulness about a convertible instrument's terms and features. Under the amendment, the Company must use the if-converted method for including convertible instruments in diluted EPS as opposed to the treasury stock method. ASU 2020-06 is effective for annual reporting periods beginning after December 15, 2021 (the Company's Fiscal 2023). Early adoption is allowed under the standard with either a modified retrospective or full retrospective method. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements. In December 2019, the FASB Issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting of Income Taxes”, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements. In January 2020, the FASB issued ASU 2020-1, “Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815.” The ASU is based on a consensus of the Emerging Issues Task Force and is expected to increase comparability in accounting for these transactions. ASU 2016-1 made targeted improvements to accounting for financial instruments, including providing an entity the ability to measure certain equity securities without a readily determinable fair value at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Among other topics, the amendments clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting. For public business entities, the amendments in the ASU are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company is evaluating the potential impact of adoption of this standard on its consolidated financial statements. Other accounting standards that have been issued or proposed by the FASB that do not require adoption until a future date are not expected to have a material impact on the condensed consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures. Update on COVID-19 On March 11, 2020, the World Health Organization ("WHO") recognized COVID-19 as a global pandemic, prompting many national, regional, and local governments, including in the markets that the Company operates in, to implement preventative or protective measures, such as travel and business restrictions, temporary store closures, and wide-sweeping quarantines and stay-at-home orders. As a result, COVID-19 has significantly curtailed global economic activity, including in the regulated cannabis and CBD industries in which the Company operates. The Company's operations, as well as those of its suppliers and customers, have been impacted by the COVID-19 pandemic. While |
CONCENTRATIONS OF RISK
CONCENTRATIONS OF RISK | 3 Months Ended |
Nov. 30, 2020 | |
Risks and Uncertainties [Abstract] | |
CONCENTRATIONS OF RISK | CONCENTRATIONS OF RISK Supplier Concentrations The Company purchases inventory from various suppliers and manufacturers. For the three months ended November 30, 2020 and November 30, 2019, the Company had one vendor that accounted for approximately 53% and 32%, respectively, of total inventory purchases. As of November 30, 2020, there were two vendors in the aggregate that represented approximately 58% of accounts payable. As of November 30, 2019, there were three vendors that represented approximately 37% of accounts payable. Customer Concentrations During the three months ended November 30, 2020, the Company had two customers in the aggregate, that represented over 28% of the Company’s revenue. For the three months ended November 30, 2019, the Company had one customer that represented approximately 10% of the Company’s revenues. As of November 30, 2020, there were three customers in the aggregate, that represented approximately 42% of accounts receivable. As of November 30, 2019, there were two customers in the aggregate that represented 35% of accounts receivable. |
RELATED-PARTY TRANSACTIONS
RELATED-PARTY TRANSACTIONS | 3 Months Ended |
Nov. 30, 2020 | |
Related Party Transactions [Abstract] | |
RELATED-PARTY TRANSACTIONS | RELATED-PARTY TRANSACTIONSThe Company sells certain products and supplies to one related party. During the three months ended November 30, 2019, the Company sold products and supplies to two related parties. Sales recognized during the three months ended November 30, 2020 and November 30, 2019 totaled $134 and $866, respectively. Total accounts receivable from related parties was $704 and $1,200 as of November 30, 2020 and August 31, 2020, respectively. Further, the Company rented certain warehouse equipment from a related party. No rental payments were made to the related party during the three months ended November 30, 2020. During the three months ended November 30, 2019, total rental payments of $158 were made to the related party. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 3 Months Ended |
Nov. 30, 2020 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | PROPERTY AND EQUIPMENT The major classes of fixed assets consist of the following: November 30, August 31, Machinery and equipment $ 9,567 $ 9,540 Vehicles 410 410 Office Equipment 376 376 Leasehold improvements 1,590 1,591 Construction in progress 774 660 12,717 12,577 Accumulated Depreciation (4,493) (3,776) $ 8,224 $ 8,801 |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 3 Months Ended |
Nov. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
INTANGIBLE ASSETS | INTANGIBLE ASSETS Intangible assets consist of the following: As of November 30, 2020 As of August 31, 2020 Description Weighted Average Estimated Useful Life Gross Carrying Value Accumulated Amortization Net Amount Gross Carrying Value Accumulated Amortization Net Amount Trade name 6 years 1,400 (1,400) — 1,400 (1,400) — Non-compete agreement 4 years 2,370 (1,498) 872 2,370 (1,370) 1,000 $ 3,770 $ (2,898) $ 872 $ 3,770 $ (2,770) $ 1,000 Amortization expense was $128 and $237 for the three months ended November 30, 2020 and 2019, respectively. The following table summarizes the remaining estimated amortization of definite-lived intangible assets as of November 30, 2020: For the year ended August 31, 2021 (remaining nine months) $ 319 2022 314 2023 239 $ 872 |
ACCRUED EXPENSES AND OTHER CURR
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | 3 Months Ended |
Nov. 30, 2020 | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities consist of the following: November 30, August 31, Accrued compensation $ 1,978 $ 2,798 Sales tax payable 750 727 Operating lease liability 1,635 1,583 Other accrued expenses 2,360 3,087 $ 6,723 $ 8,195 |
LEASES
LEASES | 3 Months Ended |
Nov. 30, 2020 | |
Lessee Disclosure [Abstract] | |
LEASES | LEASESThe Company leases its facilities and certain office equipment under operating leases which expire on various dates through 2026. The Company determines if an arrangement is a lease at inception. Right of Use ("ROU") assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. When readily determinable, the Company uses the implicit rate in determining the present value of lease payments. The ROU asset also includes any fixed lease payments, including in-substance fixed lease payments and excludes lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Lease term is determined at lease commencement and includes any non-cancellable period for which the Company has the right to use the underlying asset, together with any options to extend that the Company is reasonably certain to exercise. ROU assets and liabilities consist of the following: November 30, August 31, Operating leases - ROU assets (included in Other assets) $ 2,952 $ 3,127 Current portion of lease liabilities $ 1,635 $ 1,583 Long term lease liabilities, net of current portion 3,716 4,157 Total lease liabilities $ 5,351 $ 5,740 Aggregate lease maturities as of November 30, 2020 are as follows: Year ended August 31, 2021 (remaining nine months) $ 1,631 2022 2,137 2023 1,544 2024 951 2025 619 Thereafter 39 Total minimum lease payments 6,921 Less imputed interest (1,570) Total lease liabilities $ 5,351 Rent expense was $374, for the three months ended November 30, 2020. At November 30, 2020, the leases had a weighted average remaining lease term of 3.5 years and a weighted average discount rate of 8.3%. Rent expense for the three months ended November 30, 2019 was $850. Amortization on ROU assets was $175 for the three months ended November 30, 2020. Cash paid for amounts included in the measurement of lease liabilities was $388 for the three months ended November 30, 2020. |
