10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal quarter ended June 30, 2021

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from            to           

STEM HOLDINGS, INC.

(Exact name of small business issuer as specified in its charter)

Nevada	000-55751	61-1794883
(State of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

2201 NW Corporate Blvd, Suite 205, Boca Raton, FL 33431

(Address of principal executive offices) (Zip code)

Issuer’s telephone number: (561) 948-5410

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of exchange on which registered
Common Stock par value $0.001	STMH	OTCQX

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. ☐

Large Accelerated Filer ☐	Accelerated Filer ☐
Non-accelerated Filer ☒	Smaller Reporting Company ☒
	Emerging Growth Company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were 221,762,330 shares outstanding of registrant’s common stock, par value $0.001 per share, as of August 16, 2021.

Transitional Small Business Disclosure Format (check one): Yes ☐ No ☒

TABLE OF CONTENTS

		Page
	PART I
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets as of June 30, 2021 (unaudited) and September 30, 2020	3
	Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended June 30, 2021 and June 30, 2020	4
	Unaudited Consolidated Statement of Changes in Stockholders’ Equity for the nine months ended June 30, 2021 and June 30, 2020	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and June 30, 2020	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	45
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	51
Item 4.	Controls and Procedures	51
	PART II
Item 1.	Legal Proceedings	52
Item 1A.	Risk Factors	53
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54
Item 3.	Defaults Upon Senior Securities	54
Item 4.	Mine Safety Disclosures	54
Item 5.	Other Information	54
Item 6.	Exhibits	54
SIGNATURES		55

2

PART I

ITEM 1. FINANCIAL STATEMENTS

STEM HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands except for share and per share amounts)

	June 30,			September 30,
	2021			2020*
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	9,106		$	2,129
Accounts receivable, net of allowance for doubtful accounts		431			455
Note receivable		627			434
Inventory		2,831			1,795
Prepaid expenses and other current assets		4,136			452
Total current assets		17,131			5,265
Property and equipment, net		13,098			16,354
Investment in equity method investees		1,388			767
Investments in affiliates		2,209			1,718
Deposits and other assets		13			13
Note receivable, long term		355			355
Right of use asset		6,927			-
Intangible assets, net		59,095			13,269
Goodwill		18,061			7,221
Due from related party		28			55
Total assets	$	118,305		$	45,017
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued expenses		8,131			2,983
Convertible notes, net		3,101			5,306
Convertible notes, net related party		805			-
Short term notes and advances		686			3,425
Settlement payable		95			-
Acquisition notes payable		538			665
Contingent acquisition liability		-			1,072
Due to related party		1			200
Derivative liability		136			592
Lease liability		1,509			-
Warrant liability		4,444			257
Total current liabilities		19,446			14,500
Lease liability - long term		5,401			-
Long-term debt, mortgages		3,200			3,685
Total liabilities		28,047			18,185
Commitments and contingencies (Note 18)		-			-
Shareholders’ equity
Preferred stock, Series A; $0.001 par value; 50,000,000 shares authorized, none outstanding as of June 30, 2021 and September 30, 2020		-			-
Preferred stock, Series B; $0.001 par value; 50,000,000 shares authorized, none outstanding as of June 30, 2021 and September 30, 2020		-			-
Common stock, $0.001 par value; 750,000,000 shares authorized; 220,648,392 and 68,258,745 shares issued, issuable and outstanding as of June 30, 2021 and September 30, 2020, respectively		220			68
Additional paid-in capital		149,605			76,310
Stock subscription receivable		(735	)		-
Accumulated deficit		(60,531	)		(51,386	)
Total Stem Holdings stockholder’s equity		88,559			24,992
Noncontrolling interest		1,699			1,840
Total shareholders’ equity		90,258			26,832
Total liabilities and shareholders’ equity	$	118,305		$	45,017

* Derived from audited information

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

3

STEM HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands except for share and per share amounts)

	For the Three Months Ended June 30,						For the Nine Months Ended June 30,
	2021			2020			2021			2020
Revenues	$	10,586		$	5,198		$	26,573		$	8,817
Cost of goods sold		9,085			3,420			20,341			6,062
Gross Profit		1,501			1,778			6,232			2,755
Operating expenses:
Consulting fees		623			124			2,787			2,031
Professional fees		927			257			2,836			1,780
General and administration		4,510			2,176			11,215			6,234
Total operating expenses		6,060			2,557			16,838			10,045
Loss from operations		(4,559	)		(779	)		(10,606	)		(7,290	)
Other income (expenses), net
Interest expense		(337	)		(753	)		(1,598	)		(2,024	)
Change in fair value of derivative liability		199			(570	)		441			(428	)
Change in fair value of warrant liability		6,422			969			234			754
Foreign currency exchange gain (loss)		50			187			29			208
Other income		814			-			2,184			-
Total other income (expense)		7,148			(167	)		1,290			(1,490	)
Loss from equity method investees		-			(1	)		-			(253	)
Net income (loss)	$	2,589		$	(947	)	$	(9,316	)	$	(9,033	)
Net loss attributable to non-controlling interest		(66	)		(121	)		(170	)		(466	)
Net income (loss) attributable to Stem Holdings	$	2,655		$	(826	)	$	(9,146	)	$	(8,567	)
Net income (loss) per share
Basic net income (loss) per share attributable to Stem Holdings	$	0.01		$	(0.01	)	$	(0.07	)	$	(0.15	)
Diluted net income (loss) per share attributable to Stem Holdings	$	0.01		$	(0.01	)	$	(0.07	)	$	(0.15	)
Weighted-average shares outstanding
Basic		208,137,694			66,410,900			138,026,212			58,762,599
Diluted		285,450,257			66,410,900			138,026,212			58,762,599

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

4

STEM HOLDINGS, INC.

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands, except for share and per share amounts)

																Total Stem
	Common Stock						Additional Paid-in			Subscription			Accumulated			Holdings Shareholders’			Non-Controlling			Total Shareholders’
	Shares			Amount			Capital			Receivable			Deficit			Equity			Interest			Equity
Balance as of September 30, 2020		68,258,745		$	68		$	76,310		$	-		$	(51,386	)	$	24,992		$	1,840		$	26,832
Issuance of common stock in connection with consulting agreement		1,569,570			2			587			-			-			589			-			589
Common stock to be issued		6,833,069			7			2,863			-			-			2,870			-			2,870
Stock based compensation		1,868,750			2			560			-			-			562			-			562
Cancellation of common stock related to convertible notes		(525,400	)		(1	)		1			-			-			-			-			-
Issuance of common stock related to rent and interest expense		501,561			1			208			-			-			209			-			209
Issuance of subscription receivable		-			-			600			(600	)		-			-			-			-
Issuance of warrants in connection with employment agreement		-			-			132			-			-			132			-			132
Issuance of options in connection with employment agreement		-			-			61			-			-			61			-			61
Acquisition of Driven Deliveries, Inc.		101,968,944			101			43,224			(135	)		-			43,190						43,190
Net loss		-			-			-						(3,188	)		(3,188	)		(91	)		(3,279	)
Balance as of December 31, 2020		180,475,239		$	180		$	124,546		$	(735	)	$	(54,574	)	$	69,417		$	1,749		$	71,166
Issuance of common stock in connection with consulting agreement		1,262,500			1			1,096			-			-			1,097			-			1,097
Issuance of common stock in connection with convertible debt		4,054,206			4			2,071			-			-			2,075			-			2,075
Issuance of common stock in connection with deposit for an asset acquisition		300,000			-			210			-			-			210			-			210
Stock based compensation		1,464,009			1			867			-			-			868			-			868
Issuance of common stock related to interest expense		164,366			1			121			-			-			122			-			122
Issuance of warrants in connection with employment agreement		-			-			18			-			-			18			-			18
Issuance of options in connection with employment agreement		-			-			78			-			-			78			-			78
Issuance of common stock related to settlement payment		500,000			1			5,439			-			-			5,440			-			5,440
Issuance of common stock related to Private Placement Memorandum, net		5,263,996			5			2,060			-			-			2,065			-			2,065
Issuance of common stock related to Prospectus		2,333,990			2			1,000			-			-			1,002			-			1,002
Net loss		-			-			-			-			(8,612	)		(8,612	)		(14	)		(8,626	)
Balance as of March 31, 2021		195,818,306		$	195		$	137,506		$	(735	)	$	(63,186	)	$	73,780		$	1,735		$	75,515
Issuance of common stock related to cash purchase		1,465,117			1			629			-			-			630			-			630
Issuance of common stock in connection with consulting agreement		950,000			1			524			-			-			525			-			525
Stock based compensation		581,750			1			245									246						246
Issuance of common stock in connection with convertible debt		5,426,053			5			2,832			-			-			2,837			-			2,837
Issuance of common stock related to exercise of options		10,000			-			1			-			-			1			-			1
Issuance of common stock related to Private Placement Memorandum, net		58,140			-			-			-			-			-			-			-
Issuance of common stock in related to commission expense		90,909			-			40			-			-			40			-			40
Cancellation of common stock related to investments		(694,233	)		-			1			-			-			1			-			1
Issuance of options in connection with employment agreement		-			-			35			-			-			35			-			35
Issuance of warrants in connection with employment agreement		-			-			71			-			-			71			-			71
Issuance of common stock related to Prospectus		16,942,350			17			7,259			-			-			7,276			-			7,276
Recognition of non-controlling interest related to asset acquisition		-			-			462			-			-			462			(227	)		235
Share exchange agreement adjustment		-			-			-			-			-			-			257			257
Net loss														2,655			2,655			(66	)		2,589
Balance as of June 30, 2021		220,648,392		$	220		$	149,605		$	(735	)	$	(60,531	)	$	88,559		$	1,699		$	90,258
Balance as of September 30, 2019		52,254,941		$	52		$	61,202		$	-		$	(40,384	)	$	20,870		$	2,724		$	23,594
Issuance of common stock in connection with consulting agreement		5,000			-			4			-			-			4			-			4
Issuance of common stock in connection with asset acquisitions		394,270			-			394			-			-			394			-			394
Stock based compensation		100,000			1			497			-			-			498			-			498
Impairment on investment in South African Ventures		-			-			-						-			-			-			-
Net loss		-			-			-			-			(3,077	)		(3,077	)		(235	)		(3,312	)
Balance as of December 31, 2019		52,754,211		$	53		$	62,097		$	-		$	(43,461	)	$	18,689		$	2,489		$	21,178
Issuance of common stock in connection with consulting agreement		970,416			1			1,548			-			-			1,549			-			1,549
Cancellation of common stock in connection with consulting agreement		(700,000	)		(1	)		(699	)		-			-			(700	)		-			(700	)
Issuance of common stock in connection with asset acquisitions		12,681,008			13			10,009			-			-			10,022			-			10,022
Stock based compensation		303,756			-			47			-			-			47			-			47
Issuance of common stock related to interest on convertible notes		202,350			-			121			-			-			121			-			121
Derivatives		-			-			431			-			-			431			-			431
Net loss		-			-			-			-			(4,665	)		(4,665	)		(110	)		(4,775	)
Balance as of March 31, 2020		66,211,741		$	66		$	73,554		$	-		$	(48,126	)	$	25,494		$	2,379		$	27,873
Issuance of common stock in connection with share exchange agreement		386,035			-			196			-			-			197			(74	)		124
Stock based compensation		18,750			-			6			-			-			6			-			6
Consolidated Ventures of Oregon equity		-			-			1,613			-			-			1,613			-			1,613
Other		-			-			-			-			-			-			-			(1	)
Net loss		-			-			-			-			(826	)		(826	)		(121	)		(947	)
Balance as of June 30, 2020		66,616,526		$	66		$	75,369		$	-		$	(48,952	)	$	26,484		$	2,184		$	28,668

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

5

STEM HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	For the Nine Months Ended
	June 30,
	2021			2020
Cash flows from operating activities
Net loss	$	(9,316	)	$	(9,033	)
Equity method investee losses		170			253
Net loss before equity method investment		(9,146	)		(8,780	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		2,073			1,913
Issuance of common stock in connection with consulting agreements		2,211			-
Issuance of common stock related to rent and interest expense		331			953
Depreciation and amortization		1,370			1,632
Amortization of intangible assets		2,375			-
Amortization of debt discount		606			-
Loss on equity method investments		-			-
Gain on sale of equity method investments		(200	)		-
Change in fair value of derivative liability		(441	)		(326	)
Change in fair value of warrant liability		(234	)		-
Foreign currency translation adjustment		(29	)		(176	)
Gain on sale of property		(766	)		-
Other		209			(317	)
Changes in operating assets and liabilities:
Accounts receivable, net of allowance for doubtful accounts		106			267
Prepaid expenses and other current assets		(2,828	)		539
Inventory		(818	)		(163	)
Other assets		-			(83	)
Accounts payable and accrued expenses		(3,248	)		488
Net cash used in operating activities		(8,429	)		(4,053	)
Cash flows from investing activities
Investment in equity method investees, Michigan & Massachusetts		250			-
Purchase of property and equipment		(425	)		(433	)
Return of cash for equity investment		-			229
Cash acquired in acquisition, net of cash transferred		-			349
Related party advances made and payments received		-			60
Investment in equity method investees		(170	)		-
Project costs		(179	)		-
Cash received related to sale of property		1,505			-
Advances to related entities		-			(955	)
Issuance of notes receivable		(560	)		-
Net cash provided by (used in) investing activities		421			(750	)
Cash flows from financing activities
Proceeds from the issuance of common stock		17,713			-
Proceeds from notes payable and advances		(63	)		4,596
PPP and Debt Forgiveness		(1,031	)		-
Other		-			81
Repayments of notes payable		(1,634	)		(1,300	)
Net cash provided by financing activities		14,985			3,377
Net (decrease) increase in cash and cash equivalents		6,977			(1,426	)
Cash and cash equivalents at the beginning of the period		2,129			3,339
Cash and cash equivalents at the end of the period	$	9,106		$	1,913
Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,063		$	421
Cash paid for taxes	$	-		$	-
Supplemental disclosure of noncash activities:
Financed Insurance	$	373		$	327
Issuance of common stock related to separation agreement	$	290		$	-
Conversion of debt and accrued interest to equity	$	4,913		$	121
Issuance of common stock for settlement	$	5,440		$	-
Acquisition of Driven Deliveries, Inc.	$	43,225		$	-
Acquisition of 7LV, Inc.	$	-		$	14,025
Building acquired from related party with equity, net of lien acquired	$	-		$	394
Refinancing of mortgage	$	1,100,000		$	-
Consolidation of CVO	$	-		$	1,613
Acquisition of NVDRE interest	$	-		$	386

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

6

STEM HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Incorporation and Operations and Going Concern

Stem Holdings, Inc. (“Stem” or the “Company”) is a Nevada corporation incorporated on June 7, 2016 and is a leading omnichannel, vertically-integrated cannabis branded products and technology company with state-of-the-art cultivation, processing, extraction, retail, distribution, and delivery-as-a-service (DaaS) operations throughout the United States. Stem’s family of award-winning brands includes TJ’s Gardens™, TravisxJames™, and Yerba Buena™ flower and extracts; Cannavore™ edible confections; Doseology™, a CBD mass-market brand launching in 2021; as well as DaaS brands Budee™ and Ganjarunner™ through the acquisition of Driven Deliveries. Budee™ and Ganjarunner™ e-commerce platforms provide direct-to consumer proprietary logistics and an omnichannel UX (user experience)/CX (customer experience).

The Company purchases, improves, leases, operates, and invests in properties for use in the production, distribution and sales of cannabis and cannabis-infused products licensed under the laws of the states of Oregon, Nevada, California, Massachusetts, New York, and Michigan. As of June 30, 2021, Stem had ownership interests in 23 state issued cannabis licenses including eight (8) licenses for cannabis cultivation, four (4) licenses for cannabis processing, one (1) license for cannabis wholesale distribution, two (2) licenses for hemp production, three (3) adult-use medical retailers (non-storefront), five (5) cannabis dispensary licenses.

As of June 30, 2021, the Company has acquired eight commercial properties and leases two properties, located in Oregon and Nevada, and has entered into leases for these related entities (see Note 18). As of June 30, 2021, the buildout of these properties to support cannabis related operations was either complete or near completion.

The Company has incorporated nine wholly-owned subsidiaries –Stem Holdings Oregon, Inc., Stem Holdings IP, Inc., Opco, LLC, Stem Holdings Agri, Inc., Stem Oregon Acquisitions 2, Corp., 7LV USA Corporation, Driven Deliveries, Inc., and Stem Oregon Acquisitions 1, Corp.

With the acquisition of Driven, the Company becomes an omni-channel retailer, utilizing Driven’s proprietary logistics and user experience/customer experience (“UX/CX”) technologies. The Company will be able to offer its customers in California: (i) an “Express” delivery with a limited product selection that is usually delivered within 60 minutes or less; and (ii) a “Next Day” scheduled delivery from a larger selection of 500+ products from a Company-operated fulfillment center.

The Company’s stock is publicly traded and is listed on the Canadian Securities Exchange under the symbol “STEM” and the OTCQX exchange under the symbol “STMH”.

In June 2021, the Company’s shareholders approved a proposal to amend the Company’s Articles of Incorporation to increase the number of authorized common shares from 300,000,000 shares to 750,000,000 shares.

Going Concern

At June 30, 2021, the Company had approximate balances of cash and cash equivalents of $9.1 million, negative working capital of approximately $2.3 million, and an accumulated deficit of $60.5 million.

These unaudited consolidated financial statements have been prepared on a going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business.

While the recreational use of cannabis is legal under the laws of certain States, where the Company has and is working towards further finalizing the acquisition of entities or investment in entities that directly produce or sell cannabis, the use and possession of cannabis is illegal under United States Federal Law for any purpose, by way of Title II of the Comprehensive Drug Abuse Prevention and Control Act of 1970, otherwise known as the Controlled Substances Act of 1970 (the “ACT”). Cannabis is currently included under Schedule 1 of the Act, making it illegal to cultivate, sell or otherwise possess in the United States.

On January 4, 2018, the office of the Attorney General published a memo regarding cannabis enforcement that rescinds directives promulgated under former President Obama that eased federal enforcement. In a January 8, 2018 memo, Jefferson B. Sessions, then Attorney General of the United States, indicated enforcement decisions will be left up to the U.S. Attorney’s in their respective states clearly indicating that the burden is with “federal prosecutors deciding which cases to prosecute by weighing all relevant considerations, including federal law enforcement priorities set by the Attorney General, the seriousness of the crime, the deterrent effect of federal prosecution, and the cumulative impact of particular crimes on the community.” Subsequently, in April 2018, former President Trump promised to support congressional efforts to protect states that have legalized the cultivation, sale and possession of cannabis; however, a bill has not yet been finalized in order to implement legislation that would, in effect, make clear the federal government cannot interfere with states that have voted to legalize cannabis. Further in December 2018, the U.S. Congress passed legislation, which the President signed on December 20, 2018, removing hemp from being included with Cannabis in Schedule I of the Act.

7

In December 2019, an outbreak of a novel strain of coronavirus (COVID-19) originated in Wuhan, China, and has since spread to several other countries, including the United States. On June 11, 2020, the World Health Organization characterized COVID-19 as a pandemic. In addition, as of the time of the filing of this Quarterly Report on Form 10-Q, several states in the United States have declared states of emergency, and several countries around the world, including the United States, have taken steps to restrict travel. The existence of a worldwide pandemic, the fear associated with COVID-19, or any, pandemic, and the reactions of governments in response to COVID-19, or any, pandemic, to regulate the flow of labor and products and impede the travel of personnel, may impact our ability to conduct normal business operations, which could adversely affect our results of operations and liquidity. Disruptions to our supply chain and business operations disruptions to our retail operations and our ability to collect rent from the properties which we own, personnel absences, or restrictions on the shipment of our or our suppliers’ or customers’ products, any of which could have adverse ripple effects throughout our business. If we need to close any of our facilities or a critical number of our employees become too ill to work, our production ability could be materially adversely affected in a rapid manner. Similarly, if our customers experience adverse consequences due to COVID-19, or any other, pandemic, demand for our products could also be materially adversely affected in a rapid manner. Global health concerns, such as COVID-19, could also result in social, economic, and labor instability in the markets in which we operate. Any of these uncertainties could have a material adverse effect on our business, financial condition or results of operations.

These conditions raise substantial doubt as to the Company’s ability to continue as a going concern. Should the United States Federal Government choose to begin enforcement of the provisions under the “ACT”, the Company through its wholly owned subsidiaries could be prosecuted under the “ACT” and the Company may have to immediately cease operations and/or be liquidated upon its closing of the acquisition or investment in entities that engage directly in the production and or sale of cannabis.

Management believes that the Company has access to capital resources through potential public or private issuances of debt or equity securities. However, if the Company is unable to raise additional capital, it may be required to curtail operations and take additional measures to reduce costs, including reducing its workforce, eliminating outside consultants, and reducing legal fees to conserve its cash in amounts sufficient to sustain operations and meet its obligations. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might become necessary should the Company be unable to continue as a going concern.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The unaudited condensed financial statements included herein are unaudited. Such financial statements, in the opinion of management, contain all adjustments necessary to present fairly the financial position and results of operations as of and for the periods indicated. All such adjustments are of a normal recurring nature. These interim results are not necessarily indicative of the results to be expected for the year ending September 30, 2021 or for any other period. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, and because of this, for further information, readers should refer to the financial statements and footnotes included in its amended Form 10-K for the fiscal year ended September 30, 2020 filed on December 28, 2020. The Company believes that the disclosures are adequate to make the interim information presented not misleading.

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Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income, and expenses. The most significant estimates included in these condensed consolidated financial statements are those associated with the assumptions used to value equity instruments, valuation of its long live assets for impairment testing, valuation of intangible assets, and the valuation of inventory. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable given the circumstances that exist at the time the financial statements are prepared. Actual results may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.

Reclassifications

Certain amounts in the Company’s condensed consolidated financial statements for prior periods have been reclassified to conform to the current period presentation. These reclassifications have not changed the results of operations of prior periods.

Principles of Consolidation

The Company’s policy is to consolidate all entities that it controls by ownership of a majority of the outstanding voting stock. In addition, the Company consolidates entities that meet the definition of a variable interest entity (“VIE”) for which it is the primary beneficiary. The primary beneficiary is the party who has the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and who has an obligation to absorb losses of the entity or a right to receive benefits from the entity that could potentially be significant to the entity. For consolidated entities that are less than wholly owned, the third party’s holding of equity interest is presented as noncontrolling interests in the Company’s Consolidated Balance Sheets and Consolidated Statements of Changes in Stockholders’ Equity. The portion of net loss attributable to the noncontrolling interests is presented as net loss attributable to noncontrolling interests in the Company’s Consolidated Statements of Operations.

In August 2016, the Company and certain shareholders of the Company entered into a “Multi Party” Agreement, in which the Company became obligated to lease or acquire three separate real estate assets, and separately, if certain events occur, additional real estate assets held by entities related to those shareholders. The Agreement also gives the Company the right of first refusal in regard to certain properties owned by the persons and entities affiliated with the parties of the Agreement so long as certain targets are met. In the quarter ended June 30, 2019, the Company issued 12,500,000 shares of its common stock for the acquisition of Consolidated Ventures of Oregon, LLC (“CVO”) and Opco Holdings, LLC (“Opco”) which comprise the entities within the Multi Party Agreement. On September 6, 2020, the Company received the regulatory approval to transfer all the licenses held under both CVO and Opco. Subsequently, the Company has completed the acquisition and as a result, the Company is no longer engaged primarily in property rental operations but has taken over the operations of its primary renters, which is the cultivation, production and sale of cannabis and related productions. Since CVO and Opco are related to the Company, the acquisition was not accounted for as a business combination at fair value under the codification sections of ASC 805. The assets and liabilities were transferred to the Company at their historical cost and the Company has included the operations of Opco and CVO for all periods presented for this period ended June 30, 2021.