LEASES | LEASESThe Company leases its facilities and certain office equipment under operating leases which expire on various dates through 2026. The Company determines if an arrangement is a lease at inception. Right of Use ("ROU") assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. When readily determinable, the Company uses the implicit rate in determining the present value of lease payments. The ROU asset also includes any fixed lease payments, including in-substance fixed lease payments and excludes lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Lease term is determined at lease commencement and includes any non-cancellable period for which the Company has the right to use the underlying asset, together with any options to extend that the Company is reasonably certain to exercise. ROU assets and liabilities consist of the following: November 30, August 31, Operating leases - ROU assets (included in Other assets) $ 2,952 $ 3,127 Current portion of lease liabilities $ 1,635 $ 1,583 Long term lease liabilities, net of current portion 3,716 4,157 Total lease liabilities $ 5,351 $ 5,740 Aggregate lease maturities as of November 30, 2020 are as follows: Year ended August 31, 2021 (remaining nine months) $ 1,631 2022 2,137 2023 1,544 2024 951 2025 619 Thereafter 39 Total minimum lease payments 6,921 Less imputed interest (1,570) Total lease liabilities $ 5,351 Rent expense was $374, for the three months ended November 30, 2020. At November 30, 2020, the leases had a weighted average remaining lease term of 3.5 years and a weighted average discount rate of 8.3%. Rent expense for the three months ended November 30, 2019 was $850. Amortization on ROU assets was $175 for the three months ended November 30, 2020. Cash paid for amounts included in the measurement of lease liabilities was $388 for the three months ended November 30, 2020. |
DEBT
DEBT | 3 Months Ended |
Nov. 30, 2020 | |
Debt Disclosure [Abstract] | |
DEBT | DEBT Monroe Revolving Credit Facility On August 21, 2019, the Company and its subsidiaries entered into a secured asset based revolving credit facility (the “Monroe Revolving Credit Facility”) with an aggregate amount not to exceed $35.0 million outstanding at any time, with Monroe Capital Management Advisors, LLC (“Monroe”), as collateral agent and administrative agent, and the various lenders party thereto. The Monroe Revolving Credit Facility also includes an accordion feature that permits the Company to increase the available revolving commitments under the Monroe Revolving Credit Facility by up to an additional $15.0 million, subject to satisfaction of certain conditions. The Monroe Revolving Credit Facility has a 5-year term which matures on August 21, 2024 and is secured by a first priority lien on substantially all of the assets of the Company and its subsidiaries. The borrowing base is subject to eligible inventory and accounts receivable. The available borrowing capacity as of November 30, 2020 was $10,915. The Monroe Revolving Credit Facility contains customary representations and warranties, affirmative and negative covenants, including a financial covenant requiring certain minimum availability, and events of default. As of November 30, 2020, the outstanding balance under the facility was $4,320. As of August 31, 2020, there was no balance outstanding under the facility. The Company incurred closing costs associated with the Monroe Revolving Credit Facility in the amount of $2,672, which were deferred and amortized over the 5-year term of the Monroe Revolving Credit Facility on a straight-line basis. As of November 30, 2020 and August 31, 2020, unamortized debt issuance costs of $1,904 and $2,057, respectively, are included in “Other assets.” Interest expense and amortization of debt discount, associated with the Monroe Revolving Credit Facility during the three months ended November 30, 2020 amounted to $53 and $154, respectively. Interest expense and amortization of debt discount, associated with the Monroe Revolving Credit Facility during the three months ended November 30, 2019 amounted to $296 and $154, respectively. Monroe Warrants Also on August 21, 2019, in connection with, and as a condition to the consummation of, the Monroe Revolving Credit Facility, the Company entered into a subscription agreement (the “Subscription Agreement”) with certain entities affiliated with Monroe (collectively, the “Subscribers”), pursuant to which the Company issued to the Subscribers warrants (the “Monroe Warrants”) to purchase up to an aggregate of 500 shares of the Company common stock, at an exercise price of $4.25, being the arithmetic average of the closing price of the Company's common stock for the 10 consecutive trading days prior to the date of issuance (subject to customary adjustment upon subdivision or combination of the Company's common stock). The Monroe Warrants are immediately exercisable and may be exercised at any time, and from time to time, on or before the fifth anniversary of the date of issuance. The Monroe Warrants include a “blocker” provision that, subject to certain exceptions described in the Monroe Warrants, prevents the Subscribers from exercising the Monroe Warrants to the extent such exercise would result in a Subscriber together with certain affiliates owning in excess of 4.99% of the Company's common stock outstanding immediately after giving effect to such exercise. The Monroe Warrants were classified as equity. Senior Note with HB Sub Fund On April 29, 2019, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with an institutional investor (the “Investor”), pursuant to which the Company agreed to issue and sell, and the Investor agreed to purchase, a senior note (the “Original Note”) in a private placement offering in the aggregate principal amount of $21.3 million with an original issue discount of $1.3 million, and received net proceeds of $20.0 million. The Original Note was a senior unsecured obligation, and unless earlier redeemed, was scheduled to mature on October 30, 2020. The Original Note did not bear interest, except upon the occurrence of an event of default. On August 21, 2019, the Company entered into an exchange agreement (the “Exchange Agreement”) with the Investor in order to amend and waive certain provisions of the Securities Purchase Agreement and the Original Note and exchange the Original Note for (i) a new senior note (the “First Amended Senior Note”) for the same aggregate principal amount as the Original Note and (ii) a warrant to purchase up to 650 shares of the Company's common stock at an exercise price of $4.25 per share. The warrants have an expiration date of August 21, 2024 and have not been exercised. As of August 21, 2019, the warrants were reclassified from a derivative liability to equity with a corresponding adjustment to additional paid-in capital. The fair value of the warrants was determined using a Black-Scholes model as of August 21, 2019 and was equal to $792. Similar to the terms of the Original Note, the First Amended Senior Note was set to mature on October 30, 2020, at which time the Company would have had to pay the Investor an amount in cash representing 120% of all outstanding principal, less original issue discount, plus any accrued and unpaid interest and accrued and unpaid late charges. Similar to the terms of the Original Note, the First Amended Senior Note did not bear interest except upon the occurrence of an event of default. On November 8, 2019, the Company entered into a Second Exchange Agreement (“Second Exchange Agreement”) with the Investor, pursuant to which the Company amended the First Amended Senior Note (the “Second Amended Senior Note”). Pursuant to the terms of the Second Amended Senior Note, the maturity date was extended to April 29, 2021, and the aggregate principal amount of the Second Amended Senior Note was increased to approximately $24.0 million and the original issue discount was increased to $1.5 million. Upon maturity of the Second Amended Senior Note, the Company would have had to pay the Investor an amount in cash representing 120% of all outstanding principal, less original issue discount, plus any accrued and unpaid interest and accrued and unpaid late charges. Similar to the terms of the Original Note, the Second Amended Senior Note did not bear interest except upon the occurrence of an event of default. On June 9, 2020, the Company entered into a Third Exchange Agreement (the “Third Exchange Agreement”) with the Investor in order to (x) amend and waive certain provisions of the Securities Purchase Agreement, as amended, and the Second Amended