The accompanying condensed consolidated financial statements include the accounts of Stem Holdings, Inc. and its wholly owned subsidiaries, Stem Holdings Oregon, Inc., Stem Holdings IP, Inc., Opco, LLC, Stem Holdings Agri, Inc., Opco Holdings, Inc., 7LV USA Corporation, and Consolidated Ventures of Oregon, Inc., and Driven Deliveries, Inc. In addition, the Company has consolidated YMY Ventures, WCV, LLC and NVD RE, Inc. under the variable interest requirements.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents. The Company’s cash is primarily maintained in checking accounts. These balances may, at times, exceed the U.S. Federal Deposit Insurance Corporation insurance limits. As of June 30, 2021, and 2020, the Company had no cash equivalents or short-term investments. The Company has not experienced any losses on deposits of cash and cash equivalents.

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Accounts Receivable

Accounts receivable is shown on the face of the consolidated balance sheets, net of an allowance for doubtful accounts. The Company analyzes the aging of accounts receivable, historical bad debts, customer creditworthiness and current economic trends, in determining the allowance for doubtful accounts. The Company does not accrue interest receivable on past due accounts receivable. As of June 30, 2021, the reserve for doubtful accounts was $79 thousand.

Inventory

Inventory is comprised of raw materials, finished goods and work-in-progress such as pre-harvested cannabis plants and by-products to be extracted. The costs of growing cannabis including but not limited to labor, utilities, nutrition, and irrigation, are capitalized into inventory until the time of harvest.

Inventory is stated at the lower of cost or net realizable value, determined using weighted average cost. Cost includes expenditures directly related to manufacturing and distribution of the products. Primary costs include raw materials, packaging, direct labor, overhead, shipping and the depreciation of manufacturing equipment and production facilities determined at normal capacity. Manufacturing overhead and related expenses include salaries, wages, employee benefits, utilities, maintenance, and property taxes.

Net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. At the end of each reporting period, the Company performs an assessment of inventory obsolescence to measure inventory at the lower of cost or net realizable value. Factors considered in the determination of obsolescence include slow-moving or non-marketable items.

Prepaid Expenses and Other Current Assets

Prepaid expenses consist of various payments that the Company has made in advance for goods or services to be received in the future. These prepaid expenses include consulting, advertising, insurance, and service or other contracts requiring up-front payments.

Property and Equipment

Property, equipment, and leasehold improvements are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Repairs and maintenance expenditures that do not extend the useful lives of related assets are expensed as incurred.

Expenditures for major renewals and improvements are capitalized, while minor replacements, maintenance, and repairs, which do not extend the asset lives, are charged to operations as incurred. Upon sale or disposition, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in operations. The Company continually monitors events and changes in circumstances that could indicate that the carrying balances of its property, equipment and leasehold improvements may not be recoverable in accordance with the provisions of ASC 360, “Property, Plant, and Equipment.” When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. See “Note 3 – Property, Equipment and Leasehold Improvements”.

Property and equipment are stated at cost less accumulated depreciation. Depreciation is provided on a straight-line method over the estimated useful lives of the assets. The Company estimates useful lives as follows:

Buildings	20 years
Leasehold improvements	Shorter of term of lease or economic life of improvement
Furniture and equipment	5 years
Signage	5 years
Software and related	5 years

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Impairment of Long-Lived Assets

The Company reviews the carrying value of its long-lived assets, which include property and equipment, for indicators of impairment whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable. The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company’s overall strategy with respect to the manner or use of the acquired assets or changes in the Company’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company’s stock price for a sustained period of time; and (vi) regulatory changes. The Company evaluates assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events. The Company does not test for impairment in the year of acquisition of properties, as long as those properties are acquired from unrelated third parties.

The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. In cases where estimated future net undiscounted cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of the asset or asset group. Fair value is generally determined using the assets expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated and amortized prospectively over the newly determined remaining estimated useful lives.

Equity Method Investments

Investments in unconsolidated affiliates are accounted for under the equity method of accounting, as appropriate. The Company accounts for investments in limited partnerships or limited liability corporations, whereby the Company owns a minimum of 5.0% of the investee’s outstanding voting stock, under the equity method of accounting. These investments are recorded at the amount of the Company’s investment and adjusted each period for the Company’s share of the investee’s income or loss, and dividends paid.

During the quarter ended June 30, 2021, the Company recognized an investment loss of $84 thousand related to TIL and CGP (see Note 6).

Asset Acquisitions

The Company has adopted ASU 2017-01, which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as businesses acquisitions. As a result of adopting ASU 2017-01, acquisitions of real estate and cannabis licenses do not meet the definition of a business combination and were deemed asset acquisitions, and the Company therefore capitalized these acquisitions, including its costs associated with these acquisitions.

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Goodwill and Intangible Assets

Goodwill. Goodwill represents the excess acquisition cost over the fair value of net tangible and intangible assets acquired. Goodwill is not amortized and is subject to annual impairment testing on or between annual tests if an event or change in circumstance occurs that would more likely than not reduce the fair value of a reporting unit below its carrying value. In testing for goodwill impairment, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, the Company concludes that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is not required. If the Company concludes otherwise, the Company is required to perform the two-step impairment test. The goodwill impairment test is performed at the reporting unit level by comparing the estimated fair value of a reporting unit with its respective carrying value. If the estimated fair value exceeds the carrying value, goodwill at the reporting unit level is not impaired. If the estimated fair value is less than the carrying value, further analysis is necessary to determine the amount of impairment, if any, by comparing the implied fair value of the reporting unit’s goodwill to the carrying value of the reporting unit’s goodwill.

Intangible Assets. Intangible assets deemed to have finite lives are amortized on a straight-line basis over their estimated useful lives, where the useful life is the period over which the asset is expected to contribute directly, or indirectly, to our future cash flows. Intangible assets are reviewed for impairment on an interim basis when certain events or circumstances exist. For amortizable intangible assets, impairment exists when the carrying amount of the intangible asset exceeds its fair value. At least annually, the remaining useful life is evaluated.

An intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value. In testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely than not that an impairment exists. If it is determined that it is not more likely than not that an impairment exists, a quantitative impairment test is not necessary. If the Company concludes otherwise, it is required to perform a quantitative impairment test. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset that is amortized over the remaining useful life of that asset, if any. Subsequent reversal of impairment losses is not permitted.

During the quarter ended June 30, 2021, and 2020, the Company determined that there were not any impairments related to intangible assets.

Business Combinations

The Company applies the provisions of ASC 805 in the accounting for acquisitions. ASC 805 requires the Company to recognize separately from goodwill the assets acquired, and the liabilities assumed at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While the Company uses its best estimates and assumptions to accurately apply preliminary value to assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, these estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company records adjustments in the current period, rather than a revision to a prior period. Upon the conclusion of the measurement period or final determination of the values of the assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded in the consolidated statements of operations. Accounting for business combinations requires management to make significant estimates and assumptions, especially at the acquisition date, including estimates for intangible assets, contractual obligations assumed, restructuring liabilities, pre-acquisition contingencies, and contingent consideration, where applicable. Although the Company believes the assumptions and estimates made have been reasonable and appropriate, they are based in part on historical experience and information obtained from management of the acquired companies and are inherently uncertain. Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates, or actual results.

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Contingent Consideration

The Company accounts for “contingent consideration” according to FASB ASC 805, “Business Combinations” (“FASB ASC 805”). Contingent consideration typically represents the acquirer’s obligation to transfer additional assets or equity interests to the former owners of the acquiree if specified future events occur or conditions are met. FASB ASC 805 requires that contingent consideration be recognized at the acquisition-date fair value as part of the consideration transferred in the transaction. FASB ASC 805 uses the fair value definition in Fair Value Measurements, which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As defined in FASB ASC 805, contingent consideration is (i) an obligation of the acquirer to transfer additional assets or equity interests to the former owners of an acquiree as part of the exchange for control of the acquiree, if specified future events occur or conditions are met or (ii) the right of the acquirer to the return of previously transferred consideration if specified conditions are met.

Warrant Liability

The Company accounts for certain common stock warrants outstanding as a liability at fair value and adjusts the instruments to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s consolidated statements of operations. The fair value of the warrants issued by the Company has been estimated using a Black Scholes model.

Embedded Conversion Features

The Company evaluates embedded conversion features within convertible debt to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in the statement of operations. If the conversion feature does not require recognition of a bifurcated derivative, the convertible debt instrument is evaluated for consideration of any beneficial conversion feature (“BCF”) requiring separate recognition. When the Company records a BCF, the intrinsic value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument (offset to additional paid-in capital) and amortized to interest expense over the life of the debt.

Income Taxes

The provision for income taxes is determined in accordance with ASC 740, “Income Taxes”. The Company files a consolidated United States federal income tax return. The Company provides for income taxes based on enacted tax law and statutory tax rates at which items of income and expense are expected to be settled in our income tax return. Certain items of revenue and expense are reported for Federal income tax purposes in different periods than for financial reporting purposes, thereby resulting in deferred income taxes. Deferred taxes are also recognized for operating losses that are available to offset future taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company has incurred net operating losses for financial-reporting and tax-reporting purposes. As of June 30, 2021, and 2020, such net operating losses were offset entirely by a valuation allowance.

The Company recognizes uncertain tax positions based on a benefit recognition model. Provided that the tax position is deemed more likely than not of being sustained, the Company recognizes the largest amount of tax benefit that is greater than 50.0% likely of being ultimately realized upon settlement. The tax position is derecognized when it is no longer more likely than not of being sustained. The Company classifies income tax related interest and penalties as interest expense and selling, general and administrative expense, respectively, on the consolidated statements of operations.

In December 2017, the Tax Cuts and Jobs Act (TCJA or the Act) was enacted, which significantly changes U.S. tax law. In accordance with ASC 740, “Income Taxes”, the Company is required to account for the new requirements in the period that includes the date of enactment. The Act reduced the overall corporate income tax rate to 21.0%, created a territorial tax system (with a one-time mandatory transition tax on previously deferred foreign earnings), broadened the tax base and allowed for the immediate capital expensing of certain qualified property.

In December 2020, the Company issued a significant number of new shares in its acquisition of Driven (see Note 10). The effect of these issuances is most likely, the Company and Driven have experienced the requisite change of control as promulgated under the US Internal Revenue Code section 382. The effect of this will be that going forward, the ability of the Company and Driven to utilize their respective U.S. Federal net operating loss carryforwards from prior to December 29, 2020 will be limited in its usage. In order to determine the specific effect, the Company must perform the computations required under the Internal Revenue Code, which have not yet been performed. The Company expects it will perform the required computations in the coming fiscal year.

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Revenue Recognition

The Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (Topic 606), the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Revenue for the Company’s product sales has not been adjusted for the effects of a financing component as the Company expects, at contract inception, that the period between when the Company’s transfers control of the product and when the Company receives payment will be one year or less. Product shipping and handling costs are included in cost of product sales.

Effective October 1, 2019, the Company adopted the requirements of ASU 2014-09 (ASC 606) and related amendments, using the modified retrospective method. The adoption of ASC 606 did not have a significant impact on the Company’s revenue recognition policy as revenues related to wholesale and retail revenue are recorded upon transfer of merchandise to the customer, which was the effective policy under ASC 605 previously.

The following policies reflect specific criteria for the various revenue streams of the Company:

Cannabis Dispensary, Cultivation and Production

Revenue is recognized upon transfer of retail merchandise to the customer upon sale transaction, at which time its performance obligation is complete. Revenue is recognized upon delivery of product to the wholesale customer, at which time the Company’s performance obligation is complete. Terms are generally between cash on delivery to 30 days for the Company’s wholesale customers.

The Company’s sales environment is somewhat unique, in that once the product is sold to the customer (retail) or delivered (wholesale) there are essentially no returns allowed or warranty available to the customer under the various state laws.

Delivery

1) Identify the contract with a customer

The Company sells retail products directly to customers. In these sales there is no formal contract with the customer. These sales have commercial substance and there are no issues with collectability as the customer pays the cost of the goods at the time of purchase or delivery.

2) Identify the performance obligations in the contract

The Company sells its products directly to consumers. In this case these sales represent a performance obligation with the sales and any necessary deliveries of those products.

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3) Determine the transaction price

The sales that are done directly to the customer have no variable consideration or financing component. The transaction price is the cost that those goods are being sold for plus any additional delivery costs.

4) Allocate the transaction price to performance obligations in the contract

For the goods that the Company sells directly to customers, the transaction price is allocated between the cost of the goods and any delivery fees that may be incurred to deliver to the customer.

5) Recognize revenue when or as the Company satisfies a performance obligation

For the sales of the Company’s own goods the performance obligation is complete once the customer has received the product.

Leases

The Company recognizes rental revenue from tenants, including rental abatements, lease incentives and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of the related leases when collectability is reasonably assured.

The Company makes estimates of the collectability of its tenant receivables related to base rents, straight-line rent, and other revenues. In the current fiscal year, the Company began significant rental operations. The Company considers such things as historical bad debts, tenant creditworthiness, current economic trends, facility operating performance, lease structure, developments relevant to a tenant’s business, and changes in tenants’ payment patterns in its analysis of accounts receivable and its evaluation of the adequacy of the allowance for doubtful accounts. Specifically, for straight-line rent receivables, the Company’s assessment includes an estimation of a tenant’s ability to fulfill its rental obligations over the remaining lease term.

On October 1, 2020, the Company adopted ASC 842 and elected to apply the new standard at the adoption date and recognize a cumulative effect as an adjustment to retained earnings. Upon calculation the effect on retained earnings was immaterial and no adjustment was deemed necessary. Leases with an initial term of twelve months or less are not recorded on the balance sheet. For lease agreements entered into or reassessed after the adoption of Topic 842, we combine the lease and non-lease components in determining the lease liabilities and right of use (“ROU”) assets.

Our lease agreements generally do not provide an implicit borrowing rate, therefore an internal incremental borrowing rate is determined based on information available at lease commencement date for purposes of determining the present value of lease payments. We used the incremental borrowing rate on June 30, 2021 for all leases that commenced prior to that date. In determining this rate, which is used to determine the present value of future lease payments, we estimate the rate of interest we would pay on a collateralized basis, with similar payment terms as the lease and in a similar economic environment.

Under Topic 842, operating lease expense is generally recognized evenly over the term of the lease. Lease costs were $337 thousand and $763 thousand, respectively for the three and nine months ended June 30, 2021. There was sublease rental income of $8 thousand and $17 thousand, respectively for the three and nine months ended June 30, 2021. The Company has eleven operating leases consisting with remaining lease terms ranging from 23 months to 180 months.

Lease Costs

	Three Months
	Ended
	June 30, 2021
Components of total lease costs:
Operating lease expense	$	337
Total lease costs	$	337

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Lease positions as of June 30, 2021

ROU lease assets and lease liabilities for our operating leases were recorded in the consolidated condensed balance sheet as follows:

	June 30,
	2021
Assets
Right of use asset	$	6,927
Total assets	$	6,927
Liabilities
Operating lease liabilities – short term	$	1,509
Operating lease liabilities – long term		5,401
Total lease liability	$	6,910

Lease Terms and Discount Rate

Weighted average remaining lease term (in years) – operating lease	10
Weighted average discount rate – operating lease	9.40	%

Cash Flows

	Nine Months
	Ended
	June 30,2021
Cash paid for amounts included in the measurement of lease liabilities:
ROU amortization	$	763
Cash paydowns of operating liability	$	(763	)
Supplemental non-cash amounts of lease liabilities arising from obtaining:
ROU asset	$	6,927
Lease Liability	$	6,910

The future minimum lease payments under the leases are as follows:

2021	$	391
2022		1,676
2023		1,249
2024		899
2025		851
Thereafter		5,871
Total future minimum lease payments		10,937
Less: Lease imputed interest		(4,027	)
Total	$	6,910

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Disaggregation of Revenue

In the three and nine months ended June 30, 2021, revenue reported is primarily from the sale of cannabis and related products accounted for under ASC 606.

The following table illustrates our revenue by type related to the three months ended June 30, 2021, and 2020, respectively:

Three Months Ended June 30,	2021			2020
Revenue
Wholesale	$	1,555		$	1,597
Retail		10,795			4,516
Rental		8			11
Other		78			17
Total revenue		12,436			6,141
Discounts and returns		(1,850	)		(943	)
Net Revenue	$	10,586		$	5,198

The following table illustrates our revenue by type related to the nine months ended June 30, 2021, and 2020, respectively:

Nine Months Ended June 30,	2021			2020
Revenue
Wholesale	$	3,879		$	2,904
Retail		26,721			7,365
Rental		17			26
Product Sales		229			-
Other		336			20
Total revenue		31,182			10,315
Discounts and returns		(4,609	)		(1,498	)
Net Revenue	$	26,573		$	8,817

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Geographical Concentrations

As of June 30, 2021, the Company is primarily engaged in the production and sale of cannabis, which is only legal for recreational use in 15 states and D.C., with lesser legalization, such as for medical use in an additional 21 states and D.C., as of the time of these consolidated financial statements. In addition, the United States Congress has passed legislation, specifically the Agriculture Improvement Act of 2018 (also known as the “Farm Bill”) that has removed production and consumption of hemp and associated products from Schedule 1 of the Controlled Substances Act.

Cost of Goods Sold

Cost of sales represents costs directly related to manufacturing and distribution of the Company’s products. Primary costs include raw materials, packaging, direct labor, overhead, shipping and handling and the depreciation of manufacturing equipment and production facilities. Manufacturing overhead and related expenses include salaries, wages, employee benefits, utilities, maintenance, and property taxes. The Company recognizes the cost of sales as the associated revenues are recognized.

Fair Value of Financial Instruments

As defined in the authoritative guidance, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

To estimate fair value, the Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable.

The authoritative guidance establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (“Level 1” measurements) and the lowest priority to unobservable inputs (“Level 3” measurements). The three levels of the fair value hierarchy are as follows:

Level 1 — Observable inputs such as quoted prices in active markets at the measurement date for identical, unrestricted assets or liabilities.

Level 2 — Other inputs that are observable, directly, or indirectly, such as quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 — Unobservable inputs for which there is little or no market data and which the Company makes its own assumptions about how market participants would price the assets and liabilities.

In instances in which multiple levels of inputs are used to measure fair value, hierarchy classification is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

Stock-based Compensation

The Company accounts for share-based payment awards exchanged for services at the estimated grant date fair value of the award. Stock options issued under the Company’s long-term incentive plans are granted with an exercise price equal to no less than the market price of the Company’s stock at the date of grant and expire up to ten years from the date of grant. These options generally vest on the grant date or over a one- year period.

The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model and the assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.

Expected Term - The expected term of options represents the period that the Company’s stock-based awards are expected to be outstanding based on the simplified method, which is the half-life from vesting to the end of its contractual term.

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Expected Volatility - The Company computes stock price volatility over expected terms based on its historical common stock trading prices.

Risk-Free Interest Rate - The Company bases the risk-free interest rate on the implied yield available on U. S. Treasury zero-coupon issues with an equivalent remaining term.

Expected Dividend - The Company has never declared or paid any cash dividends on its common shares and does not plan to pay cash dividends in the foreseeable future, and, therefore, uses an expected dividend yield of zero in its valuation models.

Effective January 1, 2017, the Company elected to account for forfeited awards as they occur, as permitted by Accounting Standards Update (“ASU”) 2016-09. Ultimately, the actual expenses recognized over the vesting period will be for those shares that vested. Prior to making this election, the Company estimated a forfeiture rate for awards at 0%, as the Company did not have a significant history of forfeitures.

Earnings (Loss) per Share

ASC 260, Earnings Per Share, requires dual presentation of basic and diluted earnings per share (“EPS”) with a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilution. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.

Basic net loss per share of common stock excludes dilution and 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 of common stock reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity unless inclusion of such shares would be anti-dilutive. Since the Company only incurred losses for the nine months ended June 30, 2021 and the three and nine months ended June 30, 2020, basic and diluted net loss per share is the same.

The following table provides a reconciliation of the numerators and denominators used to determine basic and diluted net income (loss) per common share for the three months ended June 30, 2021 and 2020:

	Three Months Ended June 30,
(Amounts in thousands, except per share data)	2021		2020
Numerator
Net income (loss) attributable to Stem Holdings	$	2,655	$	(826	)
Denominator
Weighted-average common shares outstanding, basic		208,137,694		66,410,900
Dilutive impact of share-based instruments		77,312,563		-
Weighted-average common shares outstanding, diluted		285,450,257		66,410,900
Net income per common share attributable to Stem Holdings
Basic	$	0.01	$	(0.01	)
Diluted		0.01		(0.01	)

Securities that could potentially dilute loss per share in the future that were not included in the computation of diluted loss per share for the nine months ended June 30, 2021 are as follows:

Potentially dilutive share-based instruments
Convertible notes	4,547,597
Options to purchase common stock	8,418,411
Unvested restricted stock awards	-
Warrants to purchase common stock	64,346,555
	77,312,563

Advertising Costs

The Company follows the policy of charging the cost of advertising to expense as incurred. Advertising expense was $430 thousand and $22 thousand three months ended June 30, 2021, and 2020, respectively. Advertising expense was $749 thousand and $47 thousand for nine months ended June 30, 2021, and 2020, respectively.

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Related parties

Parties are related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.

Segment reporting

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision–making group in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision–maker is its chief executive officer. The Company currently operates in one segment.

Recent Accounting Guidance

In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350)—Simplifying the Test for Goodwill Impairment. ASU 2017-04 simplifies the accounting for goodwill impairments by eliminating the requirement to compare the implied fair value of goodwill with its carrying amount as part of step two of the goodwill impairment test referenced in Accounting Standards Codification (“ASC”) 350, Intangibles - Goodwill and Other (“ASC 350”). As a result, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. However, the impairment loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. ASU 2017-04 is effective for annual reporting periods beginning after December 15, 2019. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 removes, modifies and adds certain disclosure requirements in Topic 820 “Fair Value Measurement”. ASU 2018-13 eliminates certain disclosures related to transfers and the valuations process, modifies disclosures for investments that are valued based on net asset value, clarifies the measurement uncertainty disclosure, and requires additional disclosures for Level 3 fair value measurements. ASU 2018-13 is effective for the Company for annual and interim reporting periods beginning January 1, 2020. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements and related disclosures.

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In February 2016, the FASB issued ASU No. 2016-02, Leases. The standard amends the existing lease accounting guidance and requires lessees to recognize a lease liability and a right-of-use asset for all leases (except for short-term leases that have a duration of one year or less) on their balance sheets. Lessees will continue to recognize lease expense in a manner similar to current accounting. For lessors, accounting for leases under the new guidance is substantially the same as in prior periods but eliminates current real estate-specific provisions and changes the treatment of initial direct costs. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparable period presented, with an option to elect certain transition relief. Full retrospective application is prohibited. The standard was adopted as of October 1, 2020. As of June 30, 2021, the Company recognized additional operating liabilities of approximately $6.2 million, with corresponding ROU assets of approximately $6.9 million.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 provides guidance for recognizing credit losses on financial instruments based on an estimate of current expected credit losses model. The amendments are effective for fiscal years beginning after December 15, 2019. Recently, the FASB issued the final ASU to delay adoption for smaller reporting companies to calendar year 2023. The Company is currently assessing the impact of the adoption of this ASU on its financial statements.

In January 2020, the FASB issued ASU 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivative and Hedging (Topic 815), which clarifies the interaction of rules for equity securities, the equity method of accounting, and forward contracts and purchase options on certain types of securities. The guidance clarifies how to account for the transition into and out of the equity method of accounting when considering observable transactions under the measurement alternative. The ASU is effective for annual reporting periods beginning after December 15, 2020, including interim reporting periods within those annual periods, with early adoption permitted. We are currently evaluating the impact of the new guidance on our consolidated financial statements.

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): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity, and also improves and amends the related EPS guidance for both Subtopics. The ASU will be effective for annual reporting periods beginning after December 15, 2021 and interim periods within those annual periods and early adoption is permitted. We are currently evaluating the impact of the new guidance on our consolidated financial statements.

3. Property, Plant & Equipment

Property and equipment consist of the following (in thousands):

	June 30,			September 30,
	2021			2020
Land	$	1,451		$	1,451
Automobiles		113			61
Signage		19			19
Furniture and equipment		2,945			2,485
Leasehold improvements		3,568			3,455
Buildings and property improvements		10,173			12,981
Computer software		59			59
		18,328			20,511
Accumulated depreciation		(5,230	)		(4,157	)
Property and equipment, net	$	13,098		$	16,354

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Depreciation expense was approximately $0.5 and $0.5 million for the three months ended June 30, 2021 and 2020, respectively. Depreciation expense was approximately $1.4 and $1.3 million for the nine months ended June 30, 2021 and 2020, respectively. Depreciation expense is included in general and administrative expense.

4. Inventory

Inventory consists of the following (in thousands):

	June 30,		September 30,
	2021		2020
Raw materials	$	640	$	222
Work-in-progress		257		484
Finished goods		1,934		1,089
Total Inventory	$	2,831	$	1,795

Raw materials and work-in-progress include the costs incurred for cultivation materials and live plants. Finished goods consists of cannabis products sent to retail locations or ready to be sold. No inventory reserve was recorded for the three and nine months ended June 30, 2021 and 2020 due to management’s assessment of the inventory on hand.

5. Prepaid expenses and other current assets

Prepaid expenses and other current assets are assets and payments previously made, that benefit future periods. The balance as of June 30, 2021 includes the Employee Retention Tax Credit (“ERTC”) program from the U.S Treasury, as part of the COVID-19 stimulus package. The ERTC program refunds a portion of taxes paid for payroll. We accrued the amounts that we qualify for, and this reduced our payroll expenses during the quarter applied for.

Prepaid and other current assets comprised of the following:

	June 30,		September 30,
	2021		2020
Prepaid expenses	$	615	$	249
ERTC credits		2,471		-
Deposits and other current assets		1,050		203
Total prepaid expenses and other current assets	$	4,136	$	452

6. Equity method investments

SOK Management, LLC

During the nine months ended June 30, 2021, the Company sold its remaining ownership interest in SOK Management in the amount of $200,000 and was recorded as other investment income under other income on the Company’s profit and loss statement.

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Tilstar Medical, LLC

In April 2019, the Company entered into an agreement to acquire 48% of the membership interest of Tilstar Medical, LLC (“TIL”). TIL is a startup operation located in Laurel, Maryland and owns a project management company which assists in procuring licenses for the production and sale of cannabis. The purchase price for the 48% interest was $550,000 to capitalize TIL which under the operating agreement occurs upon the execution of the agreement. As of September 30, 2019, the Company had funded the $550,000 and accounted for its investment using the equity method of accounting. The Company was not made aware at time of its investment in the type and magnitude of expenses that would be funded with its investment capital and is currently in the process of renegotiating the terms of the operating agreement. During the year ended September 30, 2019, Tilstar Medical along with its partner, Stem Holdings, Inc. received a letter from the Maryland Medical Cannabis commission with notification that we received stage one pre-approval for a processor license. The Companies application ranked amongst the top nine highest scoring applications for a medical cannabis processor license. Final awards will be issued during calendar year 2021. As of June 30, 2021, and September 30, 2020, the difference between the investment and the percentage of net assets attributable to the Company’s investment was approximately $0.29 and $0.28 million, respectively. During the three and nine months ended June 30, 2021 the Company recognized a minimal loss on investment related to TIL. During the three and nine months ended June 30, 2020, the Company recognized a loss of $0.01 million and $0.14 million, respectively related to TIL.

Community Growth Partners, Inc

On January 6, 2020, the Company issued a convertible promissory note to Community Growth Partners Holdings, Inc., (“CGS”) which will act as a line of credit. Subject to the terms and conditions of the note, CGS promises to pay the Company all of the outstanding principal together with interest on the unpaid principal balance upon the date that is twelve months after the effective date and shall be payable as follows: (a)The Company agrees to make several loans to CGS from time to time upon request of CGS in amounts not to exceed the principal sum of $2,000,000, (b) Payment of principal and interest shall be immediately available funds, (c) This note may be prepaid in whole or in part at any time without premium or penalty. Any partial prepayment shall be applied against the principal amount outstanding, (d) The unpaid principal amount outstanding under this note shall bear interest commencing upon the first advance at the rate of 10% per annum through the maturity date, calculated on the basis of a 365-day, until the entire indebtedness is fully paid, (e) Upon the closing of a $2,000,000 financing by the Company, all of the principal and interest shall automatically convert into equity shares of CGS at the price obtained by the qualified financing. As of September 30, 2020 portion of the note was converted into 7.0% equity. In March 2021, the balance of a note receivable was converted into an additional 7% equity leaving an equity investment of 14%.

Kaya Holdings, Corp.

On April 13, 2021, the Company executed an Investors’ Rights Agreement in conjunction with a Subscription Agreement with Kaya Holdings, Corp. The Company purchased 2,875,000 shares of Class B common stock of Kaya Holdings, Corp for a total investment of $230,000. In addition to the purchased Class B shares, the Company received 500,000 founder Class B shares resulting in a total of 3,375,000 Class B shares.

7. Note Receivable

On January 4, 2020, the Company issued a $355,000 promissory note to Community Growth Partners Holdings, Inc., (“CGS”). CGS is a cannabis license holder in Massachusetts. Subject to the terms and conditions of the note, CGS promises to pay the Company all of the outstanding balance together with interest the date that is six months after the opening of the Great Barrington Dispensary which was opened September 2020. As of June 30, 2021 the principal and interest balance of the note is $411,934.

On October 1, 2020, the Company issued a $100,000 promissory note to Bushman Holdings, Inc., (“BHI”) BHI is a CBD Cannabis holding company in Florida. During the nine months ended June 30, 2021, the Company issued additional promissory notes totaling $210,000. Subject to the terms and conditions of the notes, BHI promises to pay the Company all outstanding balances on or before January 1, 2022. As of June 30, 2021, the outstanding balance of the promissory notes is $310,000.

On April 5, 2021, the Company issued a $250,000 non-negotiable convertible promissory note (“Note”) to Blake, Inc. The Note has a maturity date which is six months after the close of the Arkannabis, a Colorado grow facility. The note has annual interest rate of 5.75%. Per the terms of the note, the principal balance and related interest shall be made in immediately available funds in lawful currency. The terms of the note call for automatic conversion upon the closing of the Arkannabis business of the outstanding principal and interest on this Note and will convert into that number of shares of the equity securities equivalent to a non-dilitive 12.5% of the issued and outstanding shares of the Arkannabis business.

8. Consolidated Asset Acquisitions

YMY Ventures LLC

In September 2018, the Company entered into an agreement to acquire 50% of the membership interest of YMY Ventures LLC (“YMY”). YMY is a startup operation located near Las Vegas, Nevada and owns licenses for the production and sale of cannabis. The purchase price for the 50% interest was $750,000, with the first $375,000 paid into escrow upon signing, with the final $375,000 due upon closing, which under the agreement occurs when the license is transferred by the Nevada Department of Taxation and receipt of approval in transfer of ownership by the Division of Public and Behavioral Health of the City of North Las Vegas. As of June 30, 2019, the Company had funded the $375,000 into escrow and had provided the joint venture with additional funds primarily in the form of payments for work performed to acquire four licenses from the Nevada Department of Taxation in the amount of approximately $690,238. As of February 28, 2019, the Nevada Department of Taxation approved the change of ownership for four medical and recreational cultivation and production licenses held by YMY Ventures now owned by Stem Holdings, Inc. Pursuant to the agreement, the escrowed amount of $375,000 was released and an additional payment of $67,500 was issued in August 2019. The balance of $307,500 was being held and negotiated with the partners due to the additional funds over and above the original obligation to provide tenant improvements of $650,000. Non-controlling interest of $790,000, in connection with this asset acquisition, is included in investment in affiliates. As of the date of this filing, the balance has been paid in full including interest and attorney’s fees.

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NVD RE Corp.

In April 2018, the Company received a 37.5% interest in NVD RE Corp. (“NVD”) upon its issuance to NVD of a commitment to contribute $1.275 million to NVD, which included the purchase price of $600,000 and an additional commitment to pay tenant improvement costs of $675,000. As of September 30, 2019, the Company paid $600,000 in cash for the real estate and not only fully funded its commitment but invested an additional $377,000 in capital over and above its original obligation. NVD used the funds provided to date by the Company to construct a cannabis indoor grow building and processing plant located near Las Vegas, Nevada and to continue the buildout of the property. The Company has no further commitment to fund the entity beyond its initial equity purchase commitment. NVD leases its facilities to YMY Ventures, LLC. $1.2 million non-controlling interest in connection with this asset acquisition is included in investment in affiliates.

In the fiscal year ended September 30, 2019, NVD obtained $300,000 in proceeds from a mortgage on its property. The funds from this mortgage were advanced to the Company. As of December 31, 2020, this obligation was paid in its entirety, and $400,000 in additional proceeds were received on new mortgage.

In May 2020, the Company acquired an additional 26.25% interest in NVD by issuing 386,035 common shares at par value of $0.001 which resulted in a total investment of 63.75%.

West Coast Ventures

On March 29, 2019, the Company entered into a definitive agreement to acquire Western Coast Ventures, Inc. (“WCV”). At the time of acquisition, WCV was a shell with cash of $2,000,000 and a 51% ownership with ILCA Holdings, Inc. (“ILCA”). At the time of acquisition of WCV, ILCA was also a shell with no operations, which has been issued a limited Conditional Use Permit for a Marijuana Production Facility (a “MPF”) by the City of San Diego, California, which will only be granting a total of 40 MPFs. As consideration for the acquisition, the Company issued 2,500,000 shares of its common stock, with a fair value of approximately $4.4 million or $1.47 per share, the Company’s closing stock price on March 29, 2019. The Company recorded $2.0 million of cash acquired and a $2.4 million investment in ILCA. The Company has recorded $3.8 million intangible assets (cannabis licenses) in connection with the acquisition of WCV and a $1.35 million non-controlling interest in connection with this acquisition. Included in Intangible assets, as of June 30, 2021, and September 30, 2020, the Company reported $1.35 million related to this acquisition.

Michigan RE 1

On January 4, 2021, the Company entered into a Securities Purchase Agreement (“SPA”) with Michigan RE 1, Inc. (“MRE1”) pursuant to a private placement offering of up to an aggregate amount of $510 comprising up to 510 shares of MRE1’s common stock. On January 5, 2021, the Company was party to an Asset Purchase Agreement between Leoni Wellness, LLC (“Seller”) and Organic Guyz, LLC (“Purchaser”) whereas the Seller is engaged in the recreational cannabis business and the Purchaser desires to purchase the local municipal license to operate an adult use retailer in the City of Kalamazoo, Michigan. The purchase price to be paid by the Purchaser is $400,000. A non-refundable deposit of $250,000, except in the event of a material breach of the SPA, is due within three days of the executed SPA. The deposit will be acknowledged by an execution of a joint escrow agreement. At closing the Purchaser will pay $250,000 to the Seller by cashiers check or wire transfer. The remaining $150,000 shall be paid by the Purchaser to the Seller in accordance with a promissory note to be executed at closing. The promissory note shall be paid in full on the earlier of the date the Purchaser purchases the real property located at 3928 Portage Street, Kalamazoo, Michigan or eighteen months from the closing date. The promissory note shall be secured by an escrow agent whereby three hundred thousand (300,000) shares (“Shares”) of Stem Holdings shall be held in the benefit of Seller and a Collateral Assignment of Licenses and Permits whereby upon default on the promissory note, the Purchaser shall assign the marijuana business permit back to the Seller. Upon the maturity date of the promissory note, in the event that the borrower has not paid the principal balance of the note in full, Seller shall have the option to receive the Shares as payment or $150,000 by wire transfer. Included in Investments in affiliates, as of June 30, 2021, the Company reported $235,467 related to this investment.

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9. Non-Controlling Interests

Non-controlling interests in consolidated entities are as follows (in thousands):

	As of September 30, 2020
	NCI Equity Share		Net Loss Attributable to NCI			NCI in Consolidated Entities		Non-Controlling Ownership %
NVD RE Corp.	$	597	$	(48	)	$	549		50.0	%
Western Coast Ventures, Inc.		1,288		(240	)		1,048		49.0	%
YMY Ventures, Inc.		447		(204	)		243		50.0	%
	$	2,332	$	(492	)	$	1,840

		As of June 30, 2021
		NCI Equity Share		Net Loss Attributable to NCI			NCI in Consolidated Entities		Non-Controlling Ownership %
NVD RE Corp.	$	578	$	(25	)	$	553		63.8	%
Western Coast Ventures, Inc.	$	1,048		(150	)		898		49.0	%
YMY Ventures, Inc.	$	243		30			273		50.0	%
Michigan RE 1, Inc.	$	-		(25	)		(25	)	51.0	%
	$	1,869	$	(170	)	$	1,699

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10. Business Combination

Seven Leaf Ventures Corp. (“7LV”)

In March 2020, the Company acquired 100% of the voting interest in Seven Leaf Ventures Corp. (“7LV”), a private Alberta corporation, and its subsidiaries, pursuant to the terms of a share purchase agreement dated March 6, 2020. 7LV owns Foothills Health and Wellness, a medical dispensary, in the greater Sacramento, California area. In connection with the acquisition, the Company issued 12,085,770 shares of common stock to former shareholders of 7LV (“7LV Shares”). The Company also issued a replacement 10% unsecured convertible debentures in the aggregate principal amount of C$3,410 ($2,540 USD) (the “Replacement Debentures”), convertible into shares at a conversion price of C$1.67 per share at any time prior to May 3, 2021, to former holders of unsecured convertible debentures of 7LV. As part of the Acquisition, the Company assumed the obligations of 7LV with respect to the common share purchase warrants of 7LV outstanding on the closing of the acquisition, subject to appropriate adjustments to reflect the exchange ratio. Accordingly, the Company has assumed 1,022,915 common share purchase warrants (the “Warrants”), exercisable into shares at an exercise price of C$2.08 per share at any time prior to May 3, 2021, 299,975 Warrants, exercisable into shares at an exercise price of C$4.17 per share at any time prior to June 30, 2021 and 999,923 Warrants, exercisable into shares at an exercise price of C$0.50 at any time prior to October 10, 2020. Following the completion of the acquisition, 7LV is now a wholly owned subsidiary of the Company.

The table below shows the warrant liability and embedded derivative liability recorded in connection with the 7LV convertible notes and the subsequent fair value measurement during the quarter ended June 30, 2021 in USD, (in thousands):

	Warrant Liability			Derivative Liability
Balance as of September 30, 2020	$	60		$	54
Issuance		-			-
Change in fair value		(60	)		(39	)
Balance as of December 31, 2020		-			15
Issuance		-			-
Change in fair value		-			-
Balance as of March 31, 2021		-			15
Issuance		-
Change in fair value		-			(15	)
Balance as of June 30, 2021	$	-		$	-

Purchase Price Allocation

As of March 6, 2020, the Company allocated the purchase consideration to the fair value of the assets acquired and liabilities assumed as summarized in the table below (in thousands):

Consideration Paid (in thousands)
Estimated fair value of common stock issued	$	9,552
Estimated fair value of warrants issued		772
Estimated fair value of debt issued		2,540
Estimated fair value of embedded and bifurcated derivatives		244
Forgiveness of working capital advance		(150	)
Total consideration paid	$	12,958
Assets acquired: (in thousands)
Cash and cash equivalents	$	81
Fixed assets		54
Inventory		133
Goodwill		6,151
Intangible assets		7,684
Total assets acquired	$	14,103
Liabilities assumed: (in thousands)
Accrued expenses and other current liabilities		1,145
Total liabilities assumed	$	1,145
Net assets acquired (in thousands)	$	12,958

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Pursuant to the Asset Purchase Agreement (“APA”) between 7LV USA Corporation and the Company, upon the one-year anniversary date of the closing the Company shall pay 7LV USA Corporation additional consideration of $1,220,000 less certain adjustments related to revenue targets per the APA less Consultant Compensation paid to the prior owners of 7LV USA Corporation. The goodwill of $5.9 million will not be deductible for income tax purposes.

Driven

In December 2020, the Company, through an Agreement and Plan of Merger became the parent of an 100% wholly owned subsidiary Driven Deliveries, Inc., (“DRVD”, “Driven” or “Driven Deliveries”), its subsidiaries, a publicly held corporation on December 29, 2020. DRVD is an e-commerce and DaaS (delivery-as-a-service) provider with proprietary logistics and omnichannel UX/CX technology. Driven utilizes its own fulfillment centers, drivers, and proprietary technology. Driven provides two service levels to its customers: (i) an “Express” delivery with a limited product selection that is usually delivered within 90 minutes or less; and (ii) a “Next Day” scheduled delivery from a larger selection of 500+ products from a Driven fulfillment center. In connection with the acquisition, the Company issued 101,968,944 shares of common stock to the existing shareholders of Driven (“DRVD Shares”). As part of the Acquisition, the Company assumed the Driven stock options outstanding on the closing of the acquisition in the amount of 4,530,495. Accordingly, the Company has assumed 30,249,184 common share purchase warrants (the “Warrants”), exercisable into shares at an average exercise price of $.54 per share. Following the completion of the acquisition, Driven is now a wholly owned subsidiary of the Company.

The table below shows the warrant liability and embedded derivative liability recorded in connection with the Driven convertible notes and the subsequent fair value measurement during the nine months ended June 30, 2021 in USD, (in thousands):

	Warrant Liability			Derivative Liability
Balance as of September 30, 2020	$	-		$	-
Warrants acquired		9,000			-
Warrants converted into equity		(4,589	)
Change in fair value		(210	)		-
Balance as of June 30, 2021	$	4,201		$	-

The following unaudited proforma condensed consolidated results of operations have been prepared as if the acquisition of Driven had occurred October 1, 2019.

	Nine months ended			Nine months ended
	June 30, 2021			June 30, 2020
Revenue	$	31,396		$	18,410
Net income (loss)	$	(10,206	)	$	(20,406	)

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Purchase Price Allocation

As of December 29, 2020, the Company allocated the purchase consideration to the fair value of the assets acquired and liabilities assumed as summarized in the table below (in thousands):

Consideration Paid (in thousands)

Consideration Paid (in thousands)
Estimated fair value of common stock issued	$	42,825
Estimated fair value of warrants issued		9,000
Estimated fair value of options issued		500
Estimated fair value of debt assumed		4,389
Total consideration paid	$	56,714
Assets acquired: (in thousands)
Cash and cash equivalents	$	-
Fixed assets		47
Other Assets		1,526
Goodwill		10,840
Intangible assets		48,200
Total assets acquired	$	60,613
Liabilities assumed: (in thousands)
Accrued expenses and other current liabilities		(3,899	)
Total liabilities assumed	$	(3,899	)
Net assets acquired (in thousands)	$	56,714

During the quarter ended June 30, 2021, goodwill was increased by $1.0 million, resulting from the discovery of unrecorded Driven liabilities at the time of acquisition.

The goodwill of $10.8 million will not be deductible for income tax purposes.

11. Intangible Assets, net

Intangible assets as of June 30, 2021 and September 2020 (in thousands):

	Estimated Useful Life		Cannabis Licenses		Tradename		Customer Relationship		Non-compete		Technology		Accumulated Amortization			Net Carrying Amount
Balance as September 30, 2020			$	12,679	$	458	$	643	$	220	$	-	$	(730	)	$	13,270
YMY Ventures		15		-		-		-		-		-		(38	)		(38	)
Western Coast Ventures, Inc.		15		-		-		-		-		-		(122	)		(122	)
Yerba Buena		3-15 years		-		-		-		-		-		(129	)		(129	)
Foothill (7LV)		15		-		-		-		-		-		(392	)		(392	)
Driven Deliveries		10-15 years		44,000		1,800		600		-		1,800		(1,694	)		46,506
Other		5		-		-		-		-		-		-			-
Balance as June 30, 2021			$	56,679	$	2,258	$	1,243	$	220	$	1,800	$	(3,105	)	$	59,095

Actual amortization expense to be reported in future periods could differ from these estimates as a result of new intangible

asset acquisitions, changes in useful lives or other relevant factors or changes. Amortization expense for the three and nine months ended June 30, 2021 was $1,086 and $2,380, respectively. Amortization expense for the three and nine months ended June 30, 2020 was $172 and $430, respectively.

The following table is a runoff of expected amortization in the following 5-year period as of June 30:

2021	$	1,037
2022		4,147
2023		4,147
2024		4,147
2025		4,147
Thereafter		41,470
	$	59,095

28

12. Accounts payable and accrued expenses

Accounts payable and accrued expenses consist of the following (in thousands):

	June 30, 2021		September 30, 2020
Accounts payable		3,399	$	1,784
Accrued credit cards		36		41
Accrued interest		152		134
Accrued payroll		928		616
Other		3,616		408
Total Accounts Payable and Accrued Expenses	$	8,131	$	2,983

13. Notes Payable and Advances

The following table summarizes the Company’s short-term notes and advances, acquisition note payable, due to related party loans, and long-term debt, mortgages as of the quarter ended June 30, 2021, and year ended September 30, 2020:

	June 30,		September 30,
	2021		2020
Equipment financing	$	32	$	27
Insurance financing		229		177
Mortgages payable		-		923
Promissory note		425		2,298
Settlement payable		95		-
Due to related party		1		200
	$	782	$	3,625
Acquisition notes payable		538		665
Total notes payable and advances	$	1,320	$	4,290
Long-term mortgages		3,200		3,685
Total long-term debt	$	3,200	$	3,685

Equipment financing

In Effective April 29, 2018, the Company entered into a 36-month premium finance agreement in consideration for a John Deere Gator Tractor in the principal amount of $15,710. The note bears no annual interest rate and requires the Company to make thirty-six monthly payments of $442 over the term of the note. As of June 30, 2021, the obligation outstanding is $442. No amount was recorded for the premium for the non-interest-bearing feature of the note as it was immaterial. The note is secured by the equipment financed.

November 2017, the Company entered into a promissory note in the amount of $21,749 from a vendor of the Company to finance the acquisition of a security electronics system in one of its properties. The promissory note bears an interest rate of 18% per annum and contains a 10% servicing fee. The note matures 24 months after issuance and is secured by certain security electronics purchased with proceeds of the note. This vendor is now out of business, consequently, the Company recorded the balance of the note payable of $14,950 as a gain on forgiveness of debt in the nine months ended June 30, 2021.

29

Pursuant to the Company’s acquisition of Yerba Buena the Company assumed a note payable obligation dated July 2017 related to a tractor which had a 60-month premium finance agreement. The principal amount was $28,905. The note bears no annual interest rate and requires the Company to make sixty monthly payments of $482 over the term of the note. As of June 30, 2021, the obligation outstanding is $5,757. No amount was recorded for the premium for the non-interest-bearing feature of the note as it was immaterial. The note is secured by the equipment financed.

January 2021, the Company entered into a promissory note in the amount of $27,880 for the acquisition of a truck. The promissory note bears an interest rate of 13.29% per annum and is secured by the financed vehicle. The note has a sixty-month term with monthly payment of $642. As of June 30, 2021, the balance outstanding is $26,176.

Insurance financing

Effective February 7, 2020, the Company entered into a 12-month premium finance agreement in partial consideration for an insurance policy in the principal amount of $300,150. The note bears an annual interest rate of 7.46%. The Company paid $60,255 as a down payment on February 7, 2020, the note requires the Company to make 9 monthly payments of $22,718 over the remaining term of the note. This note was paid in full in January 2021.

Effective February 17, 2021, the Company entered into a 12-month premium finance agreement in partial consideration for an insurance policy in the principal amount of $243,284. The note bears an annual interest rate of 7.46%. The Company paid $47,100 as a down payment on February 17, 2021, the note requires the Company to make 10 monthly payments of $17,835 over the remaining term of the note. As of June 30, 2021, the obligation outstanding is $124,845.

Effective July 31, 2020, the Company entered into a 10-month premium finance agreement in partial consideration for an insurance policy in the principal amount of $53,325. The note bears an annual interest rate of 7.5%. The Company paid $15,602 as a down payment on July 31, 2020, the note requires the Company to make 10 monthly payments of $3,772 over the remaining term of the note. As of June 30, 2021, the obligation was paid in full.

Effective July 31, 2020, the Company entered into a 10-month premium finance agreement in partial consideration for an insurance policy in the principal amount of $78,056. The note bears an annual interest rate of 7.5%. The Company paid $22,984 as a down payment on July 31, 2020, the note requires the Company to make 10 monthly payments of $5,507 over the remaining term of the note. As of June 30, 2021, the obligation was paid in full.