Senior Note, and (y) exchange the Second Amended Senior Note without any cash consideration for (i) a new senior note in the aggregate principal amount of $22.0 million (the “Third Amended Senior Note”) and (ii) 5,347,594 shares of the Company's common stock (the “Third Exchange Shares”). The exchange of principal and Third Exchange Shares were accounted for as an extinguishment of debt, and a loss on extinguishment of $1.65 million was recorded in the statement of operations for the fiscal year ended August 31, 2020. Similar to the terms of the Second Amended Senior Note, the Third Amended Senior Note would have matured on April 29, 2021, subject to the Investor’s right to extend such maturity date. Upon maturity, the Company would have been required to pay the Investor an amount in cash representing the aggregate outstanding principal, plus any accrued and unpaid interest and accrued and unpaid late charges. Similar to the terms of the Original Note, the First Amended Senior Note and the Second Amended Senior Note, the Third Amended Senior Note did not bear interest except upon the occurrence (and during the continuance) of an Event of Default (as such term is defined in the Third Amended Senior Note), in which case the Third Amended Senior Note would bear interest at a rate of 18.0% per annum (the “Default Rate”). On November 10, 2020, the Company entered into a Fourth Exchange Agreement (the “Fourth Exchange Agreement”) with the Investor in order to (x) amend and waive certain provisions of the Securities Purchase Agreement, as amended, and the Third Amended Senior Note, and (y) exchange the Third Amended Senior Note without any cash consideration for (i) a new senior note in the aggregate principal amount of $19.0 million (the “Fourth Amended Senior Note”) and (ii) 4,687,500 shares of the Company's common stock (the “Fourth Exchange Shares”). The exchange of principal and Fourth Exchange Shares was accounted for as an extinguishment of debt, and a loss on extinguishment of $0.9 million was recorded in the statement of operations for the three months ended November 30, 2020. Similar to the terms of the Original Note, the Fourth Amended Senior Note will not bear interest except upon the occurrence (and during the continuance) of an Event of Default (as such term is defined in the Fourth Amended Senior Note), in which case the Fourth Amended Senior Note will bear interest at a rate of 18.0% per annum (the “Default Rate”). The Fourth Amended Senior Note is redeemable by us at any time after the issuance in an amount equal to the outstanding principal and any accrued interest or late charges. The Fourth Amended Senior Note contains customary affirmative and negative covenants, including a limitation on the Company's ability to incur additional indebtedness, subject to certain permitted exceptions. The Fourth Amended Senior Note includes customary events of default including, among others, payment defaults, breach of covenant defaults, bankruptcy and insolvency defaults, cross defaults with certain indebtedness, a change of control default, judgment defaults, and inaccuracies of representations and warranties defaults. Similar to the terms of the Original Note, the Investor may require us to redeem, upon the occurrence of an Event of Default, all or a portion of the Fourth Amended Senior Note at a redemption premium of 135% of the outstanding principal and any accrued interest or late charges. Similar to the terms of the Original Note, any amount of principal or other amounts due to the Investor under the Securities Purchase Agreement, as amended, or the Fourth Amended Senior Note that is not paid when due (except to the extent such amount is simultaneously accruing interest at the Default Rate) will result in a late charge being incurred and payable by us in an amount equal to interest on such amount at the rate of 18.0% per annum from the date such amount was due until the same is paid in full. PPP Loan On April 30, 2020, the Company qualified for and received a loan pursuant to the Paycheck Protection Program, a program implemented by the U.S. Small Business Administration under the Coronavirus Aid, Relief, and Economic Security Act from a qualified lender (the “PPP Lender”), for an aggregate principal amount of approximately $1.9 million (the “PPP Loan”). The PPP Loan is unsecured and guaranteed by the U.S. Small Business Administration, bears interest at a fixed rate of 1.0% per annum, a maturity of two years with the first six months of interest, principal and fees deferred. The principal and interest of the PPP Loan is eligible for forgiveness under the Paycheck Protection Program to the extent that the PPP Loan proceeds are used to pay expenses permitted by the Paycheck Protection Program, including eligible payroll costs, covered rent, business mortgage interest, and covered utility payments incurred by the Company during the elected 24 week covered period after loan disbursement. The Company has applied for forgiveness of the PPP Loan with respect to these covered expenses and the Company's principal and interest payments will continue to be deferred until the SBA remits the loan forgiveness amount to the PPP lender. To the extent that all or part of the PPP Loan is not forgiven, the Company will be required to pay a combined monthly principal and interest payment commencing on the date of the forgiveness decision rendered by the SBA with payments made through the maturity date; any outstanding and unpaid balance will be payable in full on the maturity date. The terms of the PPP Loan provide for customary events of default including, among other things, payment defaults, breach of representations and warranties, and insolvency events. The PPP Loan may be accelerated upon the occurrence of an event of default. As of November 30, 2020, the non-current portion of the PPP Loan amounted to $763, and the current portion amounted to $1,137, and is included within the current portion of notes payable on the accompanying balance sheet. As of August 31, 2020, the PPP Loan amounted to $1,900, and was included within the current portion of notes payable on the accompanying balance sheet. |
WARRANT LIABILITY
WARRANT LIABILITY | 3 Months Ended |
Nov. 30, 2020 | |
WARRANT LIABILITY | |
WARRANT LIABILITY | WARRANT LIABILITY In addition to the warrants described above, in June 2018, the Company issued warrants to purchase 3,750 shares of its common stock exercisable at a price per share of $5.28 (the “2018 Warrants”) to investors in a registered direct offering. The 2018 Warrants have a term of five years from the date of issuance. Pursuant to ASC Topic 815, the initial fair value of the 2018 Warrants of $15,350 was recorded as a warrant liability on the issuance date. The estimated fair values of the 2018 Warrants was computed at issuance using a Black-Scholes option pricing model. The estimated fair value of the outstanding liabilities associated with the 2018 Warrants was $548 and $365 as of November 30, 2020 and August 31, 2020, respectively. Increases or decreases in the fair value of the Company's liability associated with the 2018 Warrants are included as a component of “Other expense” in the accompanying condensed consolidated statements of operations for the respective period. The changes to the liability associated with the 2018 Warrants resulted in an increase of $183 in liability and a corresponding loss for the three months ended November 30, 2020. The changes to the liability associated with the 2018 Warrants resulted in a decrease of $3,204 in liability and a corresponding gain for the three months ended November 30, 2019. The estimated fair value of the 2018 Warrants was computed as of November 30, 2020 using the Black Scholes model with the following assumptions: stock price of $0.85, volatility of 94.9%, risk-free rate of 0.18%, annual dividend yield of 0% and expected life of 2.5 years. |
FAIR VALUE OF FINANCIAL INSTRUM
FAIR VALUE OF FINANCIAL INSTRUMENTS | 3 Months Ended |