Effective May 24, 2020, the Company entered into a 9-month premium finance agreement in partial consideration for an insurance policy in the principal amount of $16,777. The note bears an annual interest rate of 8.7%. The Company paid $3,485 as a down payment on May 24, 2020, the note requires the Company to make 9 monthly payments of $1,339 over the remaining term of the note. This note was paid in full in January 2021.

Effective July 16, 2020, the Company entered into a 9-month premium finance agreement in partial consideration for an insurance policy in the principal amount of $10,629. The note bears an annual interest rate of 11%. The Company paid $4,009 as a down payment on July 16, 2020, the note requires the Company to make 9 monthly payments of $736 over the remaining term of the note. As of June 30, 2021, the obligation was paid in full.

Effective September 30, 2020, the Company entered into a 10-month premium finance agreement in partial consideration for an insurance policy in the principal amount of $2,611. The note bears an annual interest rate of 7.0%. The Company paid $1,043 as a down payment on September 30, 2020, the note requires the Company to make 10 monthly payments of $157 over the remaining term of the note. As of June 30, 2021, the obligation outstanding is $157.

Effective November 7, 2020, the Company entered into a 10-month premium finance agreement in partial consideration for an insurance policy in the principal amount of $6,675. The note bears an annual interest rate of 11.4%. The Company paid $1,371 as a down payment on November 7, 2020, the note requires the Company to make 10 monthly payments of $530 over the remaining term of the note. As of June 30, 2021, the obligation outstanding is $1,061.

30

Effective December 4, 2020, the Company entered into a 10-month premium finance agreement in partial consideration for an insurance policy in the principal amount of $9,920. The note bears an annual interest rate of 12.8%. The Company paid $2,383 as a down payment on December 4, 2020, the note requires the Company to make 10 monthly payments of $754 over the remaining term of the note. As of June 30, 2021, the obligation outstanding is $3,014.

Effective February 9, 2021, the Company entered into a 12-month premium finance agreement in consideration for an insurance policy in the principal amount of $22,391. In April 2021, the Company added an additional location to the policy which increased the policy premium by $7,575. The revised policy premium is $29,967. The note bears an annual interest rate of 8.5%. The Company paid $2,488 as a down payment on March 9, 2021, the note requires the Company to make 8 monthly payments of $3,435 over the remaining term of the note. As of June 30, 2021, the obligation outstanding is $16,227.

Effective February 24, 2021, the Company entered into a 12-month premium finance agreement in partial consideration for an insurance policy in the principal amount of $13,694. The note bears an annual interest rate of 7.369%. The Company paid $3,424 as a down payment on April 19, 2021, the note requires the Company to make 9 monthly payments of $1,199 over the remaining term of the note. As of June 30, 2021, the obligation outstanding is $8,392.

Effective April 10, 2021, the Company entered into a 12-month premium finance agreement for an insurance policy in the principal amount of $78,750. The note bears an annual interest rate of 8.35%. The Company paid $15,750 as a down payment on May 10, 2021, the note requires the Company to make 9 monthly payments of $7,271 over the remaining term of the note. As of June 30, 2021, the obligation outstanding is $50,898.

Effective April 17, 2021, the Company entered into a 12-month premium finance agreement for an insurance policy in the principal amount of $23,014. The note bears an annual interest rate of 11.98%. The Company paid $4,871 as a down payment on March 16, 2021, the note requires the Company to make 10 monthly payments of $1,814 over the remaining term of the note. As of June 30, 2021, the obligation outstanding is $10,886.

Effective May 31, 2021, the Company entered into a 12-month premium finance agreement for an insurance policy in the principal amount of $8,906. The note bears an annual interest rate of 10.25%. The Company paid $2,537 as a down payment on May 28, 2021, the note requires the Company to make 9 monthly payments of $741 over the remaining term of the note. As of June 30, 2021, the obligation outstanding is $6,667.

Effective July 16, 2021, the Company entered into a 9-month premium finance agreement in partial consideration for an insurance policy in the principal amount of $10,650. The note bears an annual interest rate of 11%. The Company paid $4,113 as a down payment on June 30, 2021, the note requires the Company to make 9 monthly payments of $726 over the remaining term of the note. As of June 30, 2021, the obligation outstanding is $6,538.

Short-term mortgages payable

On January 16, 2018, the Company consummated a “Contract for Sale” for a Farm Property in Mulino Oregon (the “Mulino Property”). The purchase price was $1,700,000 which was reduced by a rental credit of approximately $135,000 which is equivalent to nine months’ rent at $15,000 a month and an additional credit of $9,500 for additional work done on the property. In connection with the purchase of the property, the Company made a cash payment as down payment plus payment of closing costs in the amount of $370,637 and issued a promissory note in the amount of $1,200,000 with a maturity of January 2020. The Company will pay monthly installments of principal and interest (at a rate of 2% per annum) in the amount of $13,500, commencing in July 2018 through the maturity date (January 2020), at which time the entire unpaid principal balance and any remaining accrued interest shall be due and payable in full. No amount was recorded for the premium for the below market rate feature of the note as it was immaterial. The note is secured by a deed of trust on the property. The Company performed an analysis and determined that the rate obtained was below market, however, no premium was recorded as the Company determined it was immaterial. As of June 30, 2021, the balance due of $922,500 including interest and fees in the amount of $144,486 was satisfied in full through the Company obtaining a new mortgage on the property (see Long-term mortgages below).

Promissory note

In January 2020, the Company issued two promissory notes with a principal balance of $500,000 to accredited investors (the “Note Holders”). The notes mature in July 2020 and has an annual rate of interest of 12%. In connection with the issuance of the promissory notes, the Company issued the Note Holders 100,000 common stock purchase warrants with a five-year term from the issuance date, $0.85 per share. As of July 2020, in consideration of the warrants being amended to $0.45 per share with an extended the term from five to a ten-year term, the maturity date has been extended to December 13, 2020. In May 2020, the Company made a principal payment of $20,000. As of June 30, 2021, these obligations were converted into equity.

31

In January 2020, the Company issued two promissory notes with a principal balance of $500,000 to accredited investors (the “Note Holders”). The note matures in October 2020 and has an annual rate of interest of 12%. In connection with the issuance of the promissory note, the Company issued the Note Holders 100,000 common stock purchase warrants with a five-year term from the issuance date, $0.85 per. As of July 2020, in consideration of the warrants being amended to $0.45 per share with an extended the term from five to a ten-year term, the maturity date has been extended to December 13, 2020. As of June 30, 2021, the obligation outstanding is $500,000 and the balance is $425,523, net of debt discount of $74,477. The Company was notified that the maturity dates on these notes have been extended for the near-term.

Settlement payable

As part of the Agreement and Plan of Merger with Driven Deliveries the Company assumed a settlement payable related to an employment claim where Driven shall pay certain employees a total of $250,451. This settlement is payable in equal bi-monthly payments over a period of seventeen (17) Months (36 pay periods), beginning in February 2021. As of June 30, 2021, the settlement payable is presented on the balance sheet in the amount of $95,451.

Due to related parties

During November 2017, one of the Company’s controlled subsidiaries entered into a Promissory Note with a face value of $80,000 with a corporate entity that has shareholders, officers and directors in common with the Company. The Note bears interest at a rate of 6% per annuum and was due one year from the date of issue. On June 1, 2021, the note was forgiven and fully cancelled by the issuer. As of June 30, 2021, the obligation outstanding is zero.

As of June 30, 2021, the Company had a related party loan payable of $1,000 payable to the Company’s officer.

Acquisition notes payable

In April 2019, the Company entered into promissory note with a principal balance of $400,000 related to its acquisition of Yerba Buena, Oregon LLC. The note was issued on April 8, 2019 and is due on April 8, 2021. The note has a coupon interest rate of 8%. The note required 12 monthly payments of $2,667, then an additional 12 monthly payments of $16,667 and then a final balloon payment of the remaining principal and accrued interest. In March 2021, the Company paid $61,860 of the principal balance of the promissory note. The remaining balance of $295,859 was converted into equity.

In September 2018, the Company entered into an agreement to acquire 50% of the membership interest of YMY. The purchase price for the 50% interest was approximately $0.8 million. In connection with this agreement, as of September 30, 2019, the Company has paid approximately $500,000 and recorded a note payable of $307,500. In January 2021, the Company paid the $307,500 balance of the note payable.

As part of the Agreement and Plan of Merger with Driven Deliveries the Company assumed a acquisition liabilities totaling $2,000,418. These liabilities related to a California’s Private Attorney General Act (“PAGA”) labor claims, liabilities related to a Purchase Agreement for certain assets, and a settlement related to a prior acquisition. In February 2021, the Company executed a settlement agreement to remove $850,000 of debt and retire 5,000,000,000 warrants in exchange for 500,000 common shares of restricted stock. In March 2021, the Company paid $612,291 of debt and recorded forgiveness of debt of $37,708 related to another settlement agreement. As of June 30, 2021, the total assumed liabilities are $930,763, the current portion of this obligation is $537,931.

Long-term debt, mortgages

In January 2020, the Company refinanced a mortgage payable on property located in Oregon to acquire additional funds. The mortgage bears interest at 15% per annum. Monthly interest only payments began February 1, 2020 and continue each month thereafter until paid. The entire unpaid balance is due on January 31, 2022, the maturity date of the mortgage, and is secured by the underlying property. The mortgage terms do not allow participation by the lender in either the appreciation in the fair value of the mortgaged real estate project or the results of operations of the mortgaged real estate project. The note has been cross guaranteed by the CEO and Director of the Company. As of June 30, 2021, the obligation outstanding is $400,000.

32

In March 2020, the Company executed a $1,585,000 mortgage payable on property located in Oregon to acquire additional funds. The mortgage bears interest at 11.55% per annum. Monthly interest only payments began April 1, 2020 and continue each month thereafter until paid. The entire unpaid balance is due on April 1, 2023, the maturity date of the mortgage, and is secured by the underlying property. The Company paid costs of approximately $120,000 to close on the mortgage. The mortgage terms do not allow participation by the lender in either the appreciation in the fair value of the mortgaged real estate project or the results of operations of the mortgaged real estate project. The note has been cross guaranteed by the CEO and Director of the Company. On May 14, 2021, the Company exercised the purchase leaseback option of the original lease and sold the property back to the original owner. As of June 30, 2021, there was no obligation related to this property.

In March 2020, the Company executed a $400,000 mortgage payable on property located in Oregon to acquire additional funds. The mortgage bears interest at 11.55% per annum. Monthly interest only payments began May 1, 2020 and continue each month thereafter until paid. The entire unpaid balance is due on April 1, 2022, the maturity date of the mortgage, and is secured by the underlying property. The Company paid costs of approximately $38,000 to close on the mortgage. The mortgage terms do not allow participation by the lender in either the appreciation in the fair value of the mortgaged real estate project or the results of operations of the mortgaged real estate project. The note has been cross guaranteed by the CEO and Director of the Company. As of June 30, 2021, the obligation outstanding is $400,000.

In March 2020, the Company refinanced a mortgage payable on property located in Oregon to acquire additional funds. The mortgage bears interest at 15% per annum. Monthly interest only payments began April 1, 2020 and continue each month thereafter until paid. The entire unpaid balance is due on March 31, 2022, the maturity date of the mortgage, and is secured by the underlying property. The mortgage terms do not allow participation by the lender in either the appreciation in the fair value of the mortgaged real estate project or the results of operations of the mortgaged real estate project. The note has been cross guaranteed by the CEO and Director of the Company. As of June 30, 2021, the obligation outstanding is $700,000.

In July 2020, the Company executed a mortgage payable on property located in Oregon to acquire additional funds. The mortgage bears interest at 14% per annum. Monthly interest only payments began August 1, 2020 and continue each month thereafter until paid. The entire unpaid balance is due on July 31, 2023, the maturity date of the mortgage, and is secured by the underlying property. The mortgage terms do not allow participation by the lender in either the appreciation in the fair value of the mortgaged real estate project or the results of operations of the mortgaged real estate project. The note has been cross guaranteed by the CEO and Director of the Company. As of June 30, 2021, the obligation outstanding is $200,000.

In April 2018, the Company received a 37.5% interest in NVD RE Corp. (“NVD”) upon its issuance to NVD of a commitment to contribute $1.275 million to NVD which included the purchase price of $600,000 and an additional commitment to pay tenant improvement costs of $675,000. In the year ended September 30, 2019, NVD obtained $300,000 in proceeds from a mortgage on its property. The funds from this mortgage were advanced to the Company. The advance is undocumented, non-interest bearing and due on demand. As of September 30, 2019, the balance due totals $300,000. In August 2020, the Company refinanced this obligation and paid the $300,000 balance. The refinanced mortgage term is 36 months and includes and interest rate of 14% and monthly interest only payments of $4,667. As of June 30, 2021, the balance due totals $400,000.

In November 2020, the Company executed a mortgage payable on property located in Mulino, Oregon to acquire additional funds. The mortgage bears interest at 15% per annum. Monthly interest only payments began December 1, 2020 and continue each month thereafter until paid. The entire unpaid balance is due on November 2022, the maturity date of the mortgage, and is secured by the underlying property. The mortgage terms do not allow participation by the lender in either the appreciation in the fair value of the mortgaged real estate project or the results of operations of the mortgaged real estate project. The note has been cross guaranteed by the CEO and Director of the Company. As of June 30, 2021, the obligation outstanding is $1,100,000.

The following is a table of the 5-year runoff of our long-term debt as of December 31:

2021	$	-
2022		2,600
2023		600
2024		-
2025		-
Thereafter		-
	$	3,200

33

14. Convertible debt

Canaccord

On December 27, 2018, the Company entered into an Agency Agreement (the “Agency Agreement”) for a private offering of up to 10,000 convertible debenture special warrants of the Company (the “CD Special Warrants”) for aggregate gross proceeds of up to CDN$10,000,000 (the “Offering”). The net proceeds of the Offering were used for expansion initiatives and general corporate purposes. The Company’s functional currency is U.S. dollars.

In December 2018 and January 2019, the Company issued 3,121 CD Special Warrants in the first closing of the Offering, at a price of CDN $1,000 per CD Special Warrant, and received aggregate gross proceeds of CDN $3.1 million or $2.3 million USD. In connection with this offering, the Company issued the agents in such offering 52,430 convertible debenture special warrants (the “Broker CD Special Warrants”) as partial satisfaction of a selling commission.

On March 14, 2019, the Company issued 962 CD Special Warrants in the second and final closing of the Offering, at a price of CDN $1,000 per CD Special Warrant, and received aggregate gross proceeds of CDN $1.0 million or $0.7 million USD. In connection with this offering, the Company issued the agents in such offering 5,600 convertible debenture special warrants (the “Broker CD Special Warrants”) as partial satisfaction of a selling commission.

The total aggregate proceeds of the Offering totaled $4.1 million CDN or $3.1 million USD.

Each CD Special Warrant will be exchanged (with no further action on the part of the holder thereof and for no further consideration) for one convertible debenture unit of the Company (a “Convertible Debenture Unit”), on the earlier of: (i) the third business day after the date on which both (A) a receipt (the “Receipt”) for a (final) document (the “Qualification Document”) qualifying the distribution of the Convertible Debentures (as defined below) and Warrants (as defined below) issuable upon exercise of the CD Special Warrants has been issued by the applicable securities regulatory authorities in the Canadian jurisdictions in which purchasers of the CD Special Warrants are resident (the “Canadian Jurisdictions”), and (B) a registration statement (the “Registration Statement”) registering the resale of the common shares underlying the Convertible Debentures and Warrants has been declared effective by the U.S. Securities and Exchange Commission (the “Registration”); and (ii) the date that is six months following the closing of the Offering. The Company has also provided certain registration rights to purchasers of the CD Special Warrants. The CD Special Warrants were exchanged for Convertible Debenture Units after six months as U.S. and Canadian registrations were not effective at that time.

Each Convertible Debenture Unit is comprised of CDN $1,000 principal amount 8.0% senior unsecured convertible debenture (each, a “Convertible Debenture”) of the Company and 167 common share purchase warrants of the Company (each, a “Warrant”). Each Warrant entitles the holder to purchase one common share of the Company (each, a “Warrant Share”) at an exercise price of CDN $3.90 per Warrant Share for a period of 24 months following the closing of the Offering.

The Company has agreed to use its best efforts to obtain the Receipt and Registration within six months following the closing of the Offering. If the Receipt and Registration have not been obtained on or before 5:00 p.m. (PST) on the date that is 120 days following the closing of the Offering, each unexercised CD Special Warrant will thereafter entitle the holder thereof to receive, upon the exercise thereof and at no additional cost, 1.05 Convertible Debenture Units per CD Special Warrant (instead of 1.0 Convertible Debenture Unit per CD Special Warrant). Until the Receipt and Registration have been obtained, securities issued in connection with the Offering (including any underlying securities issued upon conversion or exercise thereof) will be subject to a six (6)-month hold period from the date of issue. Since the CD Special Warrants were exchanged for Convertible Debenture Units after six (6) months as U.S. and Canadian registrations were not effective at that time, the holders received 1.05 Convertible Debenture Units per CD Special Warrant.

34

The brokered portion of the Offering (CDN $2.5 million, $1.9 million USD) was completed by a syndicate of agents (collectively, the “Agents”). The Company paid the Agents a cash commission equal to 7.0% of the gross proceeds raised in the brokered portion of the Offering. As additional consideration, the Company issued the Agents such number of non-transferable broker convertible debenture special warrants (the “Broker CD Special Warrants”) as is equal to 7.0% of the number of CD Special Warrants sold under the brokered portion of the Offering. Each Broker CD Special Warrant shall be exchanged, on the same terms as the CD Special Warrants, into broker warrants of the Company (the “Broker Warrants”). Each Broker Warrant entitles the holder to acquire one Convertible Debenture Unit at an exercise price of CDN $1,000, until the date that is 24 months from the closing date of the Offering. The distribution of the Broker Warrants issuable upon the exchange of the Broker CD Special Warrants shall also be qualified under the Qualification Document and the resale of the common shares underlying the Broker Warrants will be registered under the Registration Statement. The Company also paid the lead agent a commission noted above of CDN$157,290, corporate finance fee equal to CDN $50,000 in cash and as to $50,000 in common shares of the Company at a price per share of CDN$3.00 plus additional expenses of CDN$20,000. In addition, the Company paid the trustees legal fees of CDN$181,365. In total the Company approx. USD $0.32 million in fees and expenses associated with the offering.

The issuance of the securities was made in reliance on the exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), for the offer and sale of securities not involving a public offering, Regulation D promulgated under the Securities Act, Regulation S, in Canada to “accredited investors” within the meaning of National Instrument 45106 and other exempt purchasers in each province of Canada, except Quebec, and/or outside Canada and the United States on a basis which does not require the qualification or registration. The securities being offered have not been registered under the Securities Act and may not be offered or sold in the United States or to, or for the account or benefit of, U.S. persons absent registration or an applicable exemption from the registration requirements.

The Convertible Debenture features contain the following embedded derivatives:

● Conversion Option - The Convertible Debentures provide the holder the right to convert all or any portion of the outstanding principal into common shares of the Company at a conversion price of C$3.00 such that 333.33 common shares are issued for each C$1,000 of principal of Convertible Debentures converted.

● Contingent Put - Upon an Event of Default, the Convertible Debentures settle for cash at the outstanding principal and interest amount (at discretion of the Indenture Trustee or upon request of Holders of 25% or more of principal of the Convertible Debentures).

● Contingent Put - Upon a Change in Control, the Convertible Debentures settle for cash at the outstanding amount and principal and interest * 105% (where Holder accepts a Change of Control Offer).

The conversion option, the contingent put feature upon an Event of Default, and the contingent put feature upon a Change in Control should be bifurcated and recognized collectively as a compound embedded derivative at fair value at inception and at each quarterly reporting period.

A five percent penalty assessed for failure to timely file a registration statement to register the stock underlying the CD special warrants.

The Company valued the warrants granted using the Black-Scholes pricing model and determined that the value at grant date was approximately $424,000 USD (this includes the warrants issued as part of the penalty for failure to timely file the required registration statement under the indenture agreement). The significant assumptions used in the valuation are as follows:

Fair value of underlying common shares	$	1.78 to $2.10
Exercise price (converted to USD)	$	2.93
Dividend yield		-
Historical volatility		85	%
Risk free interest rate		1.4% to 1.9	%

35

The warrants are not indexed to the Company’s own stock under ASC 815, Derivatives and Hedging. As such, the warrants do not meet the scope exception in ASC 815-10-15-74(a) to derivative accounting and therefore were accounted for as a liability in accordance with the guidance in ASC 815. The warrant liability was recorded at the date of grant at fair value with subsequent changes in fair value recognized in earnings each reporting period.

In April 2020, the Company received approval of the holders Warrant holders of the warrants and the holders debenture holders of the Convertible Debentures to reprice the convertible securities issued in connection with the Company’s special warrant financing, which closed on December 27, 2018 and June 14, 2019. The share purchase warrants of the Company issued in connection with the financing will be repriced to C$1.50 per Common Share and the convertible debentures of the Company issued in connection with the financing will be repriced to C$1.15 per common share. Additionally, the Debenture holders have approved the following amendments to the terms of the convertible debentures: (i) an extension to the maturity date of the convertible debentures to three years from the date of issuance; and (ii) an amendment to permit the Company to force the conversion of the principal amount of the then outstanding convertible debentures and any accrued and unpaid interest thereof at the new conversion price on not less than June days’ prior written notice if the closing trading price of the shares of common stock of the Company’s common shares exceeds C$1.90 for a period of 10 consecutive trading days on the CSE. The Warrant holders have also approved the inclusion of an early acceleration feature in accordance with the policies of the Canadian Securities Exchange, permitting the Company to accelerate the expiry date of the warrants should the closing trading price of the Common Shares exceed C$1.87 for a period of 10 consecutive trading days on the CSE. As of June 30, 2021, the convertible debt related to the above debentures is $3,001 thousand.

The table below shows the warrant liability and embedded derivative liability recorded in connection with the Canaccord convertible notes and the subsequent fair value measurement during the nine months ended June 30, 2021 in USD, (in thousands):

	Warrant Liability			Derivative Liability
Balance at September 30, 2020	$	67		$	592
Change in fair value		(20	)		(223	)
Balance at December 31, 2020		47			369
Change in fair value		(18	)		(34	)
Balance at March 31, 2021		29			335
Change in fair value		(27	)		(199	)
Balance at June 30, 2021	$	2		$	136

7LV

During this quarter the Company tendered a repayment of the entire principal amount of its 10% unsecured convertible debentures, being C$3,260,000, through the issuance of 5,258,053 shares of common stock of the Corporation to the holders of the Debentures in accordance with the terms of the trust indenture between the Corporation and Olympia Trust Company dated December 27, 2018, as amended and supplemented. The Corporation also made a cash payment of approximately US$30,000 to the holders of the Debentures in respect of accrued and unpaid interest as of May 3, 2021, being the maturity date of the Debentures.

Driven

As part of the Agreement and Plan of Merger with Driven Deliveries the Company assumed a convertible promissory note with a principal of $1,050,000. The note accrues interest at a rate of 8% per annum. The note converts to the Company’s common stock at a rate of $0.50 per share. This note has an original issuance discount of $50,000. The proceeds of the note were paid out in two tranches, the first for $787,500 upon the execution of the note and the second for $262,500 30 days after the original funding. Each tranche will be due 12 months from the date of the funding. The Company can prepay the note as follows: if the note is outstanding for less than 90 days than 105% of the principal will be paid, at 91-120 day 110% of the principal will be paid, at 121-180 days 115% of the principal will be paid, and at 181-365 days 120% of the principal will be paid. So long as this note is outstanding, upon any issuance by the Company or any of its subsidiaries of any convertible debt security (whether such debt begins with a convertible feature or such feature is added at a later date) with any term more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to the holder in this Note, then the Company shall notify the holder of such additional or more favorable term and such term, at the holder’s option, shall become a part of this note and its supporting documentation. The types of terms contained in the other security that may be more favorable to the holder of such security include, but are not limited to, terms addressing conversion discounts, terms addressing maturity, conversion look back periods, interest rates, original issue discount percentages and warrant coverage. The Company notes the agreement included certain make-whole provisions related to the issuance of these shares which resulted in a liability. On February 26, 2021, the Company executed a conversion and satisfaction agreement resulting in the conversion of $831,110 principal balance of this promissory note. As of June 30, 2021, the outstanding balance on this obligation is $186,000, net of the debt discount of $21,802. As of the date of this filing the balance of this obligation has been fully converted.

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As part of the Agreement and Plan of Merger with Driven Deliveries the Company assumed a convertible promissory note with a principal of $50,000. The note accrues interest at a rate of 10% per annum. The note converts to the Company’s common stock at a rate of $0.50 per share. The interest on the promissory note is to be paid quarterly in arrears on the fifth day of each calendar quarter. The principal amount of the note is due on the maturity date of June 30, 2021. As of June 30, 2021, the outstanding balance on this obligation is $50,000.

The table below shows the net amount of convertible notes as of June 30, 2021 in USD (in thousands):

	June 30, 2021
Principal value of 8%, convertible at $0.91 at June 30, 2021, due December 27, 2021 including penalty provision of $155,239	$	2,954
Principal value of 10%, convertible at $1.32 at June 30, 2021, due May 30, 2021 (see Note 10), as of the date of this filing the balance of this obligation has been fully converted		-
Principal value of various convertible notes, convertible at $0.50 at June 30, 2021, due June – August, 2021		100
Debt discount		-
Cumulative foreign currency impact		47
Carrying value of convertible notes	$	3,101

Additionally, as part of the Agreement and Plan of Merger with Driven Deliveries the Company assumed a convertible promissory note with a principal of $805,000 payable to a related party. The note accrues interest at a rate of 10% per annum. The note converts to the Company’s common stock at a rate of $0.50 per share. Beginning January 1, 2021, $15,000 of principal is payable per month in addition to 50% of owed interest. Beginning April 1, 2021, 10% of the Company’s monthly cash flow, as defined will also be paid and applied to the principal of the note. The principal amount of the note along with accrued interest is due on the maturity date of June 1, 2025. As of June 30, 2021, the outstanding balance on this obligation is $805,000.

15. Fair Value Measurements

In accordance with ASC 820 (Fair Value Measurements and Disclosures), the Company uses various inputs to measure the outstanding warrants and certain embedded conversion feature associated with convertible debt on a recurring basis to determine the fair value of the liability. ASC 820 also establishes a hierarchy categorizing inputs into three levels used to measure and disclose fair value. The hierarchy gives the highest priority to quoted prices available in active markets and the lowest priority to unobservable inputs. An explanation of each level in the hierarchy is described below:

Level 1 – Unadjusted quoted prices in active markets for identical instruments that are accessible by the Company on the measurement date

Level 2 – Quoted prices in markets that are not active or inputs which are either directly or indirectly observable

Level 3 – Unobservable inputs for the instrument requiring the development of assumptions by the Company

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The following table classifies the Company’s liabilities measured at fair value on a recurring basis into the fair value hierarchy as of June 30, 2021 (in thousands):

	Fair value measured at June 30, 2021
			Quoted prices in		Significant other observable		Significant unobservable
			active markets		inputs		inputs
	Fair value		(Level 1)		(Level 2)		(Level 3)
Warrant liability	$	4,444	$	-	$	-	$	4,444
Embedded derivative liability		136		-		-		136
Total fair value	$	4,580	$	-	$	-	$	4,580

There were no transfers between Level 1, 2 or 3 during the quarter ended June 30, 2021.

The following table presents changes in Level 3 liabilities measured at fair value for the nine months ended June 30, 2021. Both observable and unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category. Unrealized gains and losses associated with liabilities within the Level 3 category include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long- dated volatilities) inputs (in thousands).

				Embedded
	Warrant Liability			Derivative Liability			Total
Balance – September 30, 2020	$	257		$	592		$	849
Warrants granted for services		11			-			11
Warrants issued pursuant to acquisition (see Note 10)		9,000			-			9,000
Change in fair value		(90	)		(208	)		(298	)
Balance – December 31, 2020		9,178			384			9,562
Change in fair value		6,278			(34	)		6,244
Warrants forfeited due to settlement agreement		(4,590	)		-			(4,590	)
Balance – March 31, 2021		10,866			350			11,216
Warrants issued pursuant to subscription agreement (see Note 13)		59			-			59
Final change due to completed conversion of debt		-			(15	)		(15	)
Change in fair value		(6,481	)		(199	)		(6,680	)
Balance – June 30, 2021	$	4,444		$	136		$	4,580

A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the Company’s warrant liabilities and embedded conversion feature that are categorized within Level 3 of the fair value hierarchy as of June 30, 2021 and September 30, 2020 is as follows:

	Warrant Liability
	As of			As of
	June 30, 2021			September 30, 2020
Strike price	$	0.48		$	0.36 to 2.96
Contractual term (years)		2.82			1 to 3
Volatility (annual)		85	%		100	%
Risk-free rate		0.9	%		0.28	%
Dividend yield (per share)		0	%		0	%

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	Embedded Derivative Liability
	As of June 30, 2021			As of September 30, 2020
Strike price	$	0.93		$	1.12
Contractual term (years)		1.1			1.5
Volatility (annual)		133	%		101	%
Risk-free rate		0.07	%		0.25	%
Dividend yield (per share)		0.00	%		0.00	%
Credit spread		14% to 16	%		11.21	%

The Company used a lattice based trinomial model developed by Tsiveriotis, K. and Fernades in which the three lattices incorporate (1) the Company’s underlying common stock price; (2) the value of the debt components of the convertible notes; and (3) the value of the equity component of the convertible notes. The main drivers of sensitivity for the model are volatility and the credit spread. The model used will vary by approximately 1.5% for a 4% change in volatility and will vary by less than 1% for each 1% change in credit spread.

16. Shareholders’ Equity

In 2016, the Company adopted a plan to allow the Company to compensate prospective and current employees, directors, and consultants through the issuance of equity instruments of the Company. The plan has an effective life of 10 years. The plan is administered by the board of directors of the Company until such time as the board transfers responsibility to a committee of the board. The plan is limited to issuing common shares of the Company up to 15% of the total shares then outstanding. No limitations exist on any other instruments issuable under the plan. In the event of a change in control of the Company, all unvested instruments issued under the plan become immediately vested.

Pursuant to the shareholders meeting on June 25, 2021, the Company has amended its certificate of incorporation to increase the number of authorized Company Common Shares from 300,000,000 to 750,000,000.

Preferred shares

The Company had two series of preferred shares designated with no preferred shares issued and outstanding as of June 30, 2021 and September 30, 2020.

Common shares

During the quarter ended December 31, 2020, the Company issued 1,868,750 shares of its common stock valued at $561,000 as stock-based compensation.

During the quarter ended December 31, 2020, the Company issued 1,569,570 shares of its common stock related to various consulting agreements for a fair value of approximately $589,000 or $0.38 per share.

During the quarter ended December 31, 2020, the Company cancelled 525,400 common shares related convertible notes.

During the quarter ended December 31, 2020, the Company converted $91,459 of its accrued interest related to convertible debt in exchange for 207,861 shares of the company’s common stock. The Company also issued 293,700 common shares in satisfaction of rent payments owed of $117,480.

As part of the Agreement and Plan of Merger with Driven Deliveries the Company issued 101,968,944 common shares.

During the quarter ended March 31, 2021, the Company issued 1,464,009 shares of its common stock valued at $868,250 as stock-based compensation.

During the quarter ended March 31, 2021, the Company issued 1,262,500 shares of its common stock related to various consulting agreements for a fair value of approximately $1,097,500 or $0.87 per share.

During the quarter ended March 31, 2021, the Company issued 300,000 shares of its common stock with a fair value of $210,000 on behalf of its Michigan joint venture partner into escrow pursuant to a security agreement related to the commercial lease.

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During the quarter ended March 31, 2021, the Company converted $1,975,965 of principal balance related to convertible debt in exchange for 4,054,206 shares of the company’s common stock. The Company also issued 164,366 common shares in satisfaction of interest payments owed of $121,631.

During the quarter ended March 31, 2021, the Company issued 500,000 shares of its common stock in connection with a settlement agreement for settlement liability of $5,439,855.

Pursuant to a prospectus the Company has been tendered $1.0 million and will issue 2,332,506 common shares.

During the quarter ended March 31, 2021, the Company raised $4,934,376 for the issuance of 12,097,065 shares of its common stock in connection with a private placement memorandum.

During the quarter ended June 30, 2021, the Company raised $630,000 for the issuance of 1,523,257 shares of its common stock in connection with a private placement memorandum.

During the quarter ended June 30, 2021, the Company issued 950,000 shares of its common stock related to various consulting agreements for a fair value of approximately $525,000 or $0.55 per share.

During the quarter ended June 30, 2021, the Company issued 581,750 shares of its common stock valued at $246,000 as stock-based compensation.

During the quarter ended June 30, 2021, the Company converted $2,838,000 of principal balance related to convertible debt in exchange for 5,426,053 shares of the company’s common stock.

During the quarter ended June 30, 2021, the Company issued 10,000 shares of its common stock in connection with the exercise of the company’s stock option plan.

During the quarter ended June 30, 2021, the Company issued 90,909 shares of its common stock valued at $40,000 in connection with commission expense.

During the quarter ended June 30, 2021, the Company cancelled 694,233 common shares related to investment.

During the quarter ended June 30, 2021, the Company issued 16,942,350 shares of its common stock valued at $7,278,000 pursuant to its Canadian prospectus.

17. Stock Based Compensation

Stock Options

The fair value of the Company’s common stock was based upon the publicly quoted price on the date that the final approval of the awards was obtained. The Company does not expect to pay dividends in the foreseeable future so therefore the expected dividend yield is 0%. The expected term for stock options granted with service conditions represents the average period the stock options are expected to remain outstanding and is based on the expected term calculated using the approach prescribed by the Securities and Exchange Commission’s Staff Accounting Bulletin for “plain vanilla” options for options granted in 2019. The expected term for stock options granted with performance and/or market conditions represents the period estimated by management by which the performance conditions will be met. The Company obtained the risk-free interest rate from publicly available data published by the Federal Reserve. The Company uses a methodology in estimating its volatility percentage from a computation that was based on a comparison of average volatility rates of similar companies to a computation based on the standard deviation of the Company’s own underlying stock price’s daily logarithmic returns. During the nine months ended June 30, 2021, pursuant to an employment agreement the Company issued 100,000 stock options.

The fair value of options granted during the nine months ended June 30, 2021, and 2020 were estimated using the following weighted-average assumptions:

Options:

	June 30, 2021			June 30, 2020
Exercise price	$	0.40		$	0.80 - $4.00
Expected term (years)		3.5			0.5 - 4.0
Expected stock price volatility		93	%		108.8% - 188.6	%
Risk-free rate of interest		0.28	%		1.56	%
Expected dividend rate		0	%		0%

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	Number of Shares			Weighted Average Exercise Price		Total Intrinsic Value		Weighted Average Remaining Contractual Life (in years)
Outstanding as of October 1, 2019		3,210,416		$	2.45	$	-		2.1
Granted		2,362,500		$	0.33	$	-		2.89
Outstanding as of September 30, 2020		5,572,916		$	1.77	$	-		1.6
Granted		100,000		$	0.40	$	-		2.8
Outstanding as of December 31, 2020		5,672,916		$	1.73	$	-		1.4
Granted		-		$	-	$	-		-
Outstanding as of March 31, 2021		5,672,916		$	1.73	$	-		1.18
Granted		250,000		$	0.40	$	-		3.94
Expired		(2,285,000	)	$	2.39	$	-		-
Outstanding as of June 30, 2021		3,637,916		$	2.13	$	-		1.57

A summary of option activity under the Company’s stock option plan for the nine months ended June 30, 2021 is presented below:

Estimated future stock-based compensation expense relating to unvested stock options was nominal as of June 30, 2021 and 2020. Weighted average remaining contractual life of the options is .9 years.

Stock-based Compensation Expense

Stock-based compensation expense for the three months ended June 30, 2021 and 2020 was comprised of the following (in thousands):

	Three months ended June 30,
	2021		2020
Stock grants	$	525	$	6
Stock options		353		-
Warrants		-		-
Total stock-based compensation	$	878	$	6

Stock-based compensation expense for the nine months ended June 30, 2021 and 2020 was comprised of the following (in thousands):

	Nine months ended June 30,
	2021		2020
Stock grants	$	3,642	$	1,193
Stock options		492		615
Warrants		150		105
Total stock-based compensation	$	4,284	$	1,913

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18. Commitments and contingencies

As noted earlier in Note 1, the Company, engages in a business that constitutes an illegal act under the laws of the United States Federal Government. This raises several possible issues which may impact the Company’s overall operations, not the least of which are related to traditional banking and other key operational risks. Since cannabis remains illegal on the federal level, and most traditional banks are federally insured, those financial institutions will not service cannabis businesses. In states where medical or recreational marijuana is legal, dispensary owners, manufacturers, and anybody who “touches the plant,” continue to face a host of operational hurdles. While local, state-chartered banks and credit unions now accept cannabis commerce, there remains a reluctance by traditional banks to do business with them. Aside from a huge inconvenience and the need to find creative ways to manage financial flow, payroll logistics, and payment of taxes, his also poses tremendous risks to controls as a result of operating a lucrative business in cash. This lack of access to traditional banking may inhibit industry growth. In the period ended June 30, 2021, the Company’s has accounts with a Florida bank and several credit unions located in Washington and California.

Despite the uncertainties surrounding the Federal government’s position on legalized marijuana, the Company does not believe these risks will have a substantive impact on its planned operations in the near term.

In July 2016, the Company entered into a 10-year lease for a commercial building from an unrelated third party in Springfield, Oregon. The lease requires the Company to pay a starting base rental fee of $7,033 plus an additional estimated $315 per month in real estate taxes in which the base rental fee escalates each year by approximately 2%. All taxes (including reconciling real estate taxes), maintenance and utilities are included at the end of each year as a one-time payment. In addition, the Company also remitted $14,000 for a security deposit to the landlord. No amounts have been recorded for deferred rent in these financial statements as the amount was deemed immaterial by the Company. The Company has subleased this space pursuant to a 10-year lease. On February 22, 2018, both parties executed a lease addendum that adds contiguous property for 12,322 square feet. The term commences November 1, 2017 and continues through November 31, 2026 at a starting rate of $3,525 a month that escalates after the first year. The Company subleases this property to a related party (see disclosures below under “Springfield Suites”). As of June 30, 2021, Company eliminates this rental income in consolidation.

In September 2019, the Company entered into a 4-year lease for the occupancy of the Company’s new corporate office located in Boca Raton, Florida. The lease requires the Company to pay a starting base rental fee of $4,285 per month with yearly increases thereafter. As of November 23, 2020, the Company added an additional 2,000 rentable square feet to its current lease under the same terms and conditions.

In January 2019, the Company entered into a 5-year lease for the occupancy of real estate and a building located in Hillsboro, Oregon. The lease requires the Company to pay a starting base rental fee of $9,696 per month with yearly increases thereafter.

Pursuant to the execution of a sale lease back agreement with the Company’s Wallis property, a/k/a Never Again, the Company in May 2021, entered into a 15-year lease for the Wallis commercial building from an unrelated third party located in New York, NY. The lease requires the Company to pay a starting base rental fee of $31,500 plus an additional estimated triple net charges per month including real estate taxes in which the base rental fee escalates each year by approximately 2.5%. All taxes (including reconciling real estate taxes), maintenance and utilities are included and paid monthly and reserved until payments are due. In addition, the Company also remitted $60,000 for a security deposit to the landlord.

As of June 30, 2021, the Company has acquired interests in several entities more fully described in Note 6 and Note 8. As part of those interests, the Company has commitments to fund the acquisition of licenses and permits to allow for the cultivation and sale of cannabis and related products in the United States. As of June 30, 2021, Company estimates that its investees will need up to approximately $200,000 to complete the acquisition of licenses and permits, to fund the buildout or expansion of facilities to fully operate in their respective cannabis markets, which will encompass several years of development.

In December 2020, the Company filed a preliminary short form document with the securities regulatory authorities in each of the provinces of British Columbia, Alberta and Ontario in connection with a marketed public offering of units of the Company. The Offering is being led by Canaccord Genuity Corp. Each Unit shall be comprised of one common share in the capital of the Company and one common share purchase warrant of the Company Each Warrant is exercisable into one common share at an exercise price to be determined in the context of the market. The final pricing of each Unit, the exercise price of each Warrant, and the term of each Warrant will be determined in the context of the market prior to the filing of the final short form document in respect of the Offering. The net proceeds raised under the Offering will be used for working capital and general corporate purposes.

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The Company, as of June 30, 2021 executed an Agency Agreement and in consideration of the services rendered by the Agent and in connection with the Offering, the Company has agreed to pay the Agent, on the Closing Date a commission equal to 7% of the gross proceeds of the Offering (including in respect of any exercise of the Over-Allotment Option, if any) payable in cash (the “Agent’s Commission”), subject to a reduced fee equal to 1% for Units ‎sold to certain purchasers designated by the Company on a president’s list (the “President’s ‎List”). In addition the Agent will receive ‎a number of share purchase warrants (the “Broker Warrants”) to purchase up to that number of shares of common stock of the Company (each, a “Broker Share”) that is equal to 7% of the aggregate number of Units issued under the Offering ‎(including any Additional Units (as hereinafter defined) issued upon exercise of the Over-Allotment Option, if any), subject to a ‎reduced number of Broker Warrants equal to 3.5% of the Units sold to purchasers on the President’s List‎, at an exercise price of $0.55 CAD per Broker Share, exercisable for a period of 24 months following the Closing Date. Pursuant to the Agency Agreement, the Company also agreed to pay to the Agent a corporate finance fee of $100,000 CAD (the “Corporate Finance Fee”), such Corporate Finance Fee to be payable as to $50,000 CAD in cash and as to $50,000 CAD by the issuance of 90,909 shares of common stock of the Company (the “Corporate Finance Fee Shares”) at the Offering Price. After deducting the Agent’s Commission ‎(assuming no President’s List purchasers)‎, the estimated expenses of the Offering of $350,000 CAD and the cash portion of the Corporate Finance Fee, which will be paid out of the general funds of the Company‎. The Company has also granted to the Agent an over-allotment option (the “Over-Allotment Option”), exercisable in whole or in part, at the Agent’s sole discretion, to purchase up to an additional 15% of the number of Units sold pursuant to the Offering, being up to an additional 2,590,909 Units in the case of the Maximum Offering (the “Additional Units”), each Additional Unit to be comprised of one Unit Share and one Warrant, at the Offering Price to cover the Agent’s over-allocation position, if any, and for market stabilization purposes. The Over-Allotment Option is exercisable, in whole or in part, at any time or times until the date that is 30 days immediately following the Closing Date. A purchaser who acquires Additional Units forming part of the Agent’s over-allocation position acquires such Additional Units under this Prospectus, regardless of whether the over-allocation position is ultimately filled through the exercise of the Over-Allotment Option or secondary market purchases. If the Over-Allotment Option is exercised in full, the total Price to the Public, Agent’s Commission and Net Proceeds to the Company (before deducting expenses of the Offering and assuming no President’s List purchasers) will be $9,200,000 CAD, $644,000 CAD and $8,556,000 CAD, respectively, in the case of the Minimum Offering and, ‎$10,925,000 CAD, $764,750 CAD and $10,160,250 CAD, respectively, in the case of the Maximum Offering. Pursuant to the terms of the Agency Agreement, all subscription funds received from subscribers will be retained in trust by the Agent until the Minimum Offering is obtained. Once the Minimum Offering has been obtained, the sale of the Units shall be completed in accordance with the Agency Agreement. To date, all funds have been subscribed and will be held in escrow for final approval.

During the quarter ended June 30, 2021 the Company entered into an offering led by Canaccord Genuity Corp. (the “Agent”) on a ‘commercially reasonable efforts’ basis and consisted of the sale of 16,926,019 Units (including 1,471,291 Units pursuant to the partial exercise of the over-allotment option by the Agent) at a price of C$0.55 per Unit for aggregate gross proceeds of C$10,309,210 (including C$809,210.05 pursuant to the partial exercise of the over-allotment option by the Agent). Each Unit is comprised of one share in the common stock of the Company (each a “Unit Share”) and one share purchase warrant of the Company (each, a “Warrant”). Each Warrant is exercisable to acquire one share in the common stock of the Company (each, a “Warrant Share”) until April 23, 2023 at a price per Warrant Share of C$0.68, subject to adjustment in certain events. The net proceeds raised under the Offering will be used for working capital and in furtherance of some or all of the business objectives described in the final short form prospectus of the Company dated April 19, 2021 (the “Final Prospectus”). The Company has given notice to list the Unit Shares and the Warrant Shares on the Canadian Securities Exchange (the “Exchange”). Listing will be subject to the Company fulfilling all of the requirements of the Exchange. Concurrent with the Offering, the Company also conducted a non-brokered offering in the United States of 972,092 units of the Company at a price of US$0.43 per unit for aggregate gross proceeds of approximately US$420,000 under the terms of a registration statement on Form S-1, as amended, filed with the United States Securities and Exchange Commission under the U.S. Securities Act on January 5, 2021.

Legal Proceedings

D.H. Flamingo, Inc. v. Department of Taxation, et. al.

On February 27, 2020, a subsidiary of the Company (YMY Ventures, LLC) was served with a Summons and Second Amended Complaint in a matter pending in the District Court of Clark County Nevada (Case # A-19-787004-B) which is styled “D.H. Flamingo, Inc. v. Department of Taxation, et. al.” (the DOT Litigation”). In this matter, the Plaintiff is alleging that certain parties (including YMY Ventures, LLC) received Conditional Recreational Marijuana Establishment Licenses, while certain other parties (including Plaintiff) were denied licenses. In the matter, Plaintiff seeks declaratory relief, injunctive relief, relief from violation of procedural and substantive due process, violation of equal protection, unjust enrichment, judicial review of the entire matter, together with a Petition for Writ of Mandamus. The Plaintiff seeks damages in an unspecified amount. Thereafter, on April 20, 2020, YMY Ventures, LLC filed a Notice of Non-Participation and Request for Dismissal. The Company believes it will ultimately be dismissed from the action without any liability exposure. Notwithstanding, there is no guarantee at this time that this will occur, and the ultimate result of the matter could potentially be the loss of YMY Ventures, LLC’s Conditional Recreational Marijuana Establishment License. The Company believes that this result would be highly unlikely and that the matter will be fully resolved as to YMY Ventures, LLC in the near term.

Chord Advisors, LLC v. Stem Holdings, Inc., et. al.

On June 5, 2020 Chord Advisors, LLC (“Chord”) filed a Complaint in the Circuit Court of the Fifteenth Judicial District in and for Palm Beach County, Florida (Case # 502020CA006097) alleging that Stem Holdings, Inc. owes Chord approximately $260,000 on account of fees for accounting services accrued pursuant to a Letter of Agreement dated October 2019. On July 6, 2020, the Company filed an Answer and Affirmative Defenses to the Complaint. As of April 16, 2021, a joint stipulation for the order of dismissal with prejudice was recorded.

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Lili Enterprises, LLC adv. YMY Ventures and OPCO, LLC

In July 2020, a dispute arose with the Company’s joint venture partner in connection with the Company’s operations in the State of Nevada. In this regard, the Company’s joint venture partner claims that it is owed certain amounts totaling approximately $307,500 pursuant to the joint venture Operating Agreement. On the other hand, the Company claims that the joint venture partner is in breach of its agreements with the Company and that the Company has heretofore advanced over $1 million in excess of its commitments under the Operating Agreement. The operative agreements require the disputes to be arbitrated. The parties have engaged an arbitrator and the matters are set for an arbitration hearing in February 2021. The Company has now settled with its joint venture partner with respect to the operating agreement, however, the Company is now in negotiating with its partner on recovering the amount of money spent in excess of its obligation for over funding the operation for tenant improvements.

Herbalcure vs Driven Deliveries, Inc.

On May 6, 2021, Herbalcure Corporation filed a Complaint for preliminary and permanent injunction in the Superior Court of California Central District County of Los Angeles (Case # 21STCV17099) alleging that Driven Deliveries owes Herbalcure Corporation approximately $1,700,000 on account of gross receipts tax, sales tax, and services accrued. Currently, the Company is in negotiations to mitigate the alleged amount owed. The Company settled the gross receipts and sales tax liability that was owed.