Nov. 30, 2020 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE OF FINANCIAL INSTRUMENTS | FAIR VALUE OF FINANCIAL INSTRUMENTS Fair value measurements are performed in accordance with the guidance provided by ASC Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”). ASC 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or parameters are not available, valuation models are applied. ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Assets and liabilities recorded at fair value in the financial statements are categorized based upon the hierarchy of levels of judgment associated with the inputs used to measure their fair value. Hierarchical levels directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows: Level 1 – Quoted prices in active markets for identical assets or liabilities that an entity has the ability to access. Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 3 – Unobservable inputs that are supportable by little or no market activity and that are significant to the fair value of the asset or liability. The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, equity investments, accounts receivable, accounts payable and accrued liabilities and obligations approximate their fair values based on their short-term nature. The carrying amount of the Company’s long-term notes payable approximates its fair value based on interest rates available to the Company for similar debt instruments and similar remaining maturities. The Company accounts for its investment in Smoke Cartel, Inc. (“Smoke Cartel”) at fair value. On September 21, 2018, Smoke Cartel and the Company entered into an agreement to sell Rowl-Uh-Bowl (the “RUB”) web domain and inventory related to this product line and in exchange, received 1,410 shares of Smoke Cartel common stock. The fair value of the Company’s investment as of August 31, 2020 and November 30, 2020 was based upon the closing price of Smoke Cartel's common stock on each respective date. The investment was classified as a Level 2 financial instrument. The Company accounts for its investment in XS Financial at fair value. The fair value of the Company’s investment at November 30, 2020 was based upon the closing price of XS Financial common stock on each respective date. The investment was classified as a Level 2 financial instrument. In connection with the Company’s registered direct offering in June 2018, the Company issued the 2018 Warrants, which are accounted for as a warrant liability (see Note 9 above.) The estimated fair value of the liability is recorded using significant unobservable measures and other fair value inputs and is therefore classified as a Level 3 financial instrument. The following table details the fair value measurement within the fair value hierarchy of the Company’s financial instruments, which includes the Level 2 assets and the Level 3 liabilities: Fair Value at November 30, 2020 Total Level 1 Level 2 Level 3 Assets: Equity investment $ 3,408 $ — $ 3,408 $ — Liabilities: Warrant liability $ 548 $ — $ — $ 548 Fair Value at August 31, 2020 Total Level 1 Level 2 Level 3 Assets: Equity investment $ 2,157 $ — $ 2,157 $ — Liabilities: Warrant liability $ 365 $ — $ — $ 365 The following table reflects adjustments to the estimated fair value of the Company’s warrant liability with respect to the 2018 Warrants measured using Level 3 inputs: Warrant Liability As of August 31, 2020 $ 365 Adjustments to estimated fair value 183 As of November 30, 2020 $ 548 Warrant Liability As of August 31, 2019 $ 5,444 Adjustments to estimated fair value (3,204) As of November 30, 2019 $ 2,240 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Nov. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Other Commitments In the ordinary course of business, the Company may enter into contractual purchase obligations and other agreements that are legally binding and specify certain minimum payment terms. The Company had no such agreements as of November 30, 2020. Litigation The Company may be subject to legal proceedings and claims that arise in the ordinary course of its business. During fiscal 2019, lawsuits were filed in California federal and state court by various purported shareholders against, the Company, certain of the current members of the Company’s Board of Directors, and certain of the Company’s current and former officers, alleging, among other things, certain federal securities law violations and/or related breaches of fiduciary duties in connection with the Company’s April 2019 restatement of certain prior period financial statements. In general, the lawsuits assert the same or similar allegations, including that the defendants artificially inflated the Company’s securities prices by knowingly making materially false and misleading statements and omissions to the investing public about the Company’s financial statements, business, operations, management, and internal controls. These lawsuits are described below. May v. KushCo Holdings, Inc., et al. Filed April 30, 2019. Case No. 8:19-cv-00798-JLS-KES, U.S. District Court for the Central District of California. This putative shareholder class action against the Company and certain of its current and former officers alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, and seeks unspecified compensatory damages and other relief on behalf of a class of purchasers of the Company’s securities between July 13, 2017 and April 9, 2019, inclusive. In September 2019, the Court appointed co-lead plaintiffs and co-lead counsel for the plaintiffs. The lead plaintiffs’ amended complaint was filed in November 2019. In February 2020, the Company moved to dismiss the amended complaint. In September 2020, the Court granted the defendants’ motion to dismiss with leave to amend. On November 2, 2020, after the lead plaintiffs failed to file an amended complaint, the Court entered judgment in favor of the defendants, dismissing the action with prejudice. On December 2, 2020, the lead plaintiffs filed a notice of appeal of the judgment to the U.S. Court of Appeals for the Ninth Circuit. Salsberg v. Kovacevich, et al . Filed May 24, 2019. Case No. 8:19-cv-00998-JLS-KES, U.S. District Court for the Central District of California and Neysmith v. Baum, et al . Filed May 31, 2019. Case No. 8:19-cv-01070-JLS-KES, U.S. District Court for the Central District of California. This purported shareholder derivative action against certain current and former directors and officers of the Company alleges, among other things, breach of fiduciary duty, waste of corporate assets, and unjust enrichment. The Company is named as a nominal defendant and the plaintiff seeks, among other things, corporate governance reforms, and disgorgement of profits, benefits, and compensation obtained by the defendants from the alleged conduct, to be paid to the Company. In September 2019, the Court consolidated these cases. In December 2019, the Court ordered a stay of this action pursuant to a stipulation of the parties, which expired in December 2020. Savage v. Kovacevich, et al . Filed June 14, 2019. Case No. 30-2019-01077191-CU-MC-NJC, Superior Court of California, County of Orange. This purported shareholder derivative action against certain current and former directors and officers of the Company alleges, among other things, breach of fiduciary duty, waste of corporate assets, and unjust enrichment. The Company is named as a nominal defendant and the plaintiff seeks, among other things, corporate governance reforms, and unspecified damages and restitution from the defendants, to be paid to the Company. In August 2019, the Court ordered a stay of this action pursuant to a stipulation of the parties, which expired in December 2020. Bruno, et al. v. Kovacevich, et al . Filed September 26, 2019. Case No. A-19-802660-C, Eighth Judicial District Court of the State of Nevada and Majchrzak v. Kovacevich, et al . Filed October 2, 2019. Case No. A-19-902945-B, First Judicial District Court of the State of Nevada. These purported shareholder derivative actions against certain current and former directors and officers allege, among other things, breach of fiduciary duty, waste of corporate assets, and unjust enrichment. The Company is named as a nominal defendant in each action and the plaintiffs seek, among other things, equitable relief and unspecified damages from the defendants, to be paid to the Company. In May 2020, the Company accepted service of the complaints. The plaintiffs have indicated that they intend to move to stay each action, which stays expired in December 2020. In addition, after fiscal 2019, in October 2020, a purported Company shareholder filed a shareholder derivative action and putative class action complaint ( Choate v. Kovacevich, et al ., filed October 1, 2020, Case No. 8:20-cv-01904-JLS-KES, U.S. District Court for the Central District of California) against certain current Company directors. The suit alleges, among other things, breach of fiduciary duty with respect to the administration of the Company's 2016 Stock Incentive Plan. The Company is named as a nominal defendant. The suit seeks declaratory relief and, from the director defendants, unspecified compensatory damages and other relief. As of November 30, 2020, the Company cannot predict the ultimate outcome of the matters and cannot reasonably estimate the potential loss or range of loss that the Company may incur. |
2020 PLAN & RESTRUCTURING CHARG
2020 PLAN & RESTRUCTURING CHARGES | 3 Months Ended |
Nov. 30, 2020 | |
Restructuring Charges [Abstract] | |
2020 PLAN & RESTRUCTURING CHARGES | 2020 PLAN & RESTRUCTURING CHARGES In the three months ended November 30, 2020, the Company recorded $8 thousand in restructuring costs. During the second quarter of fiscal 2020, the Company adopted and implemented a comprehensive strategic plan (the “2020 Plan”) to more effectively execute the Company’s strategy of focusing its resources on more established, financially stable, and creditworthy customers (namely multi-state operators, licensed producers, and leading brands). In connection with the 2020 Plan, the Company began implementing a restructuring plan designed to rationalize all aspects of its operations by, among other things, significantly reducing its overhead, implementing more stringent expense controls, consolidating its warehouses, reducing its inventory, and drastically altering its sales strategy to focus more on these customers. The Company believes that this strategic shift and associated restructuring has resulted in a better forecast of demand, reduction of inventory and warehouse space, improved collections and cash flow, and potential revenue upside from these customers’ continued expansion and consolidation in the marketplace. The Company has incurred $8.4 million in restructuring charges as of November 30, 2020, and expects to incur a total of $9.6 million in restructuring charges under the 2020 Plan, which represents the Company’s best estimate as of November 30, 2020. The 2020 Plan is expected to be completed by the end of fiscal 2021. The recognition of restructuring charges requires that the Company make certain judgments and estimates regarding the nature, timing and amount of costs associated with the planned reductions of workforce and facility, ROU and asset impairment costs. At the end of each reporting period, the Company will evaluate the remaining accrued balance to ensure that no excess accruals are retained, and the utilization of the provisions are for their intended purpose in accordance with developed plans. The following table reflects the movement of activity of the restructuring reserve for the three months ended November 30, 2020: Severance Facility, ROU Facility Exit Cost Total Balance at September 1, 2020 $ — $ — $ — $ — Provisions/Additions — — 8 8 Utilized/Paid — — (8) (8) Balance at November 30, 2020 $ — $ — $ — $ — Expenses incurred under the 2020 Plan during the three months ended November 30, 2020 are included within “Restructuring costs” in the condensed consolidated statement of operations. |
SIGNIFICANT ACCOUNTING POLICI_2
SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Nov. 30, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the activity of KushCo Holdings, Inc. (the “Company”) and its wholly-owned subsidiaries and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information pursuant to Securities and Exchange Commission (“SEC”) rules and regulations. Accordingly, they do not include all of the information and notes required by GAAP for annual financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included in the condensed consolidated financial statements for the interim periods presented herein, but are not necessarily indicative of operating results to be achieved for full fiscal years or other interim periods. The condensed consolidated balance sheet as of August 31, 2020 was derived from the audited financial statements as of that date but does not include all disclosures as required by GAAP. These condensed consolidated financial statements and notes should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes for the fiscal year ended August 31, 2020 and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year then ended and filed with the SEC on November 10, 2020. The Company’s principal sources of liquidity at November 30, 2020 consisted of cash on hand, a line of credit and future cash anticipated to be generated from operations. The Company reported positive working capital as of November 30, 2020. However, the Company’s principal loan balances mature on April 29, 2021. The Company intends to refinance such loan balances by their stated maturity. The Company believes its current cash balances coupled with anticipated cash flow from operating activities, and its plans to refinance its borrowings will be sufficient to meet its working capital requirements for at least one year from the date the consolidated financial statements were available to be issued. References to amounts in these notes to condensed consolidated financial statements are in thousands, except per share amounts, unless otherwise specified. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenues and expenses during the reporting period. Significant estimates relied upon in preparing these condensed consolidated financial statements include revenue recognition, accounts receivable reserves, inventory and related reserves, expected future cash flows used to evaluate the recoverability of long-lived assets, estimated fair values of long-lived assets used to record impairment charges related to intangible assets and goodwill, amortization periods, accrued expenses, stock-based compensation expenses, and recoverability of the Company’s net deferred tax assets and any related valuation allowance. Although the Company regularly assesses these estimates, actual results could differ materially from these estimates. Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Actual results may differ from management’s estimates if past experience or other assumptions do not turn out to be substantially accurate. |
Accounts Receivable | Accounts Receivable Trade accounts receivable are carried at their estimated collectible amounts. Trade credit is generally extended on a short-term basis; thus, trade receivables do not bear interest. Trade accounts receivables are periodically evaluated for collectability based on the customer's past credit history and current financial condition. The Company’s net accounts receivable balance was $11,959 and $9,427 as of November 30, 2020 and August 31, 2020, respectively. The Company’s allowance for doubtful accounts was $2,336 and $2,439 as of November 30, 2020 and August 31, 2020, respectively. The Company wrote-off $43 of customers' balances during the three month period ended November 30, 2020. The Company’s sales return reserve was $182 |
Inventory | Inventory Inventories are stated at the lower of cost or net realizable value using the average cost method. The Company’s inventory consists of finished goods of $43,878 and $38,546 as of November 30, 2020 and August 31, 2020, respectively. The Company also makes prepayments against the future delivery of inventory classified as prepaid inventory. The Company’s prepaid inventory was $8,304 and $3,373 as of November 30, 2020 and August 31, 2020, respectively and is included in prepaid expenses and other current assets on the accompanying balance sheets. The Company regularly reviews inventory and, when appropriate, records a provision for obsolete and excess inventory. The provision is based on actual loss experience and a forecast of product demand compared to its remaining shelf life. As of November 30, 2020, the Company had $9,161 of inventory reserve. As of August 31, 2020, the Company had $10,497 of inventory reserve. |