TrueFarma

This arbitration arose from the plaintiff’s claim that Driven adversely impacted their business. The total damages that the plaintiff is seeking is $1.0mm, which management believes has absolutely no merit. Additionally, management believes the Company can resolve this with a dismissal before costs are incurred.

19. Subsequent events

Subsequent to June 30, 2021, the Company entered into an Advisory Services Agreement, and as part of that agreement for services agreed to compensation of $12,500 a month, the issuance of 90,000 shares of the Company’s common stock and 750,000 options priced at $0.36.

Subsequent to June 30, 2021, the Company entered into a 12-month professional services agreement, and as part of that agreement for services agreed to issue 500,000 shares of the Company’s common stock.

Subsequent to June 30, 2021, the Company tendered the amount of $555,054 including principal and interest in payment of a note leaving a net principal balance totaling $352,862.

Subsequent to June 30, 2021, the Company issued 181,190 shares as payment in kind for six months of accrued interest on convertible notes.

Subsequent to June 30, 2021, the Company issued 866,000 for various consulting and service agreements.

Subsequent to June 30, 2021, Treevana Wellness, a Georgia based company was awarded a Medical Cannabis License of which the Company has a 2.5% equity investment in consideration for services.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Forward Looking Statements

This Interim Report on Form 10-Q contains, in addition to historical information, certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (“PLSRA”), Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) regarding Stem Holdings, Inc. (the “Company” or “Stem”, also referred to as “us”, “we” or “our”). Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. Forward-looking statements involve risks and uncertainties. Forward-looking statements include statements regarding, among other things, (a) our projected sales, profitability, and cash flows, (b) our growth strategies, (c) anticipated trends in our industries, (d) our future financing plans and (e) our anticipated needs for working capital. They are generally identifiable by use of the words “may,” “will,” “should,” “anticipate,” “estimate,” “plans,” “potential,” “projects,” “continuing,” “ongoing,” “expects,” “management believes,” “we believe,” “we intend” or the negative of these words or other variations on these words or comparable terminology. These statements may be found under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Description of Business,” as well as in this Form 10-Q generally. In particular, these include statements relating to future actions, prospective products or product approvals, future performance or results of current and anticipated products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, and financial results.

Any or all of our forward-looking statements in this report may turn out to be inaccurate. They can be affected by inaccurate assumptions we might make or by known or unknown risks or uncertainties. Consequently, no forward-looking statement can be guaranteed. Actual future results may vary materially as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” detailed in the Company’s Form 10 and S-1 registration statements and matters described in this Form 10-Q generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur. You should not place undue reliance on these forward-looking statements. The forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities laws, we undertake no obligation to publicly update any forward-looking statements, whether as the result of new information, future events, or otherwise. We intend that all forward-looking statements be subject to the safe harbor provisions of the PSLRA.

Update on COVID-19

On March 11, 2020, the World Health Organization 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.

COVID-19 has materially impacted our markets and sources of revenues, especially in the three and nine months ended May 31, 2020, including without limitation, as a result of the following:

● State and provincial mandates requiring the temporary closure of nonessential businesses, such as the temporary closure of adult recreational use stores in Massachusetts, Nevada, and Ontario, Canada, as well as the substantial closure of many retail storefronts that sell CBD;

● Restrictions and limitations on travel that have curtailed consumer demand in tourist-heavy markets, such as Nevada and Colorado, as well as a general negative effect on the ability of our sales force to meet with potential customers and secure new orders; and

● Our customers increasingly consolidating orders and purchasing less frequently in response to general macroeconomic and business uncertainty, creating a more volatile and irregular purchasing and revenue recognition pattern.

While the U.S. has recently seen a significant decline in new cases and states are loosening their shutdown and social distancing protocols, resulting in a wide reopening of adult recreational use and medical stores as well as retail stores that sell CBD, COVID-19 continues to affect the Company’s sources of revenue in Canada, particularly in provinces such as Ontario that were still under lockdown until recently.

We continue to be impacted by business and supply chain interruptions resulting from the COVID-19 pandemic. The COVID-19 pandemic has also resulted in increased air freight costs incurred by us, which we are passing on to our customers via a surcharge, as well as general difficulties in securing space on incoming freight from international vendors in order to make room for essential items.

We continue to experience unexpected and uncontrollable delays with our international supply shipments due to a significant increase in shipments to U.S. ports, less cargo being shipped by air, and a general shortage of containers. While these delays have moderately improved in recent months, we, along with many other importers of goods across all industries, continue to experience severe congestion and extensive wait times for carriers at ports across the United States. In addition, restrictions imposed by local, state and federal agencies due to the COVID-19 pandemic has led to reduced personnel of importers, government staff and others in our supply chain. We have been working diligently with our network of freight partners and suppliers to expedite delivery dates and provide solutions to reduce further impact and delays. However, we are unable to determine the full impact of these delays as they are out of our control.

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We have also experienced, and could continue to experience, delays in orders from vendors, particularly in countries where the pandemic has had a significant impact, such as in China.

While the Company is continuing to navigate the financial, operational, and personnel challenges presented by the COVID-19 pandemic, the full extent of the impact of COVID-19 on our operational and financial performance will depend on future developments, including the duration and spread of the pandemic, the potential uncertainty related to and proliferation of new strains, and related actions taken by the U.S. government, state and local government officials, and international governments to prevent disease spread, all of which are uncertain, out of our control and cannot be predicted at this time.

For the three and nine months ended June 30, 2021, the financial statements have been prepared by management in accordance with the standards of the Public Company Accounting Oversight Board (United States). For the three and nine months ended June 30, 2021, the unaudited interim financial statements have been prepared by management in accordance with the condensing rules of the United States Securities and Exchange Commission.

Results of Operations

	For the Three Months Ended June 30,						Change
($ in thousands)	2021			2020			$			%
Gross Revenue	$	12,436		$	6,111			6,325			104	%
Discounts and returns		(1,850	)		(913	)		(937	)		(103	)%
Cost of goods sold		9,085			3,420			5,665			166	%
Consulting fees		623			124			499			402	%
Professional fees		927			257			670			261	%
General and administration		4,510			2,176			2,334			107	%
Other income (expenses), net		7,148			(167	)		7,315			4380	%
Loss from equity method investees		-			(1	)		1			100	%
Net income (loss)	$	2,589		$	(947	)

Comparison of the results of operations for the three months ended June 30, 2021 compared to the three months ended June 30, 2020

The Company had net revenues during the three months ended June 30, 2021 of $10,586 compared with $5,198 for the comparable period of 2020, the increase in revenue was primarily related to the increase due to the acquisitions of both Seven Leaf and Driven and the consolidation of an additional nine related entities.

Cost of goods for the three months ended June 30, 2021, amounted to approximately $9,085 compared to $3,420 in the comparable period of the prior year. These costs include both the cost of finished product purchased for retail and the cost of cultivation and processing for the grow facilities and sold at the wholesale level.

In the three months ended June 30, 2021, we incurred consulting costs of approximately $623 compared to approximately $124 in the comparable period of the prior year. The increase in consulting fees was attributed to an increase of stock-based expenses for consultants. We expended those fees as we have yet to build up a significant employee base and currently outsource certain tasks to consultants.

In the three months ended June 30, 2021, we incurred professional fees of approximately $927 compared to approximately $257 in the comparable period of the prior year. Those fees are primarily for legal, accounting, and related services that pertains to our being a public company in both the United States and Canada. We expect as we grow our operations these costs will continue to grow.

In the three months ended June 30, 2021, we incurred general and administrative costs of approximately $4,510 compared to approximately $2,176. This increase relates primarily to an increase in costs related to the inclusion of certain entities due to their being variable interest entities plus the acquisition of entities and related expenses.

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	For the Nine Months Ended June 30,						Change
($ in thousands)	2021			2020			$			%
Gross Revenue	$	31,182		$	10,315			20,867			202	%
Discounts and returns		(4,609	)		(1,498	)		(3,111	)		(208	)%
Cost of goods sold		20,341			6,062			14,279			236	%
Consulting fees		2,787			2,031			756			37	%
Professional fees		2,836			1,780			1,056			59	%
General and administration		11,215			6,234			4,981			80	%
Other income (expenses), net		1,290			(1,490	)		2,780			187	%
Loss from equity method investees		-			(253	)		253			100	%
Net loss	$	(9,316	)	$	(9,033	)

Comparison of the results of operations for the nine months ended June 30, 2021 compared to the nine months ended June 30, 2020

The Company had net revenues during the nine months ended June 30, 2021 of $26,573 compared with $8,817 for the comparable period of 2020, the increase is primarily due to the acquisitions of Driven, Yerba Buena, Seven Leaf and the consolidation of four related entities.

Cost of goods for the nine months ended June 30, 2021, amounted to approximately $20,341 compared to $6,062 in the comparable period of the prior year. These costs include both the cost of finished product purchased for retail and the cost of cultivation and processing for the grow facilities and sold at the wholesale level.

In the nine months ended June 30, 2021, we incurred consulting costs of $2,787 compared to $2,031 in the comparable period of the prior year. We mitigated our consulting expenses which were stock based the prior year.

In the nine months ended June 30, 2021, we incurred professional fees of approximately $2,836 compared to $1,780 in the comparable period of the prior year. Those fees are primarily for legal, accounting and related services relating to our being a public company in both the United States and Canada. We expect as we grow our operations these costs will continue to grow.

In nine months ended June 30, 2021, we incurred general and administrative costs of approximately $11,215 compared to $6,234, these costs include payroll, depreciation and amortization, insurance, rent expense and other general costs. We expect that these costs will increase as we increase our operations.

LIQUIDITY AND FINANCIAL CONDITION

Liquidity and Capital Resources

The Company had cash of $9,106 as of June 30, 2021. The following trends are reasonably likely to result in changes in our liquidity over the near to long term:

● An increase in working capital requirements to finance our entry into the cultivation, production, and sale of cannabis;

● Acquisition and buildout of rental properties;

● Addition of administrative and sales personnel as the business grows and

● The cost of being a public company.

Subsequent to June 30, 2021, we have not raised any additional funds in our private placements. Our efforts to raise additional capital are ongoing and we expect to continue our efforts in the following quarters.

With respect to the company’s investments in the projects pertaining to the equity method investee’s and affiliates, we have committed that we need to spend an estimated $2 million in expansion, buildout and improvements potentially in the near term. These capital expenditures are contingent upon several factors including the Company obtaining financing for the development of the properties and the construction of the tenant improvements in such amount and on such terms and provisions as are acceptable to the Company.

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The Company has entered into a joint venture in which the Company has extended a $2.5 million line of credit for Community Growth Partners Holdings, Inc. (“CGP”). The Company has funded up to $880k of its obligation to fund the requests of CGP and has currently converted the note into 14% equity in the joint venture. The line of credit has been terminated and is no longer active.

As of December 23, 2019 has entered into a stock purchase agreement with Attollo Capital Holdings A, LLC (the “Purchaser”) pursuant to which Stem will issue 11,764,706 shares of preferred stock of the Company (the “Preferred Stock”) at a purchase price of US$0.85 per share of Preferred Stock (the “Original Issue Price”) for gross proceeds to the Company of approximately US$10,000,000 (the “Investment”). As of the date of this filing, the Company has not yet closed on this transaction.

We have used our available funds to fund our operating expenses, pay our obligations, acquire and develop rental properties, and grow our company. We need to raise significant additional capital or debt financing to acquire new properties, to develop existing properties, and to assure we have sufficient working capital for our ongoing operations and debt obligations. There is no guarantee that such funding will be available to the Company at a viable cost, if at all.

Cash Flow

For the nine months ended June 30, 2021 and 2020

Net cash flows used in operating activities was $8,429 for the nine months ended June 30,2021 as compared net cash flow used in operating activities to $4,053 for the nine months ended June 30, 2020, a change of $4,073.

● Net cash flow used in operating activities for the nine months ended June 30, 2021 primarily reflected a net loss of $9,146 adjusted for the add-back of non-cash items consisting of depreciation and amortization of $3,745, stock-based compensation expense of $4,284, non-cash rent and interest $331, amortization of debt discount of $606, a loss of $170 from equity method investee and other adjustments of $209 offset by the change in foreign currency translation of $29, a gain in sale of equity method investments of $200, and a gain on the sale of a property of $766, a change in the fair value of derivative and warrant liabilities of $675, a change in operating assets and liabilities consisting of an decrease in accounts payable and accrued expenses of $3,248, an increase in prepaid expenses and other operating assets of $3,540.

● Net cash flow provided by investing activities for the nine months ended June 30, 2021 amounted to $421 and consisted of $425 used in the purchase of property and equipment, $179 for project costs and an additional $560 was used in investments, offset by cash received related to the sale of a property of $1,505 and a net of $80 related to investment in equity method investees.

● Net cash provided by financing activities was $14,985 for the nine months ended June 30, 2021 as compared to $3,377 for the nine months ended June 30, 2020. During the nine months ended June 30, 2021, we received proceeds from the issuance of common shares of $17,713 offset by $1,697 of repayment on notes payable was incurred and $1,031 for the forgiveness of debt.

CRITICAL ACCOUNTING POLICIES

Basis of preparation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The condensed financial statements included herein are unaudited. Such financial statements, in the opinion of management, contain all adjustments necessary to present fairly the financial position and results of operations as of and for the periods indicated. All such adjustments are of a normal recurring nature. These interim results are not necessarily indicative of the results to be expected for the year ending September 30, 2021 or for any other period. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, and because of this, for further information, readers should refer to the financial statements and footnotes included in our Form 10-K for the fiscal year ended September 30, 2020 filed with the Securities and Exchange Commission on December 28, 2020. The Company believes that the disclosures are adequate to make the interim information presented not misleading.

Principles of Consolidation

The Company’s policy is to consolidate all entities that it controls by ownership of a majority of the outstanding voting stock. In addition, the Company consolidates entities that meet the definition of a variable interest entity (“VIE”) for which it is the primary beneficiary. The primary beneficiary is the party who has the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and who has an obligation to absorb losses of the entity or a right to receive benefits from the entity that could potentially be significant to the entity. For consolidated entities that are less than wholly owned, the third party’s holding of equity interest is presented as noncontrolling interests in the Company’s Consolidated Balance Sheets and Consolidated Statements of Changes in Stockholders’ Equity. The portion of net loss attributable to the noncontrolling interests is presented as net loss attributable to noncontrolling interests in the Company’s Consolidated Statements of Operations.

In August 2016, the Company and certain shareholders of the Company entered into a “Multi Party” Agreement, in which the Company became obligated to lease or acquire three separate real estate assets, and separately, if certain events occur, additional real estate assets held by entities related to those shareholders. The Agreement also gives the Company the right of first refusal in regard to certain properties owned by the persons and entities affiliated with the parties of the Agreement so long as certain targets are met. In the quarter ended June 30, 2019, the Company issued 12,500,000 shares of its common stock for the acquisition of Consolidated Ventures of Oregon, LLC (“CVO”) and Opco Holdings, LLC (“Opco”) which comprise the entities within the Multi Party Agreement. On September 6, 2020, the Company received the regulatory approval to transfer all the licenses held under both CVO and Opco. Subsequently, the Company has completed the acquisition and as a result, the Company is no longer engaged primarily in property rental operations but has taken over the operations of its primary renters, which is the cultivation, production and sale of cannabis and related productions. Since CVO and Opco are related to the Company, the acquisition was not accounted for as a business combination at fair value under the codification sections of ASC 805. The assets and liabilities were transferred to the Company at their historical cost and the Company has included the operations of Opco and CVO for all periods presented for this period ended June 30, 2021.

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The accompanying condensed consolidated financial statements include the accounts of Stem Holdings, Inc. and its wholly owned subsidiaries, Stem Holdings Oregon, Inc., Stem Holdings IP, Inc., Opco, LLC, Stem Holdings Agri, Inc., Opco Holdings, Inc., 7LV USA Corporation, and Consolidated Ventures of Oregon, Inc., and Driven Deliveries, Inc. In addition, the Company has consolidated YMY Ventures, WCV, LLC and NVD RE, Inc. under the variable interest requirements.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The most significant estimates included in these condensed consolidated financial statements are those associated with the assumptions used to value equity instruments, valuation of its long live assets for impairment testing, valuation of intangible assets, and the valuation of inventory. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable given the circumstances that exist at the time the financial statements are prepared. Actual results may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.

Revenue recognition

The Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (Topic 606), the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Revenue for the Company’s product sales has not been adjusted for the effects of a financing component as the Company expects, at contract inception, that the period between when the Company’s transfers control of the product and when the Company receives payment will be one year or less. Product shipping and handling costs are included in cost of product sales.

Effective October 1, 2019, the Company adopted the requirements of ASU 2014-09 (ASC 606) and related amendments, using the modified retrospective method. The adoption of ASC 606 did not have a significant impact on the Company’s revenue recognition policy as revenues related to wholesale and retail revenue are recorded upon transfer of merchandise to the customer, which was the effective policy under ASC 605 previously.

The following policies reflect specific criteria for the various revenue streams of the Company:

Cannabis Dispensary, Cultivation and Production

Revenue is recognized upon transfer of retail merchandise to the customer upon sale transaction, at which time its performance obligation is complete. Revenue is recognized upon delivery of product to the wholesale customer, at which time the Company’s performance obligation is complete. Terms are generally between cash of delivery to 30 days for the Company’s wholesale customers.

The Company’s sales environment is somewhat unique, in that once the product is sold to the customer (retail) or delivered (wholesale) there are essentially no returns allowed or warranty available to the customer under the various state laws.

Delivery

1) Identify the contract with a customer

The Company sells retail products directly to customers. In these sales there is no formal contract with the customer. These sales have commercial substance and there are no issues with collectability as the customer pays the cost of the goods at the time of purchase or delivery.

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2) Identify the performance obligations in the contract

The Company sells its products directly to consumers. In this case these sales represent a performance obligation with the sales and any necessary deliveries of those products.

3) Determine the transaction price

The sales that are done directly to the customer have no variable consideration or financing component. The transaction price is the cost that those goods are being sold for plus any additional delivery costs.

4) Allocate the transaction price to performance obligations in the contract

For the goods that the Company sells directly to customers, the transaction price is allocated between the cost of the goods and any delivery fees that may be incurred to deliver to the customer.

5) Recognize revenue when or as the Company satisfies a performance obligation

For the sales of the Company’s own goods the performance obligation is complete once the customer has received the product.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

As noted earlier in Note 1, the Company, engages in a business that constitutes an illegal act under the laws of the United States Federal Government. This raises several possible issues which may impact the Company’s overall operations, not the least of which are related to traditional banking and other key operational risks. Since cannabis remains illegal on the federal level, and most traditional banks are federally insured, those financial institutions will not service cannabis businesses. In states where medical or recreational marijuana is legal, dispensary owners, manufacturers, and anybody who “touches the plant,” continue to face a host of operational hurdles. While local, state-chartered banks and credit unions now accept cannabis commerce, there remains a reluctance by traditional banks to do business with them. Aside from a huge inconvenience and the need to find creative ways to manage financial flow, payroll logistics, and payment of taxes, this also poses tremendous risks to controls as a result of operating a lucrative business in cash. This lack of access to traditional banking may inhibit industry growth. In the period ended December 31, 2019, the Company’s accounts with a major money center bank were closed as the bank would not allow the Company to continue to use its banking network.

Despite the uncertainties surrounding the Federal government’s position on legalized marijuana, the Company does not believe these risks will have a substantive impact on its planned operations in the near term.

As of June 30, 2021, the Company has acquired interests in several entities. As part of those interests, the Company has commitments to fund the acquisition of licenses and permits to allow for the cultivation and sale of cannabis and related products in the United States. As of June 30, 2021, Company estimates that its investees will need up to approximately $2 million to complete the acquisition of licenses and permits, to fund the buildout or expansion of facilities to fully operate in their respective cannabis markets, which will encompass several years of development.

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OFF-BALANCE SHEET ARRANGEMENTS

The Company does not have any off-balance sheet arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures

We are required to maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer (also our principal executive officer) and our chief financial officer (also our principal financial and accounting officer) to allow for timely decisions regarding required disclosure.

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company’s management, including the Company’s Chief Executive Officer (“CEO”) (the Company’s principal executive officer) and Chief Financial Officer (“CFO”) (the Company’s principal financial and accounting officer), has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were not effective as of June 30, 2021 to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. The principal basis for this conclusion is the lack of segregation of duties within our financial function and the lack of an operating Audit Committee.

(b) Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:

● Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;

● Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

● Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

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We carried out an assessment, under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of the design and operation of our internal controls over financial reporting, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as of June 30, 2021. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework (2013). Based on that assessment and on those criteria, our CEO and CFO concluded that our internal control over financial reporting was not effective as of June 30, 2021. The principal basis for this conclusion is (i) failure to engage sufficient resources regarding our accounting and reporting obligations during our startup and (ii) failure to fully document our internal control policies and procedures.

This quarterly report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only the management’s report in this quarterly report.

The Company’s management, including the Company’s CEO and CFO, does not expect that the Company’s internal control over financial reporting will prevent all errors and all fraud. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate.

(c) Changes in Internal Controls

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) under the Exchange Act) during the fiscal period to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

The Company’s management, including the Company’s CEO and CFO, does not expect that the Company’s internal control over financial reporting will prevent all errors and all fraud. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

D.H. Flamingo, Inc. v. Department of Taxation, et. al.

On February 27, 2020, a subsidiary of the Company (YMY Ventures, LLC) was served with a Summons and Second Amended Complaint in a matter pending in the District Court of Clark County Nevada (Case # A-19-787004-B) which is styled “D.H. Flamingo, Inc. v. Department of Taxation, et. al.” (the DOT Litigation”). In this matter, the Plaintiff is alleging that certain parties (including YMY Ventures, LLC) received Conditional Recreational Marijuana Establishment Licenses, while certain other parties (including Plaintiff) were denied licenses. In the matter, Plaintiff seeks declaratory relief, injunctive relief, relief from violation of procedural and substantive due process, violation of equal protection, unjust enrichment, judicial review of the entire matter, together with a Petition for Writ of Mandamus. The Plaintiff seeks damages in an unspecified amount. Thereafter, on April 20, 2020, YMY Ventures, LLC filed a Notice of Non-Participation and Request for Dismissal. The Company believes it will ultimately be dismissed from the action without any liability exposure. Notwithstanding, there is no guarantee at this time that this will occur, and the ultimate result of the matter could potentially be the loss of YMY Ventures, LLC’s Conditional Recreational Marijuana Establishment License. The Company believes that this result would be highly unlikely and that the matter will be fully resolved as to YMY Ventures, LLC in the near term.

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Chord Advisors, LLC v. Stem Holdings, Inc., et. al.

On June 5, 2020 Chord Advisors, LLC (“Chord”) filed a Complaint in the Circuit Court of the Fifteenth Judicial District in and for Palm Beach County, Florida (Case # 502020CA006097) alleging that Stem Holdings, Inc. owes Chord approximately $260,000 on account of fees for accounting services accrued pursuant to a Letter of Agreement dated October 2019. On July 6, 2020, the Company filed an Answer and Affirmative Defenses to the Complaint. As of April 16, 2021, a joint stipulation for the order of dismissal with prejudice was recorded.

Lili Enterprises, LLC adv. YMY Ventures and OPCO, LLC

In July 2020, a dispute arose with the Company’s joint venture partner in connection with the Company’s operations in the State of Nevada. In this regard, the Company’s joint venture partner claims that it is owed certain amounts totaling approximately $307,500 pursuant to the joint venture Operating Agreement. On the other hand, the Company claims that the joint venture partner is in breach of its agreements with the Company and that the Company has heretofore advanced over $1 million in excess of its commitments under the Operating Agreement. The operative agreements require the disputes to be arbitrated. The parties have engaged an arbitrator and the matters are set for an arbitration hearing in February 2021. The Company has now settled with its joint venture partner with respect to the operating agreement, however, the Company is now in negotiating with its partner on recovering the amount of money spent in excess of its obligation for over funding the operation for tenant improvements.

Herbalcure vs Driven Deliveries, Inc.