Equity Investment | Equity Investment On January 30, 2020, the Company partnered with XS Financial Inc. (“XS Financial”), formerly Xtraction Services Holding Corp, a provider of equipment leasing solutions to owners and operators of cannabis and hemp companies in the United States in order to provide such solutions to the Company’s network of regulated cannabis and hemp-derived cannabidiol ("CBD") operators. The Company’s Chief Financial Officer, Stephen Christoffersen, has served on the board of directors for XS Financial since May 2019. Under the terms of its agreement with XS Financial, upon the closing of the transaction, the Company issued 1,653 of its common shares in exchange for 10,600 proportionate voting shares of XS Financial (the “XS Shares”), the equivalent of 19.9% of XS Financials' market capitalization on the closing date. On January 30, 2020, the value of the Company's shares issued in exchange for the equity investment in XS Financial was $2,528. The Company’s investment in XS Financial is included in “Other assets” on the Company’s condensed consolidated balance sheets. The fair value of Company's investment in XS Financial was $2,321 as of November 30, 2020. The fair value of Company's investment in XS Financial was $1,225 as of August 31, 2020. |
Net Loss Per Share | Net Loss Per Share The Company computes earnings per share under Accounting Standards Codification (“ASC”) Topic 260, Earnings per Share (“ASC 260”). Basic net loss per common share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the sum of (a) the weighted average number of shares of common stock outstanding during the period and (b) the potentially dilutive securities outstanding during the period. Stock options and warrants are potentially dilutive securities; and the number of dilutive options is computed using the treasury stock method. For the three months ended November 30, 2020 and 2019, basic and diluted weighted average shares are the same, as the Company generated a net loss for the period. The computation for the three months ended November 30, 2020 does not include 10,782 options and 21,737 warrants, as their inclusion would have an anti-dilutive effect on net loss per share. The computation of diluted net loss per share for the three months ended November 30, 2019 does not include 14,407 options and 16,737 warrants, as their inclusion would have an anti-dilutive effect on net loss per share. |
Revenue Recognition | Revenue Recognition The Company markets and sells a wide variety of ancillary products and services to customers operating in the regulated medical and recreational cannabis and CBD industries. These complementary products and services include bottles, jars, bags, tubes, containers, vape cartridges, vape batteries and accessories, labels and processing supplies, solvents, natural products, stainless steel tanks, custom branded anti-counterfeit and authentication labels, and services focused on building distribution networks of compliant hemp-derived CBD brands across conventional and other retail channels, including convenience, pet care, and beauty channels. In accordance with ASC 606, Revenue from Contracts with Customers , the Company applies the following steps to recognize revenue for the sale of products that reflects the consideration to which the Company expects to be entitled to receive in exchange for the promised goods: • Identify the contract with a customer. • Identify the performance obligations in the contract. • Determine the transaction price. • Allocate the transaction price to the performance obligations in the contract. • Recognize revenue when the Company satisfies a performance obligation. |
Advertising | AdvertisingThe Company conducts advertising for the promotion of its products and services. In accordance with ASC subtopic 720-35-25 (“ASC 720”), advertising costs are charged to expense when incurred. Advertising costs were $3 and $81 for the three months ended November 30, 2020 and November 30, 2019, respectively. |
Share-based Compensation | Share-based Compensation The Company recorded total stock-based compensation expense of $2,360 and $4,662 for the three months ended November 30, 2020 and November 30, 2019, respectively, in connection with the issuance of shares of common stock and options to purchase common stock. Stock-based compensation expense is included in selling, general and administrative expense in the Company's condensed consolidated statements of operations. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements In August 2020, the FASB issued ASU 2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40).” ASU 2020-06 reduces the number of models used to account for convertible instruments, amends diluted EPS calculations for convertible instruments, and amends the requirements for a contract (or embedded derivative) that is potentially settled in an entity's own shares to be classified in equity. The amendments add certain disclosure requirements to increase transparency and decision-usefulness about a convertible instrument's terms and features. Under the amendment, the Company must use the if-converted method for including convertible instruments in diluted EPS as opposed to the treasury stock method. ASU 2020-06 is effective for annual reporting periods beginning after December 15, 2021 (the Company's Fiscal 2023). Early adoption is allowed under the standard with either a modified retrospective or full retrospective method. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements. In December 2019, the FASB Issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting of Income Taxes”, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements. In January 2020, the FASB issued ASU 2020-1, “Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815.” The ASU is based on a consensus of the Emerging Issues Task Force and is expected to increase comparability in accounting for these transactions. ASU 2016-1 made targeted improvements to accounting for financial instruments, including providing an entity the ability to measure certain equity securities without a readily determinable fair value at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Among other topics, the amendments clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting. For public business entities, the amendments in the ASU are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company is evaluating the potential impact of adoption of this standard on its consolidated financial statements. Other accounting standards that have been issued or proposed by the FASB that do not require adoption until a future date are not expected to have a material impact on the condensed consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures. |
Fair Value Measurement | ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Assets and liabilities recorded at fair value in the financial statements are categorized based upon the hierarchy of levels of judgment associated with the inputs used to measure their fair value. Hierarchical levels directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows: Level 1 – Quoted prices in active markets for identical assets or liabilities that an entity has the ability to access. Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 3 – Unobservable inputs that are supportable by little or no market activity and that are significant to the fair value of the asset or liability. |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 3 Months Ended |
Nov. 30, 2020 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | The major classes of fixed assets consist of the following: November 30, August 31, Machinery and equipment $ 9,567 $ 9,540 Vehicles 410 410 Office Equipment 376 376 Leasehold improvements 1,590 1,591 Construction in progress 774 660 12,717 12,577 Accumulated Depreciation (4,493) (3,776) $ 8,224 $ 8,801 |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 3 Months Ended |
Nov. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Intangible assets | Intangible assets consist of the following: As of November 30, 2020 As of August 31, 2020 Description Weighted Average Estimated Useful Life Gross Carrying Value Accumulated Amortization Net Amount Gross Carrying Value Accumulated Amortization Net Amount Trade name 6 years 1,400 (1,400) — 1,400 (1,400) — Non-compete agreement 4 years 2,370 (1,498) 872 2,370 (1,370) 1,000 $ 3,770 $ (2,898) $ 872 $ 3,770 $ (2,770) $ 1,000 |
Schedule of remaining estimated amortization of definite-lived intangible assets | The following table summarizes the remaining estimated amortization of definite-lived intangible assets as of November 30, 2020: For the year ended August 31, 2021 (remaining nine months) $ 319 2022 314 2023 239 $ 872 |
ACCRUED EXPENSES AND OTHER CU_2
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables) | 3 Months Ended |
Nov. 30, 2020 | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | |
Schedule of accrued expenses and other current liabilities | Accrued expenses and other current liabilities consist of the following: November 30, August 31, Accrued compensation $ 1,978 $ 2,798 Sales tax payable 750 727 Operating lease liability 1,635 1,583 Other accrued expenses 2,360 3,087 $ 6,723 $ 8,195 |
LEASES (Tables)
LEASES (Tables) | 3 Months Ended |
Nov. 30, 2020 | |
Lessee Disclosure [Abstract] | |
Summary of lease liabilities | ROU assets and liabilities consist of the following: November 30, August 31, Operating leases - ROU assets (included in Other assets) $ 2,952 $ 3,127 Current portion of lease liabilities $ 1,635 $ 1,583 Long term lease liabilities, net of current portion 3,716 4,157 Total lease liabilities $ 5,351 $ 5,740 |
Summary of aggregate lease maturities | Aggregate lease maturities as of November 30, 2020 are as follows: Year ended August 31, 2021 (remaining nine months) $ 1,631 2022 2,137 2023 1,544 2024 951 2025 619 Thereafter 39 Total minimum lease payments 6,921 Less imputed interest (1,570) Total lease liabilities $ 5,351 |
FAIR VALUE OF FINANCIAL INSTR_2
FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables) | 3 Months Ended |
Nov. 30, 2020 | |
Fair Value Disclosures [Abstract] | |
Schedule of fair value of financial instruments | The following table details the fair value measurement within the fair value hierarchy of the Company’s financial instruments, which includes the Level 2 assets and the Level 3 liabilities: Fair Value at November 30, 2020 Total Level 1 Level 2 Level 3 Assets: Equity investment $ 3,408 $ — $ 3,408 $ — Liabilities: Warrant liability $ 548 $ — $ — $ 548 Fair Value at August 31, 2020 Total Level 1 Level 2 Level 3 Assets: Equity investment $ 2,157 $ — $ 2,157 $ — Liabilities: Warrant liability $ 365 $ — $ — $ 365 |
Schedule of fair value warrant liability | The following table reflects adjustments to the estimated fair value of the Company’s warrant liability with respect to the 2018 Warrants measured using Level 3 inputs: Warrant Liability As of August 31, 2020 $ 365 Adjustments to estimated fair value 183 As of November 30, 2020 $ 548 Warrant Liability As of August 31, 2019 $ 5,444 Adjustments to estimated fair value (3,204) As of November 30, 2019 $ 2,240 |
2020 PLAN & RESTRUCTURING CHA_2
2020 PLAN & RESTRUCTURING CHARGES (Tables) | 3 Months Ended |
Nov. 30, 2020 | |
Restructuring Charges [Abstract] | |
Schedule of movement of activity of the restructuring reserve | The following table reflects the movement of activity of the restructuring reserve for the three months ended November 30, 2020: Severance Facility, ROU Facility Exit Cost Total Balance at September 1, 2020 $ — $ — $ — $ — Provisions/Additions — — 8 8 Utilized/Paid — — (8) (8) Balance at November 30, 2020 $ — $ — $ — $ — |
SIGNIFICANT ACCOUNTING POLICI_3
SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) $ in Thousands | Jan. 30, 2020 | Nov. 30, 2020 | Nov. 30, 2019 | Aug. 31, 2020 |
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES | ||||
Accounts receivable, net | $ 11,959 | $ 9,427 | ||
Accounts receivable, write-offs | 43 | |||
Allowance for doubtful accounts | 2,336 | 2,439 | ||
Sales return reserve | 182 | 332 | ||
Inventory finished goods | 43,878 | 38,546 | ||
Prepaid inventory | 8,304 | 3,373 | ||
Inventory reserve | 9,161 | 10,497 | ||
Advertising costs | $ 3 | $ 81 | ||
Options | ||||
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES | ||||
Exclusion of shares that have an anti-dilutive effect on net loss per share | 10,782 | 14,407 | ||
Warrant | ||||
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES | ||||
Exclusion of shares that have an anti-dilutive effect on net loss per share | 21,737 | 16,737 | ||
Common Stock | ||||
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES | ||||
Stock issued for equity investment (Shares) | 1,653 | |||
XS Financial | ||||
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES | ||||
Shares exchanged for common stock (in shares) | 10,600 | |||
Percentage of equity interests received | 19.90% | |||
Stock issued during period, equity investment | $ 2,528 | |||
Equity method investments, fair value | $ 2,321 | $ 1,225 |
CONCENTRATIONS OF RISK (Details
CONCENTRATIONS OF RISK (Details) | 3 Months Ended | |
Nov. 30, 2020vendorcustomers | Nov. 30, 2019vendorcustomers | |
Purchase | Supplier Concentration Risk | ||
Concentration Risk [Line Items] | ||
Number of vendors | vendor | 1 | 1 |
Concentration risk, percentage | 53.00% | 32.00% |
Accounts Payable | Supplier Concentration Risk | ||
Concentration Risk [Line Items] | ||
Number of vendors | vendor | 2 | 3 |
Concentration risk, percentage | 58.00% | 37.00% |
Revenue | Customer Concentration Risk | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 28.00% | 10.00% |
Number of customers | customers | 2 | 1 |
Accounts Receivable | Customer Concentration Risk | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 42.00% | 35.00% |
Number of customers | customers | 3 | 2 |
RELATED-PARTY TRANSACTIONS (Det
RELATED-PARTY TRANSACTIONS (Details) | 3 Months Ended | ||
Nov. 30, 2020USD ($)relatedParty | Nov. 30, 2019USD ($)relatedParty | Aug. 31, 2020USD ($) | |
Related Party Transactions [Abstract] | |||
Number of related parties | relatedParty | 1 | 2 | |
Sales recognized from related parties | $ 134,000 | $ 866,000 | |
Total accounts receivable from related parties | 704,000 | $ 1,200,000 | |
Total payments made to related party | $ 0 | $ 158,000 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Nov. 30, 2020 | Nov. 30, 2019 | Aug. 31, 2020 | |
PROPERTY AND EQUIPMENT | |||
Property and equipment, gross | $ 12,717 | $ 12,577 | |
Accumulated Depreciation | (4,493) | (3,776) | |
Property and equipment, net | 8,224 | 8,801 | |
Depreciation expense | 717 | $ 725 | |
Machinery and equipment | |||
PROPERTY AND EQUIPMENT | |||
Property and equipment, gross | 9,567 | 9,540 | |
Vehicles | |||
PROPERTY AND EQUIPMENT | |||
Property and equipment, gross | 410 | 410 | |
Office Equipment | |||
PROPERTY AND EQUIPMENT | |||
Property and equipment, gross | 376 | 376 | |
Leasehold improvements | |||
PROPERTY AND EQUIPMENT | |||
Property and equipment, gross | 1,590 | 1,591 | |
Construction in progress | |||
PROPERTY AND EQUIPMENT | |||
Property and equipment, gross | $ 774 | $ 660 |
INTANGIBLE ASSETS - Intangible
INTANGIBLE ASSETS - Intangible assets (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Nov. 30, 2020 | Nov. 30, 2019 | Aug. 31, 2020 | |
Acquired Finite-Lived Intangible Assets [Line Items] | |||
Gross carrying value | $ 3,770 | $ 3,770 | |
Accumulated amortization | (2,898) | (2,770) | |
Net Amount | 872 | 1,000 | |
Amortization expense | $ 128 | $ 237 | |
Trade name | |||
Acquired Finite-Lived Intangible Assets [Line Items] | |||
Weighted average estimated useful life (in years) | 6 years | ||
Gross carrying value | $ 1,400 | 1,400 | |
Accumulated amortization | (1,400) | (1,400) | |
Net Amount | $ 0 | 0 | |
Non-compete agreement | |||
Acquired Finite-Lived Intangible Assets [Line Items] | |||
Weighted average estimated useful life (in years) | 4 years | ||
Gross carrying value | $ 2,370 | 2,370 | |
Accumulated amortization | (1,498) | (1,370) | |
Net Amount | $ 872 | $ 1,000 |
INTANGIBLE ASSETS - Amortizatio
INTANGIBLE ASSETS - Amortization expense (Details) - USD ($) $ in Thousands | Nov. 30, 2020 | Aug. 31, 2020 |
Year ended August 31, | ||
2021 (remaining nine months) | $ 319 | |
2022 | 314 | |
2023 | 239 | |
Net Amount | $ 872 | $ 1,000 |
ACCRUED EXPENSES AND OTHER CU_3
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details) - USD ($) $ in Thousands | Nov. 30, 2020 | Aug. 31, 2020 |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | ||
Accrued compensation | $ 1,978 | $ 2,798 |
Sales tax payable | 750 | 727 |
Operating lease liability | 1,635 | 1,583 |
Other accrued expenses | 2,360 | 3,087 |
Accrued expenses and other current liabilities | $ 6,723 | $ 8,195 |
LEASES - Narrative (Details)
LEASES - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Nov. 30, 2020 | Nov. 30, 2019 | Aug. 31, 2020 | |
Lessee Disclosure [Abstract] | |||
Weighted average discount rate (percent) | 8.30% | ||
Lease liabilities | $ 5,351 | $ 5,740 | |
ROU assets | 2,952 | $ 3,127 | |
Rent expense | $ 374 | $ 850 | |
Weighted average remaining lease term (in years) | 3 years 6 months | ||
Right-of-use assets amortization | $ 175 | $ 603 | |
Cash paid for measurement of operating lease liabilities | $ 388 |