On May 6, 2021, Herbalcure Corporation filed a Complaint for preliminary and permanent injunction in the Superior Court of California Central District County of Los Angeles (Case # 21STCV17099) alleging that Driven Deliveries owes Herbalcure Corporation approximately $1,700,000 on account of gross receipts tax, sales tax, and services accrued. Currently, the Company is in negotiations to mitigate the alleged amount owed. The Company settled the gross receipts and sales tax liability that was owed.

TrueFarma

This arbitration arose from the plaintiff’s claim that Driven adversely impacted their business. The total damages that the plaintiff is seeking is $1.0mm, which management believes has absolutely no merit. Additionally, management believes the Company can resolve this with a dismissal before costs are incurred.

ITEM 1A. RISK FACTORS

Smaller reporting companies are not required to provide the information required by this item. Notwithstanding, in addition to risk factors highlighted in previous reports, the Company adds the following additional risk factor:

We could be substantially affected by the Coronavirus (COVID-19) pandemic

In December 2019, an outbreak of a novel strain of coronavirus (COVID-19) originated in Wuhan, China, and has since spread to a number of other countries, including the United States. On March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic. In addition, as of the time of the filing of this quarterly report on Form 10-Q, several states in the United States have declared states of emergency, and several countries around the world, including the United States, have taken steps to restrict travel. The existence of a worldwide pandemic, the fear associated with COVID-19, or any, pandemic, and the reactions of governments in response to COVID-19, or any, pandemic, to regulate the flow of labor and products and impede the travel of personnel, may impact our ability to conduct normal business operations, which could adversely affect our results of operations and liquidity. Disruptions to our supply chain and business operations disruptions to our retail operations and our ability to collect rent from the properties which we own, personnel absences, or restrictions on the shipment of our or our suppliers’ or customers’ products, any of which could have adverse ripple effects throughout our business. If we need to close any of our facilities or a critical number of our employees become too ill to work, our production ability could be materially adversely affected in a rapid manner. Similarly, if our customers experience adverse consequences due to COVID-19, or any other, pandemic, demand for our products could also be materially adversely affected in a rapid manner. Global health concerns, such as COVID-19, could also result in social, economic, and labor instability in the markets in which we operate. Any of these uncertainties could have a material adverse effect on our business, financial condition or results of operations.

53

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table sets forth all securities issued by Stem between October 1, 2020 and June 30, 2021:

	Security	No. Shares
Services	Common Stock		3,872,979
Compensation	Common Stock		3,914,509
Issuance of common stock related to cash sales	Common Stock		6,787,253
Issuance of common stock related to option exercise	Common Stock		10,000
Interest and converted notes	Common Stock		10,146,186
Issuance of common stock in connection with deposit for an asset acquisition	Common Stock		300,000
Issuance of common stock related to settlement payment	Common Stock		500,000
Cancelled	Common Stock		(1,219,633	)
Total			24,311,294

All of the aforementioned shares were issued by the Company pursuant to an exemption from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibit No.	Description
31.1/31.2	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(a) and Rule15d- 14(a) of the Securities Exchange Act of 1934, as amended
32.1/32.2	Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

54

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	STEM HOLDINGS, INC.
August 16, 2021	By:	/s/ Adam Berk
		Adam Berk, President and Chief Executive Officer

55

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

I, Adam Berk, certify that:

1.	I have reviewed this Form 10-Q for the period ended June 30, 2021 of Stem Holdings, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 16, 2021

/s/ Adam Berk

Adam Berk

Principal Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

I, Steve Hubbard, certify that:

1.	I have reviewed this Form 10-Q for the period ended June 30, 2021 of Stem Holdings, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 16, 2021

/s/ Steve Hubbard

Steve Hubbard

Principal Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATIONS PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officer of Stem Holdings, Inc., a Nevada corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:

The quarterly report on Form 10-Q for the period ended June 30, 2021 (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 16, 2021
	/s/ Adam Berk
	Adam Berk
	Principal Executive Officer

A signed original of this written statement required by Section 906 has been provided to STEM HOLDINGS, INC. and will be retained by STEM HOLDINGS, INC. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

CERTIFICATIONS PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officer of Stem Holdings, Inc., a Nevada corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:

The quarterly report on Form 10-Q for the period ended June 30, 2021 (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 16, 2021
	/s/ Steve Hubbard
	Steve Hubbard
	Principal Financial and Accounting Officer

A signed original of this written statement required by Section 906 has been provided to STEM HOLDINGS, INC. and will be retained by STEM HOLDINGS, INC. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Cover - shares	9 Months Ended
	Jun. 30, 2021	Aug. 16, 2021
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Jun. 30, 2021
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2021
Current Fiscal Year End Date	--09-30
Entity File Number	000-55751
Entity Registrant Name	STEM HOLDINGS, INC.
Entity Central Index Key	0001697834
Entity Tax Identification Number	61-1794883
Entity Incorporation, State or Country Code	NV
Entity Address, Address Line One	2201 NW Corporate Blvd
Entity Address, Address Line Two	Suite 205
Entity Address, City or Town	Boca Raton
Entity Address, State or Province	FL
Entity Address, Postal Zip Code	33431
City Area Code	(561)
Local Phone Number	948-5410
Title of 12(b) Security	Common Stock par value $0.001
Trading Symbol	STMH
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Elected Not To Use the Extended Transition Period	true
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		221,762,330

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2021	Sep. 30, 2020
Current assets
Cash and cash equivalents	$ 9,106	$ 2,129
Accounts receivable, net of allowance for doubtful accounts	431	455
Note receivable	627	434
Inventory	2,831	1,795
Prepaid expenses and other current assets	4,136	452
Total current assets	17,131	5,265
Property and equipment, net	13,098	16,354
Investment in equity method investees	1,388	767
Investments in affiliates	2,209	1,718
Deposits and other assets	13	13
Note receivable, long term	355	355
Right of use asset	6,927
Intangible assets, net	59,095	13,269
Goodwill	18,061	7,221
Due from related party	28	55
Total assets	118,305	45,017
Current liabilities
Accounts payable and accrued expenses	8,131	2,983
Convertible notes, net	3,101	5,306
Convertible notes, net related party	805
Short term notes and advances	686	3,425
Settlement payable	95
Acquisition notes payable	538	665
Contingent acquisition liability		1,072
Due to related party	1	200
Derivative liability	136	592
Lease liability	1,509
Warrant liability	4,444	257
Total current liabilities	19,446	14,500
Lease liability - long term	5,401
Long-term debt, mortgages	3,200	3,685
Total liabilities	28,047	18,185
Commitments and contingencies (Note 18)
Shareholders’ equity
Common stock, $0.001 par value; 750,000,000 shares authorized; 220,648,392 and 68,258,745 shares issued, issuable and outstanding as of June 30, 2021 and September 30, 2020, respectively	220	68
Additional paid-in capital	149,605	76,310
Stock subscription receivable	(735)
Accumulated deficit	(60,531)	(51,386)
Total Stem Holdings stockholder’s equity	88,559	24,992
Noncontrolling interest	1,699	1,840
Total shareholders’ equity	90,258	26,832
Total liabilities and shareholders’ equity	118,305	45,017
Series A Preferred Stock [Member]
Shareholders’ equity
Preferred stock, value
Series B Preferred Stock [Member]
Shareholders’ equity
Preferred stock, value

XML

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2021	Sep. 30, 2020
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	750,000,000	750,000,000
Common stock, shares issued	220,648,392	68,258,745
Common stock, shares outstanding	220,648,392	68,258,745
Series A Preferred Stock [Member]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	50,000,000	50,000,000
Preferred stock, shares outstanding	0	0
Series B Preferred Stock [Member]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	50,000,000	50,000,000
Preferred stock, shares outstanding	0	0

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Income Statement [Abstract]
Revenues	$ 10,586	$ 5,198	$ 26,573	$ 8,817
Cost of goods sold	9,085	3,420	20,341	6,062
Gross Profit	1,501	1,778	6,232	2,755
Operating expenses:
Consulting fees	623	124	2,787	2,031
Professional fees	927	257	2,836	1,780
General and administration	4,510	2,176	11,215	6,234
Total operating expenses	6,060	2,557	16,838	10,045
Loss from operations	(4,559)	(779)	(10,606)	(7,290)
Other income (expenses), net
Interest expense	(337)	(753)	(1,598)	(2,024)
Change in fair value of derivative liability	199	(570)	441	(428)
Change in fair value of warrant liability	6,422	969	234	754
Foreign currency exchange gain (loss)	50	187	29	208
Other income	814		2,184
Total other income (expense)	7,148	(167)	1,290	(1,490)
Loss from equity method investees		(1)		(253)
Net income (loss)	2,589	(947)	(9,316)	(9,033)
Net loss attributable to non-controlling interest	66	121	170	466
Net income (loss) attributable to Stem Holdings	$ 2,655	$ (826)	$ (9,146)	$ (8,567)
Basic net income (loss) per share attributable to Stem Holdings	$ 0.01	$ (0.01)	$ (0.07)	$ (0.15)
Diluted net income (loss) per share attributable to Stem Holdings	$ 0.01	$ (0.01)	$ (0.07)	$ (0.15)
Weighted-average shares outstanding
Basic	208,137,694	66,410,900	138,026,212	58,762,599
Diluted	285,450,257	66,410,900	138,026,212	58,762,599

XML

Consolidated Statement of Changes In Stockholders' Equity (Unaudited) - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Subscription Receivable [Member]	Retained Earnings [Member]	Parent [Member]	Noncontrolling Interest [Member]	Total
Beginning balance, value at Sep. 30, 2019	$ 52	$ 61,202		$ (40,384)	$ 20,870	$ 2,724	$ 23,594
Balance, shares at Sep. 30, 2019	52,254,941
Issuance of common stock in connection with consulting agreement		4			4		4
Issuance of common stock in connection with consulting agreement, shares	5,000
Stock based compensation	$ 1	497			498		498
Stock based compensation, shares	100,000
Cancellation of common stock related to convertible notes, shares	5,426,053
Issuance of common stock in connection with asset acquisitions		394			394		394
Acquisition of Driven Deliveries, Inc., shares	394,270
Impairment on investment in South African Ventures
Net loss				(3,077)	(3,077)	(235)	(3,312)
Ending balance, value at Dec. 31, 2019	$ 53	62,097		(43,461)	18,689	2,489	21,178
Balance, shares at Dec. 31, 2019	52,754,211
Beginning balance, value at Sep. 30, 2019	$ 52	61,202		(40,384)	20,870	2,724	23,594
Balance, shares at Sep. 30, 2019	52,254,941
Issuance of common stock related to interest expense							(953)
Net loss							(9,033)
Ending balance, value at Jun. 30, 2020	$ 66	75,369		(48,952)	26,484	2,184	28,668
Balance, shares at Jun. 30, 2020	66,616,526
Beginning balance, value at Dec. 31, 2019	$ 53	62,097		(43,461)	18,689	2,489	21,178
Balance, shares at Dec. 31, 2019	52,754,211
Issuance of common stock in connection with consulting agreement	$ 1	1,548			1,549		1,549
Issuance of common stock in connection with consulting agreement, shares	970,416
Stock based compensation		47			47		47
Stock based compensation, shares	303,756
Issuance of common stock related to interest on convertible notes		121			121		121
Cancellation of common stock related to convertible notes, shares	202,350
Cancellation of common stock in connection with consulting agreement	$ (1)	(699)			(700)		(700)
Cancellation of common shares in connection with consulting agreement, shares	(700,000)
Issuance of common stock in connection with asset acquisitions	$ 13	10,009			10,022		10,022
Issuance of common stock in connection with deposit for an asset acquisitions, shares	12,681,008
Derivatives		431			431		431
Net loss				(4,665)	(4,665)	(110)	(4,775)
Ending balance, value at Mar. 31, 2020	$ 66	73,554		(48,126)	25,494	2,379	27,873
Balance, shares at Mar. 31, 2020	66,211,741
Stock based compensation		6			6		6
Stock based compensation, shares	18,750
Issuance of common stock in connection with share exchange agreement		196			197	(74)	124
Issuance of common stock in connection with share exchange agreement, shares	386,035
Consolidated Ventures of Oregon equity		1,613			1,613		1,613
Other							(1)
Net loss				(826)	(826)	(121)	(947)
Issuance of common stock related to Private Placement Memorandum, net, shares	58,140
Ending balance, value at Jun. 30, 2020	$ 66	75,369		(48,952)	26,484	2,184	28,668
Balance, shares at Jun. 30, 2020	66,616,526
Beginning balance, value at Sep. 30, 2020	$ 68	76,310		(51,386)	24,992	1,840	26,832
Balance, shares at Sep. 30, 2020	68,258,745
Issuance of common stock in connection with consulting agreement	$ 2	587			589		589
Issuance of common stock in connection with consulting agreement, shares	1,569,570
Common stock to be issued	$ 7	2,863			2,870		2,870
Common stock to be issued, shares	6,833,069
Stock based compensation	$ 2	560			562		562
Stock based compensation, shares	1,868,750
Issuance of common stock related to interest on convertible notes	$ (1)	1
Cancellation of common stock related to convertible notes, shares	(525,400)
Issuance of common stock related to interest expense	$ 1	208			209		209
Issuance of common stock related to rent and interest expense, shares	501,561
Issuance of subscription receivable		600	(600)
Issuance of warrants in connection with employment agreement		132			132		132
Issuance of options in connection with employment agreement		61			61		61
Issuance of common stock in connection with asset acquisitions	$ 101	43,224	(135)		43,190		43,190
Acquisition of Driven Deliveries, Inc., shares	101,968,944
Net loss				(3,188)	(3,188)	(91)	(3,279)
Ending balance, value at Dec. 31, 2020	$ 180	124,546	(735)	(54,574)	69,417	1,749	71,166
Balance, shares at Dec. 31, 2020	180,475,239
Beginning balance, value at Sep. 30, 2020	$ 68	76,310		(51,386)	24,992	1,840	26,832
Balance, shares at Sep. 30, 2020	68,258,745
Issuance of common stock related to interest expense							$ (331)
Acquisition of Driven Deliveries, Inc., shares							101,968,944
Net loss							$ (9,316)
Ending balance, value at Jun. 30, 2021	$ 220	149,605	(735)	(60,531)	88,559	1,699	90,258
Balance, shares at Jun. 30, 2021	220,648,392
Beginning balance, value at Dec. 31, 2020	$ 180	124,546	(735)	(54,574)	69,417	1,749	71,166
Balance, shares at Dec. 31, 2020	180,475,239
Issuance of common stock in connection with consulting agreement	$ 1	1,096			1,097		1,097
Issuance of common stock in connection with consulting agreement, shares	1,262,500
Stock based compensation	$ 1	867			868		868
Stock based compensation, shares	1,464,009
Issuance of common stock related to interest on convertible notes	$ 4	2,071			2,075		2,075
Cancellation of common stock related to convertible notes, shares	4,054,206
Issuance of common stock related to interest expense	$ 1	121			122		122
Issuance of common stock related to rent and interest expense, shares	164,366
Issuance of warrants in connection with employment agreement		18			18		18
Issuance of options in connection with employment agreement		78			78		78
Issuance of common stock in connection with asset acquisitions		210			210		210
Issuance of common stock in connection with deposit for an asset acquisitions, shares	300,000
Net loss				(8,612)	(8,612)	(14)	(8,626)
Issuance of common stock related to settlement payment	$ 1	5,439			5,440		5,440
Issuance of common stock related to settlement payment, shares	500,000
Issuance of common stock related to Private Placement Memorandum, net	$ 5	2,060			2,065		2,065
Issuance of common stock related to Private Placement Memorandum, net, shares	5,263,996
Issuance of common stock related to Prospectus	$ 2	1,000			1,002		1,002
Issuance of common stock related to Prospectus, shares	2,333,990
Ending balance, value at Mar. 31, 2021	$ 195	137,506	(735)	(63,186)	73,780	1,735	75,515
Balance, shares at Mar. 31, 2021	195,818,306
Issuance of common stock in connection with consulting agreement	$ 1	524			525		525
Issuance of common stock in connection with consulting agreement, shares	950,000
Issuance of common stock related to cash purchase	$ 1	629			630		630
Issuance of common stock related to cash purchase, shares	1,465,117
Stock based compensation	$ 1	245			246		246
Stock based compensation, shares	581,750
Issuance of common stock related to interest on convertible notes	$ 5	2,832			2,837		2,837
Recognition of non-controlling interest related to asset acquisition		462			462	(227)	235
Share exchange agreement adjustment						257	257
Issuance of warrants in connection with employment agreement		71			71		71
Issuance of options in connection with employment agreement		35			35		35
Issuance of common stock related to exercise of options		1			1		$ 1
Issuance of common stock related to exercise of options, shares							10,000
Issuance of common stock in related to commission expense		40			40		$ 40
Issuance of common stock in related to commission expense, shares							90,909
Net loss				2,655	2,655	(66)	$ 2,589
Issuance of common stock related to Private Placement Memorandum, net
Issuance of common stock related to Prospectus	$ 17	7,259			7,276		7,276
Issuance of common stock related to Prospectus, shares	16,942,350
Cancellation of common stock related to investments		1			1		$ 1
Cancellation of common stock related to investments, shares							(694,233)
Ending balance, value at Jun. 30, 2021	$ 220	$ 149,605	$ (735)	$ (60,531)	$ 88,559	$ 1,699	$ 90,258
Balance, shares at Jun. 30, 2021	220,648,392

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Cash flows from operating activities
Net loss	$ (9,316)	$ (9,033)
Equity method investee losses	170	253
Net loss before equity method investment	(9,146)	(8,780)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense	2,073	1,913
Issuance of common stock in connection with consulting agreements	2,211
Issuance of common stock related to rent and interest expense	331	953
Depreciation and amortization	1,370	1,632
Amortization of intangible assets	2,375
Amortization of debt discount	606
Loss on equity method investments
Gain on sale of equity method investments	(200)
Change in fair value of derivative liability	(441)	(326)
Change in fair value of warrant liability	(234)
Foreign currency translation adjustment	(29)	(176)
Gain on sale of property	(766)
Other	209	(317)
Changes in operating assets and liabilities:
Accounts receivable, net of allowance for doubtful accounts	106	267
Prepaid expenses and other current assets	(2,828)	539
Inventory	(818)	(163)
Other assets		(83)
Accounts payable and accrued expenses	(3,248)	488
Net cash used in operating activities	(8,429)	(4,053)
Cash flows from investing activities
Investment in equity method investees, Michigan & Massachusetts	250
Purchase of property and equipment	(425)	(433)
Return of cash for equity investment		229
Cash acquired in acquisition, net of cash transferred		349
Related party advances made and payments received		60
Investment in equity method investees	(170)
Project costs	(179)
Cash received related to sale of property	1,505
Advances to related entities		(955)
Issuance of notes receivable	(560)
Net cash provided by (used in) investing activities	421	(750)
Cash flows from financing activities
Proceeds from the issuance of common stock	17,713
Proceeds from notes payable and advances	(63)	4,596
PPP and Debt Forgiveness	(1,031)
Other		81
Repayments of notes payable	(1,634)	(1,300)
Net cash provided by financing activities	14,985	3,377
Net (decrease) increase in cash and cash equivalents	6,977	(1,426)
Cash and cash equivalents at the beginning of the period	2,129	3,339
Cash and cash equivalents at the end of the period	9,106	1,913
Supplemental disclosure of cash flow information:
Cash paid for interest	1,063	421
Cash paid for taxes
Supplemental disclosure of noncash activities:
Financed Insurance	373	327
Issuance of common stock related to separation agreement	290
Conversion of debt and accrued interest to equity	4,913	121
Issuance of common stock for settlement	5,440
Acquisition of Driven Deliveries, Inc.	43,225
Acquisition of 7LV, Inc.		14,025
Building acquired from related party with equity, net of lien acquired		394
Refinancing of mortgage	1,100,000
Consolidation of CVO		1,613
Acquisition of NVDRE interest		$ 386

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Incorporation and Operations and Going Concern

9 Months Ended

Jun. 30, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Incorporation and Operations and Going Concern

1. Incorporation and Operations and Going Concern

Stem Holdings, Inc. (“Stem” or the “Company”) is a Nevada corporation incorporated on June 7, 2016 and is a leading omnichannel, vertically-integrated cannabis branded products and technology company with state-of-the-art cultivation, processing, extraction, retail, distribution, and delivery-as-a-service (DaaS) operations throughout the United States. Stem’s family of award-winning brands includes TJ’s Gardens™, TravisxJames™, and Yerba Buena™ flower and extracts; Cannavore™ edible confections; Doseology™, a CBD mass-market brand launching in 2021; as well as DaaS brands Budee™ and Ganjarunner™ through the acquisition of Driven Deliveries. Budee™ and Ganjarunner™ e-commerce platforms provide direct-to consumer proprietary logistics and an omnichannel UX (user experience)/CX (customer experience).

The Company purchases, improves, leases, operates, and invests in properties for use in the production, distribution and sales of cannabis and cannabis-infused products licensed under the laws of the states of Oregon, Nevada, California, Massachusetts, New York, and Michigan. As of June 30, 2021, Stem had ownership interests in 23 state issued cannabis licenses including eight (8) licenses for cannabis cultivation, four (4) licenses for cannabis processing, one (1) license for cannabis wholesale distribution, two (2) licenses for hemp production, three (3) adult-use medical retailers (non-storefront), five (5) cannabis dispensary licenses.

As of June 30, 2021, the Company has acquired eight commercial properties and leases two properties, located in Oregon and Nevada, and has entered into leases for these related entities (see Note 18). As of June 30, 2021, the buildout of these properties to support cannabis related operations was either complete or near completion.

The Company has incorporated nine wholly-owned subsidiaries –Stem Holdings Oregon, Inc., Stem Holdings IP, Inc., Opco, LLC, Stem Holdings Agri, Inc., Stem Oregon Acquisitions 2, Corp., 7LV USA Corporation, Driven Deliveries, Inc., and Stem Oregon Acquisitions 1, Corp.

With the acquisition of Driven, the Company becomes an omni-channel retailer, utilizing Driven’s proprietary logistics and user experience/customer experience (“UX/CX”) technologies. The Company will be able to offer its customers in California: (i) an “Express” delivery with a limited product selection that is usually delivered within 60 minutes or less; and (ii) a “Next Day” scheduled delivery from a larger selection of 500+ products from a Company-operated fulfillment center.

The Company’s stock is publicly traded and is listed on the Canadian Securities Exchange under the symbol “STEM” and the OTCQX exchange under the symbol “STMH”.

In June 2021, the Company’s shareholders approved a proposal to amend the Company’s Articles of Incorporation to increase the number of authorized common shares from 300,000,000 shares to 750,000,000 shares.

Going Concern

At June 30, 2021, the Company had approximate balances of cash and cash equivalents of $9.1 million, negative working capital of approximately $2.3 million, and an accumulated deficit of $60.5 million.

These unaudited consolidated financial statements have been prepared on a going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business.

While the recreational use of cannabis is legal under the laws of certain States, where the Company has and is working towards further finalizing the acquisition of entities or investment in entities that directly produce or sell cannabis, the use and possession of cannabis is illegal under United States Federal Law for any purpose, by way of Title II of the Comprehensive Drug Abuse Prevention and Control Act of 1970, otherwise known as the Controlled Substances Act of 1970 (the “ACT”). Cannabis is currently included under Schedule 1 of the Act, making it illegal to cultivate, sell or otherwise possess in the United States.

On January 4, 2018, the office of the Attorney General published a memo regarding cannabis enforcement that rescinds directives promulgated under former President Obama that eased federal enforcement. In a January 8, 2018 memo, Jefferson B. Sessions, then Attorney General of the United States, indicated enforcement decisions will be left up to the U.S. Attorney’s in their respective states clearly indicating that the burden is with “federal prosecutors deciding which cases to prosecute by weighing all relevant considerations, including federal law enforcement priorities set by the Attorney General, the seriousness of the crime, the deterrent effect of federal prosecution, and the cumulative impact of particular crimes on the community.” Subsequently, in April 2018, former President Trump promised to support congressional efforts to protect states that have legalized the cultivation, sale and possession of cannabis; however, a bill has not yet been finalized in order to implement legislation that would, in effect, make clear the federal government cannot interfere with states that have voted to legalize cannabis. Further in December 2018, the U.S. Congress passed legislation, which the President signed on December 20, 2018, removing hemp from being included with Cannabis in Schedule I of the Act.