LEASES - Lease liabilities (Det
LEASES - Lease liabilities (Details) - USD ($) $ in Thousands | Nov. 30, 2020 | Aug. 31, 2020 |
Lease Liabilities | ||
ROU assets | $ 2,952 | $ 3,127 |
Operating lease liability | 1,635 | 1,583 |
Long term lease liabilities, net of current portion | 3,716 | 4,157 |
Total lease liabilities | $ 5,351 | $ 5,740 |
LEASES - Aggregate lease maturi
LEASES - Aggregate lease maturities (Details) - USD ($) $ in Thousands | Nov. 30, 2020 | Aug. 31, 2020 |
Aggregate lease maturities | ||
2021 (remaining nine months) | $ 1,631 | |
2022 | 2,137 | |
2023 | 1,544 | |
2024 | 951 | |
2025 | 619 | |
Thereafter | 39 | |
Total minimum lease payments | 6,921 | |
Less imputed interest | (1,570) | |
Total lease liabilities | $ 5,351 | $ 5,740 |
DEBT - Monroe Revolving Credit
DEBT - Monroe Revolving Credit Facility (Details) - USD ($) | Aug. 21, 2019 | Nov. 30, 2020 | Nov. 30, 2019 | Aug. 31, 2020 |
Line of Credit Facility [Line Items] | ||||
Outstanding amount | $ 4,320,000 | $ 0 | ||
Amortization of debt discount | 1,492,000 | $ 1,181,000 | ||
Monroe Revolving Credit Facility | ||||
Line of Credit Facility [Line Items] | ||||
Maximum borrowing capacity | $ 35,000,000 | |||
Additional borrowing capacity, accordion feature amount | $ 15,000,000 | |||
Available borrowing capacity | $ 10,915,000 | |||
Debt instrument, term | 5 years | 5 years | ||
Outstanding amount | $ 4,320,000 | 0 | ||
Closing costs incurred | 2,672,000 | |||
Unamortized debt issuance costs | 1,904,000 | $ 2,057,000 | ||
Interest expense | 53,000 | 296,000 | ||
Amortization of debt discount | $ 154,000 | $ 154,000 |
DEBT - Monroe Warrants (Details
DEBT - Monroe Warrants (Details) | Aug. 21, 2019operatingSegment$ / sharesshares |
Monroe Subscription Agreement | |
Line of Credit Facility [Line Items] | |
Warrants issued | shares | 500 |
Consecutive trading days | operatingSegment | 10 |
Percentage of stock ownership after conversion | 0.0499 |
Exchange Agreement | |
Line of Credit Facility [Line Items] | |
Warrants exercise price (in dollars per share) | $ / shares | $ 4.25 |
DEBT - Senior Note with HB Sub
DEBT - Senior Note with HB Sub Fund (Details) | Nov. 10, 2020USD ($)shares | Jun. 09, 2020USD ($)shares | Aug. 21, 2019USD ($)$ / sharesshares | Apr. 29, 2019USD ($) | Nov. 30, 2020USD ($) | Nov. 30, 2019USD ($) | Nov. 08, 2019USD ($) |
Line of Credit Facility [Line Items] | |||||||
Gain (Loss) on extinguishment of debt | $ 877,000 | $ 0 | |||||
Securities Purchase Agreement (the "Purchase Agreement") | Senior Notes | |||||||
Line of Credit Facility [Line Items] | |||||||
Aggregate principal amount | $ 21,300,000 | ||||||
Issue discount | 1,300,000 | ||||||
Proceeds from issuance of long-term debt | $ 20,000,000 | ||||||
Monroe Subscription Agreement | |||||||
Line of Credit Facility [Line Items] | |||||||
Warrants exercise price (in dollars per share) | $ / shares | $ 4.25 | ||||||
Percentage of outstanding principal for repayment | 1.20 | ||||||
Exchange Agreement | |||||||
Line of Credit Facility [Line Items] | |||||||
Warrants issued | shares | 650 | ||||||
Fair value of warrants | $ 792,000 | ||||||
Maturity date | Oct. 30, 2020 | ||||||
Second Exchange Agreement | |||||||
Line of Credit Facility [Line Items] | |||||||
Aggregate principal amount | $ 24,000,000 | ||||||
Issue discount | $ 1,500,000 | ||||||
Percentage of outstanding principal for repayment | 1.20 | ||||||
The Third Exchange Agreement | Senior Notes | |||||||
Line of Credit Facility [Line Items] | |||||||
Aggregate principal amount | $ 22,000,000 | ||||||
Debt instrument, convertible, number of equity instruments (in shares) | shares | 5,347,594 | ||||||
Gain (Loss) on extinguishment of debt | $ 1,650,000 | ||||||
Debt instrument, interest rate, stated percentage | 18.00% | ||||||
Fourth Exchange Agreement | Senior Notes | |||||||
Line of Credit Facility [Line Items] | |||||||
Aggregate principal amount | $ 19,000,000 | ||||||
Debt instrument, convertible, number of equity instruments (in shares) | shares | 4,687,500 | ||||||
Gain (Loss) on extinguishment of debt | $ 900,000 | ||||||
Debt instrument, interest rate, stated percentage | 18.00% | ||||||
Debt Instrument, redemption price, percentage | 135.00% |
DEBT - PPP Loan (Details)
DEBT - PPP Loan (Details) - Paycheck Protection Program - USD ($) $ in Thousands | Apr. 30, 2020 | Nov. 30, 2020 | Aug. 31, 2020 |
Short-term Debt [Line Items] | |||
Proceeds from issuance of debt | $ 1,900 | ||
Notes payable, noncurrent - CARES Act | $ 763 | ||
Notes payable, current - CARES Act | $ 1,137 | ||
Notes payable - CARES Act | $ 1,900 |
WARRANT LIABILITY (Details)
WARRANT LIABILITY (Details) - Derivative Warrant Liability | 3 Months Ended | |||
Nov. 30, 2020USD ($) | Nov. 30, 2019USD ($) | Aug. 31, 2020USD ($) | Jun. 30, 2018USD ($)$ / sharesshares | |
Credit Derivatives [Line Items] | ||||
Warrants issued | shares | 3,750 | |||
Warrants exercise price (in dollars per share) | $ / shares | $ 5.28 | |||
Term of warrants (in years) | 5 years | |||
Estimated fair value of outstanding warrant liabilities | $ 548,000 | $ 365,000 | $ 15,350,000 | |
Changes in derivative liability | $ 183,000 | $ 3,204,000 | ||
Stock price | ||||
Credit Derivatives [Line Items] | ||||
Measurement input | 0.85 | |||
Volatility | ||||
Credit Derivatives [Line Items] | ||||
Measurement input | 0.949 | |||
Risk-free rate | ||||
Credit Derivatives [Line Items] | ||||
Measurement input | 0.0018 | |||
Annual dividend yield | ||||
Credit Derivatives [Line Items] | ||||
Measurement input | 0 | |||
Expected life | ||||
Credit Derivatives [Line Items] | ||||
Term of warrants (in years) | 2 years 6 months |
FAIR VALUE OF FINANCIAL INSTR_3
FAIR VALUE OF FINANCIAL INSTRUMENTS - Narrative (Details) | Sep. 21, 2018shares |
Smoke Cartel, Inc. | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Common stock issued for consideration to sell a web domain and inventory related to the Company's Roll-uh-Bowl ("RUB") product line (in shares) | 1,410 |
FAIR VALUE OF FINANCIAL INSTR_4
FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - Recurring - USD ($) $ in Thousands | Nov. 30, 2020 | Aug. 31, 2020 | Nov. 30, 2019 | Aug. 31, 2019 |
Assets: | ||||
Equity investment | $ 3,408 | $ 2,157 | ||
Liabilities: | ||||
Warrant liability | 548 | 365 | ||
Level 1 | ||||
Assets: | ||||
Equity investment | 0 | 0 | ||
Liabilities: | ||||
Warrant liability | 0 | 0 | ||
Level 2 | ||||
Assets: | ||||
Equity investment | 3,408 | 2,157 | ||
Liabilities: | ||||
Warrant liability | 0 | 0 | ||
Level 3 | ||||
Assets: | ||||
Equity investment | 0 | 0 | ||
Liabilities: | ||||
Warrant liability | 548 | 365 | ||
Level 3 | Derivative Warrant Liability | ||||
Liabilities: | ||||
Warrant liability | $ 548 | $ 365 | $ 2,240 | $ 5,444 |
FAIR VALUE OF FINANCIAL INSTR_5
FAIR VALUE OF FINANCIAL INSTRUMENTS - Activity for Warrant derivative Liability (Details) - Recurring - USD ($) $ in Thousands | 3 Months Ended | |
Nov. 30, 2020 | Nov. 30, 2019 | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Beginning Balance | $ 365 | |
Ending Balance | 548 | |
Level 3 | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Beginning Balance | 365 | |
Ending Balance | 548 | |
Level 3 | Derivative Warrant Liability | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Beginning Balance | 365 | $ 5,444 |
Adjustments to estimated fair value | 183 | (3,204) |
Ending Balance | $ 548 | $ 2,240 |
2020 PLAN & RESTRUCTURING CHA_3
2020 PLAN & RESTRUCTURING CHARGES (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Nov. 30, 2020 | Nov. 30, 2019 | |
RESTRUCTURING CHARGES | ||
Incurred restructuring charges | $ 8,400 | |
Expected restructuring charges | 9,600 | |
Restructuring reserve | ||
Restructuring reserve, beginning balance | 0 | |
Provisions/Additions | 8 | $ 0 |
Utilized/Paid | (8) | |
Restructuring reserve, ending balance | 0 | |
Severance related costs | ||
Restructuring reserve | ||
Restructuring reserve, beginning balance | 0 | |
Provisions/Additions | 0 | |
Utilized/Paid | 0 | |
Restructuring reserve, ending balance | 0 | |
Facility, ROU and asset impairment | ||
Restructuring reserve | ||
Restructuring reserve, beginning balance | 0 | |
Provisions/Additions | 0 | |
Utilized/Paid | 0 | |
Restructuring reserve, ending balance | 0 | |
Facility exit cost | ||
Restructuring reserve | ||
Restructuring reserve, beginning balance | 0 | |
Provisions/Additions | 8 | |
Utilized/Paid | (8) | |
Restructuring reserve, ending balance | $ 0 |