In December 2019, an outbreak of a novel strain of coronavirus (COVID-19) originated in Wuhan, China, and has since spread to several other countries, including the United States. On June 11, 2020, the World Health Organization characterized COVID-19 as a pandemic. In addition, as of the time of the filing of this Quarterly Report on Form 10-Q, several states in the United States have declared states of emergency, and several countries around the world, including the United States, have taken steps to restrict travel. The existence of a worldwide pandemic, the fear associated with COVID-19, or any, pandemic, and the reactions of governments in response to COVID-19, or any, pandemic, to regulate the flow of labor and products and impede the travel of personnel, may impact our ability to conduct normal business operations, which could adversely affect our results of operations and liquidity. Disruptions to our supply chain and business operations disruptions to our retail operations and our ability to collect rent from the properties which we own, personnel absences, or restrictions on the shipment of our or our suppliers’ or customers’ products, any of which could have adverse ripple effects throughout our business. If we need to close any of our facilities or a critical number of our employees become too ill to work, our production ability could be materially adversely affected in a rapid manner. Similarly, if our customers experience adverse consequences due to COVID-19, or any other, pandemic, demand for our products could also be materially adversely affected in a rapid manner. Global health concerns, such as COVID-19, could also result in social, economic, and labor instability in the markets in which we operate. Any of these uncertainties could have a material adverse effect on our business, financial condition or results of operations.

These conditions raise substantial doubt as to the Company’s ability to continue as a going concern. Should the United States Federal Government choose to begin enforcement of the provisions under the “ACT”, the Company through its wholly owned subsidiaries could be prosecuted under the “ACT” and the Company may have to immediately cease operations and/or be liquidated upon its closing of the acquisition or investment in entities that engage directly in the production and or sale of cannabis.

Management believes that the Company has access to capital resources through potential public or private issuances of debt or equity securities. However, if the Company is unable to raise additional capital, it may be required to curtail operations and take additional measures to reduce costs, including reducing its workforce, eliminating outside consultants, and reducing legal fees to conserve its cash in amounts sufficient to sustain operations and meet its obligations. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might become necessary should the Company be unable to continue as a going concern.

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Summary of Significant Accounting Policies

9 Months Ended

Jun. 30, 2021

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The unaudited condensed financial statements included herein are unaudited. Such financial statements, in the opinion of management, contain all adjustments necessary to present fairly the financial position and results of operations as of and for the periods indicated. All such adjustments are of a normal recurring nature. These interim results are not necessarily indicative of the results to be expected for the year ending September 30, 2021 or for any other period. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, and because of this, for further information, readers should refer to the financial statements and footnotes included in its amended Form 10-K for the fiscal year ended September 30, 2020 filed on December 28, 2020. The Company believes that the disclosures are adequate to make the interim information presented not misleading.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income, and expenses. The most significant estimates included in these condensed consolidated financial statements are those associated with the assumptions used to value equity instruments, valuation of its long live assets for impairment testing, valuation of intangible assets, and the valuation of inventory. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable given the circumstances that exist at the time the financial statements are prepared. Actual results may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.

Reclassifications

Certain amounts in the Company’s condensed consolidated financial statements for prior periods have been reclassified to conform to the current period presentation. These reclassifications have not changed the results of operations of prior periods.

Principles of Consolidation

The Company’s policy is to consolidate all entities that it controls by ownership of a majority of the outstanding voting stock. In addition, the Company consolidates entities that meet the definition of a variable interest entity (“VIE”) for which it is the primary beneficiary. The primary beneficiary is the party who has the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and who has an obligation to absorb losses of the entity or a right to receive benefits from the entity that could potentially be significant to the entity. For consolidated entities that are less than wholly owned, the third party’s holding of equity interest is presented as noncontrolling interests in the Company’s Consolidated Balance Sheets and Consolidated Statements of Changes in Stockholders’ Equity. The portion of net loss attributable to the noncontrolling interests is presented as net loss attributable to noncontrolling interests in the Company’s Consolidated Statements of Operations.

In August 2016, the Company and certain shareholders of the Company entered into a “Multi Party” Agreement, in which the Company became obligated to lease or acquire three separate real estate assets, and separately, if certain events occur, additional real estate assets held by entities related to those shareholders. The Agreement also gives the Company the right of first refusal in regard to certain properties owned by the persons and entities affiliated with the parties of the Agreement so long as certain targets are met. In the quarter ended June 30, 2019, the Company issued 12,500,000 shares of its common stock for the acquisition of Consolidated Ventures of Oregon, LLC (“CVO”) and Opco Holdings, LLC (“Opco”) which comprise the entities within the Multi Party Agreement. On September 6, 2020, the Company received the regulatory approval to transfer all the licenses held under both CVO and Opco. Subsequently, the Company has completed the acquisition and as a result, the Company is no longer engaged primarily in property rental operations but has taken over the operations of its primary renters, which is the cultivation, production and sale of cannabis and related productions. Since CVO and Opco are related to the Company, the acquisition was not accounted for as a business combination at fair value under the codification sections of ASC 805. The assets and liabilities were transferred to the Company at their historical cost and the Company has included the operations of Opco and CVO for all periods presented for this period ended June 30, 2021.

The accompanying condensed consolidated financial statements include the accounts of Stem Holdings, Inc. and its wholly owned subsidiaries, Stem Holdings Oregon, Inc., Stem Holdings IP, Inc., Opco, LLC, Stem Holdings Agri, Inc., Opco Holdings, Inc., 7LV USA Corporation, and Consolidated Ventures of Oregon, Inc., and Driven Deliveries, Inc. In addition, the Company has consolidated YMY Ventures, WCV, LLC and NVD RE, Inc. under the variable interest requirements.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents. The Company’s cash is primarily maintained in checking accounts. These balances may, at times, exceed the U.S. Federal Deposit Insurance Corporation insurance limits. As of June 30, 2021, and 2020, the Company had no cash equivalents or short-term investments. The Company has not experienced any losses on deposits of cash and cash equivalents.

Accounts Receivable

Accounts receivable is shown on the face of the consolidated balance sheets, net of an allowance for doubtful accounts. The Company analyzes the aging of accounts receivable, historical bad debts, customer creditworthiness and current economic trends, in determining the allowance for doubtful accounts. The Company does not accrue interest receivable on past due accounts receivable. As of June 30, 2021, the reserve for doubtful accounts was $79 thousand.

Inventory

Inventory is comprised of raw materials, finished goods and work-in-progress such as pre-harvested cannabis plants and by-products to be extracted. The costs of growing cannabis including but not limited to labor, utilities, nutrition, and irrigation, are capitalized into inventory until the time of harvest.

Inventory is stated at the lower of cost or net realizable value, determined using weighted average cost. Cost includes expenditures directly related to manufacturing and distribution of the products. Primary costs include raw materials, packaging, direct labor, overhead, shipping and the depreciation of manufacturing equipment and production facilities determined at normal capacity. Manufacturing overhead and related expenses include salaries, wages, employee benefits, utilities, maintenance, and property taxes.

Net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. At the end of each reporting period, the Company performs an assessment of inventory obsolescence to measure inventory at the lower of cost or net realizable value. Factors considered in the determination of obsolescence include slow-moving or non-marketable items.

Prepaid Expenses and Other Current Assets

Prepaid expenses consist of various payments that the Company has made in advance for goods or services to be received in the future. These prepaid expenses include consulting, advertising, insurance, and service or other contracts requiring up-front payments.

Property and Equipment

Property, equipment, and leasehold improvements are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Repairs and maintenance expenditures that do not extend the useful lives of related assets are expensed as incurred.

Expenditures for major renewals and improvements are capitalized, while minor replacements, maintenance, and repairs, which do not extend the asset lives, are charged to operations as incurred. Upon sale or disposition, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in operations. The Company continually monitors events and changes in circumstances that could indicate that the carrying balances of its property, equipment and leasehold improvements may not be recoverable in accordance with the provisions of ASC 360, “Property, Plant, and Equipment.” When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. See “Note 3 – Property, Equipment and Leasehold Improvements”.

Property and equipment are stated at cost less accumulated depreciation. Depreciation is provided on a straight-line method over the estimated useful lives of the assets. The Company estimates useful lives as follows:

Buildings	20 years
Leasehold improvements	Shorter of term of lease or economic life of improvement
Furniture and equipment	5 years
Signage	5 years
Software and related	5 years

Impairment of Long-Lived Assets

The Company reviews the carrying value of its long-lived assets, which include property and equipment, for indicators of impairment whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable. The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company’s overall strategy with respect to the manner or use of the acquired assets or changes in the Company’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company’s stock price for a sustained period of time; and (vi) regulatory changes. The Company evaluates assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events. The Company does not test for impairment in the year of acquisition of properties, as long as those properties are acquired from unrelated third parties.

The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. In cases where estimated future net undiscounted cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of the asset or asset group. Fair value is generally determined using the assets expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated and amortized prospectively over the newly determined remaining estimated useful lives.

Equity Method Investments

Investments in unconsolidated affiliates are accounted for under the equity method of accounting, as appropriate. The Company accounts for investments in limited partnerships or limited liability corporations, whereby the Company owns a minimum of 5.0% of the investee’s outstanding voting stock, under the equity method of accounting. These investments are recorded at the amount of the Company’s investment and adjusted each period for the Company’s share of the investee’s income or loss, and dividends paid.

During the quarter ended June 30, 2021, the Company recognized an investment loss of $84 thousand related to TIL and CGP (see Note 6).

Asset Acquisitions

The Company has adopted ASU 2017-01, which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as businesses acquisitions. As a result of adopting ASU 2017-01, acquisitions of real estate and cannabis licenses do not meet the definition of a business combination and were deemed asset acquisitions, and the Company therefore capitalized these acquisitions, including its costs associated with these acquisitions.

Goodwill and Intangible Assets

Goodwill. Goodwill represents the excess acquisition cost over the fair value of net tangible and intangible assets acquired. Goodwill is not amortized and is subject to annual impairment testing on or between annual tests if an event or change in circumstance occurs that would more likely than not reduce the fair value of a reporting unit below its carrying value. In testing for goodwill impairment, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, the Company concludes that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is not required. If the Company concludes otherwise, the Company is required to perform the two-step impairment test. The goodwill impairment test is performed at the reporting unit level by comparing the estimated fair value of a reporting unit with its respective carrying value. If the estimated fair value exceeds the carrying value, goodwill at the reporting unit level is not impaired. If the estimated fair value is less than the carrying value, further analysis is necessary to determine the amount of impairment, if any, by comparing the implied fair value of the reporting unit’s goodwill to the carrying value of the reporting unit’s goodwill.

Intangible Assets. Intangible assets deemed to have finite lives are amortized on a straight-line basis over their estimated useful lives, where the useful life is the period over which the asset is expected to contribute directly, or indirectly, to our future cash flows. Intangible assets are reviewed for impairment on an interim basis when certain events or circumstances exist. For amortizable intangible assets, impairment exists when the carrying amount of the intangible asset exceeds its fair value. At least annually, the remaining useful life is evaluated.

An intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value. In testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely than not that an impairment exists. If it is determined that it is not more likely than not that an impairment exists, a quantitative impairment test is not necessary. If the Company concludes otherwise, it is required to perform a quantitative impairment test. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset that is amortized over the remaining useful life of that asset, if any. Subsequent reversal of impairment losses is not permitted.

During the quarter ended June 30, 2021, and 2020, the Company determined that there were not any impairments related to intangible assets.

Business Combinations

The Company applies the provisions of ASC 805 in the accounting for acquisitions. ASC 805 requires the Company to recognize separately from goodwill the assets acquired, and the liabilities assumed at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While the Company uses its best estimates and assumptions to accurately apply preliminary value to assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, these estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company records adjustments in the current period, rather than a revision to a prior period. Upon the conclusion of the measurement period or final determination of the values of the assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded in the consolidated statements of operations. Accounting for business combinations requires management to make significant estimates and assumptions, especially at the acquisition date, including estimates for intangible assets, contractual obligations assumed, restructuring liabilities, pre-acquisition contingencies, and contingent consideration, where applicable. Although the Company believes the assumptions and estimates made have been reasonable and appropriate, they are based in part on historical experience and information obtained from management of the acquired companies and are inherently uncertain. Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates, or actual results.

Contingent Consideration

The Company accounts for “contingent consideration” according to FASB ASC 805, “Business Combinations” (“FASB ASC 805”). Contingent consideration typically represents the acquirer’s obligation to transfer additional assets or equity interests to the former owners of the acquiree if specified future events occur or conditions are met. FASB ASC 805 requires that contingent consideration be recognized at the acquisition-date fair value as part of the consideration transferred in the transaction. FASB ASC 805 uses the fair value definition in Fair Value Measurements, which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As defined in FASB ASC 805, contingent consideration is (i) an obligation of the acquirer to transfer additional assets or equity interests to the former owners of an acquiree as part of the exchange for control of the acquiree, if specified future events occur or conditions are met or (ii) the right of the acquirer to the return of previously transferred consideration if specified conditions are met.

Warrant Liability

The Company accounts for certain common stock warrants outstanding as a liability at fair value and adjusts the instruments to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s consolidated statements of operations. The fair value of the warrants issued by the Company has been estimated using a Black Scholes model.

Embedded Conversion Features

The Company evaluates embedded conversion features within convertible debt to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in the statement of operations. If the conversion feature does not require recognition of a bifurcated derivative, the convertible debt instrument is evaluated for consideration of any beneficial conversion feature (“BCF”) requiring separate recognition. When the Company records a BCF, the intrinsic value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument (offset to additional paid-in capital) and amortized to interest expense over the life of the debt.

Income Taxes

The provision for income taxes is determined in accordance with ASC 740, “Income Taxes”. The Company files a consolidated United States federal income tax return. The Company provides for income taxes based on enacted tax law and statutory tax rates at which items of income and expense are expected to be settled in our income tax return. Certain items of revenue and expense are reported for Federal income tax purposes in different periods than for financial reporting purposes, thereby resulting in deferred income taxes. Deferred taxes are also recognized for operating losses that are available to offset future taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company has incurred net operating losses for financial-reporting and tax-reporting purposes. As of June 30, 2021, and 2020, such net operating losses were offset entirely by a valuation allowance.

The Company recognizes uncertain tax positions based on a benefit recognition model. Provided that the tax position is deemed more likely than not of being sustained, the Company recognizes the largest amount of tax benefit that is greater than 50.0% likely of being ultimately realized upon settlement. The tax position is derecognized when it is no longer more likely than not of being sustained. The Company classifies income tax related interest and penalties as interest expense and selling, general and administrative expense, respectively, on the consolidated statements of operations.

In December 2017, the Tax Cuts and Jobs Act (TCJA or the Act) was enacted, which significantly changes U.S. tax law. In accordance with ASC 740, “Income Taxes”, the Company is required to account for the new requirements in the period that includes the date of enactment. The Act reduced the overall corporate income tax rate to 21.0%, created a territorial tax system (with a one-time mandatory transition tax on previously deferred foreign earnings), broadened the tax base and allowed for the immediate capital expensing of certain qualified property.

In December 2020, the Company issued a significant number of new shares in its acquisition of Driven (see Note 10). The effect of these issuances is most likely, the Company and Driven have experienced the requisite change of control as promulgated under the US Internal Revenue Code section 382. The effect of this will be that going forward, the ability of the Company and Driven to utilize their respective U.S. Federal net operating loss carryforwards from prior to December 29, 2020 will be limited in its usage. In order to determine the specific effect, the Company must perform the computations required under the Internal Revenue Code, which have not yet been performed. The Company expects it will perform the required computations in the coming fiscal year.

Revenue Recognition

The Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (Topic 606), the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Revenue for the Company’s product sales has not been adjusted for the effects of a financing component as the Company expects, at contract inception, that the period between when the Company’s transfers control of the product and when the Company receives payment will be one year or less. Product shipping and handling costs are included in cost of product sales.

Effective October 1, 2019, the Company adopted the requirements of ASU 2014-09 (ASC 606) and related amendments, using the modified retrospective method. The adoption of ASC 606 did not have a significant impact on the Company’s revenue recognition policy as revenues related to wholesale and retail revenue are recorded upon transfer of merchandise to the customer, which was the effective policy under ASC 605 previously.

The following policies reflect specific criteria for the various revenue streams of the Company:

Cannabis Dispensary, Cultivation and Production

Revenue is recognized upon transfer of retail merchandise to the customer upon sale transaction, at which time its performance obligation is complete. Revenue is recognized upon delivery of product to the wholesale customer, at which time the Company’s performance obligation is complete. Terms are generally between cash on delivery to 30 days for the Company’s wholesale customers.

The Company’s sales environment is somewhat unique, in that once the product is sold to the customer (retail) or delivered (wholesale) there are essentially no returns allowed or warranty available to the customer under the various state laws.

Delivery

1) Identify the contract with a customer

The Company sells retail products directly to customers. In these sales there is no formal contract with the customer. These sales have commercial substance and there are no issues with collectability as the customer pays the cost of the goods at the time of purchase or delivery.

2) Identify the performance obligations in the contract

The Company sells its products directly to consumers. In this case these sales represent a performance obligation with the sales and any necessary deliveries of those products.

3) Determine the transaction price

The sales that are done directly to the customer have no variable consideration or financing component. The transaction price is the cost that those goods are being sold for plus any additional delivery costs.

4) Allocate the transaction price to performance obligations in the contract

For the goods that the Company sells directly to customers, the transaction price is allocated between the cost of the goods and any delivery fees that may be incurred to deliver to the customer.

5) Recognize revenue when or as the Company satisfies a performance obligation

For the sales of the Company’s own goods the performance obligation is complete once the customer has received the product.

Leases

The Company recognizes rental revenue from tenants, including rental abatements, lease incentives and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of the related leases when collectability is reasonably assured.

The Company makes estimates of the collectability of its tenant receivables related to base rents, straight-line rent, and other revenues. In the current fiscal year, the Company began significant rental operations. The Company considers such things as historical bad debts, tenant creditworthiness, current economic trends, facility operating performance, lease structure, developments relevant to a tenant’s business, and changes in tenants’ payment patterns in its analysis of accounts receivable and its evaluation of the adequacy of the allowance for doubtful accounts. Specifically, for straight-line rent receivables, the Company’s assessment includes an estimation of a tenant’s ability to fulfill its rental obligations over the remaining lease term.

On October 1, 2020, the Company adopted ASC 842 and elected to apply the new standard at the adoption date and recognize a cumulative effect as an adjustment to retained earnings. Upon calculation the effect on retained earnings was immaterial and no adjustment was deemed necessary. Leases with an initial term of twelve months or less are not recorded on the balance sheet. For lease agreements entered into or reassessed after the adoption of Topic 842, we combine the lease and non-lease components in determining the lease liabilities and right of use (“ROU”) assets.

Our lease agreements generally do not provide an implicit borrowing rate, therefore an internal incremental borrowing rate is determined based on information available at lease commencement date for purposes of determining the present value of lease payments. We used the incremental borrowing rate on June 30, 2021 for all leases that commenced prior to that date. In determining this rate, which is used to determine the present value of future lease payments, we estimate the rate of interest we would pay on a collateralized basis, with similar payment terms as the lease and in a similar economic environment.

Under Topic 842, operating lease expense is generally recognized evenly over the term of the lease. Lease costs were $337 thousand and $763 thousand, respectively for the three and nine months ended June 30, 2021. There was sublease rental income of $8 thousand and $17 thousand, respectively for the three and nine months ended June 30, 2021. The Company has eleven operating leases consisting with remaining lease terms ranging from 23 months to 180 months.

Lease Costs

	Three Months
	Ended
	June 30, 2021
Components of total lease costs:
Operating lease expense	$	337
Total lease costs	$	337

Lease positions as of June 30, 2021

ROU lease assets and lease liabilities for our operating leases were recorded in the consolidated condensed balance sheet as follows:

	June 30,
	2021
Assets
Right of use asset	$	6,927
Total assets	$	6,927
Liabilities
Operating lease liabilities – short term	$	1,509
Operating lease liabilities – long term		5,401
Total lease liability	$	6,910

Lease Terms and Discount Rate

Weighted average remaining lease term (in years) – operating lease	10
Weighted average discount rate – operating lease	9.40	%

Cash Flows

	Nine Months
	Ended
	June 30,2021
Cash paid for amounts included in the measurement of lease liabilities:
ROU amortization	$	763
Cash paydowns of operating liability	$	(763	)
Supplemental non-cash amounts of lease liabilities arising from obtaining:
ROU asset	$	6,927
Lease Liability	$	6,910

The future minimum lease payments under the leases are as follows:

2021	$	391
2022		1,676
2023		1,249
2024		899
2025		851
Thereafter		5,871
Total future minimum lease payments		10,937
Less: Lease imputed interest		(4,027	)
Total	$	6,910

Disaggregation of Revenue

In the three and nine months ended June 30, 2021, revenue reported is primarily from the sale of cannabis and related products accounted for under ASC 606.

The following table illustrates our revenue by type related to the three months ended June 30, 2021, and 2020, respectively:

Three Months Ended June 30,	2021			2020
Revenue
Wholesale	$	1,555		$	1,597
Retail		10,795			4,516
Rental		8			11
Other		78			17
Total revenue		12,436			6,141
Discounts and returns		(1,850	)		(943	)
Net Revenue	$	10,586		$	5,198

The following table illustrates our revenue by type related to the nine months ended June 30, 2021, and 2020, respectively:

Nine Months Ended June 30,	2021			2020
Revenue
Wholesale	$	3,879		$	2,904
Retail		26,721			7,365
Rental		17			26
Product Sales		229			-
Other		336			20
Total revenue		31,182			10,315
Discounts and returns		(4,609	)		(1,498	)
Net Revenue	$	26,573		$	8,817

Geographical Concentrations

As of June 30, 2021, the Company is primarily engaged in the production and sale of cannabis, which is only legal for recreational use in 15 states and D.C., with lesser legalization, such as for medical use in an additional 21 states and D.C., as of the time of these consolidated financial statements. In addition, the United States Congress has passed legislation, specifically the Agriculture Improvement Act of 2018 (also known as the “Farm Bill”) that has removed production and consumption of hemp and associated products from Schedule 1 of the Controlled Substances Act.

Cost of Goods Sold

Cost of sales represents costs directly related to manufacturing and distribution of the Company’s products. Primary costs include raw materials, packaging, direct labor, overhead, shipping and handling and the depreciation of manufacturing equipment and production facilities. Manufacturing overhead and related expenses include salaries, wages, employee benefits, utilities, maintenance, and property taxes. The Company recognizes the cost of sales as the associated revenues are recognized.

Fair Value of Financial Instruments

As defined in the authoritative guidance, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

To estimate fair value, the Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable.

The authoritative guidance establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (“Level 1” measurements) and the lowest priority to unobservable inputs (“Level 3” measurements). The three levels of the fair value hierarchy are as follows:

Level 1 — Observable inputs such as quoted prices in active markets at the measurement date for identical, unrestricted assets or liabilities.

Level 2 — Other inputs that are observable, directly, or indirectly, such as quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 — Unobservable inputs for which there is little or no market data and which the Company makes its own assumptions about how market participants would price the assets and liabilities.

In instances in which multiple levels of inputs are used to measure fair value, hierarchy classification is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

Stock-based Compensation

The Company accounts for share-based payment awards exchanged for services at the estimated grant date fair value of the award. Stock options issued under the Company’s long-term incentive plans are granted with an exercise price equal to no less than the market price of the Company’s stock at the date of grant and expire up to ten years from the date of grant. These options generally vest on the grant date or over a one- year period.

The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model and the assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.

Expected Term - The expected term of options represents the period that the Company’s stock-based awards are expected to be outstanding based on the simplified method, which is the half-life from vesting to the end of its contractual term.

Expected Volatility - The Company computes stock price volatility over expected terms based on its historical common stock trading prices.

Risk-Free Interest Rate - The Company bases the risk-free interest rate on the implied yield available on U. S. Treasury zero-coupon issues with an equivalent remaining term.

Expected Dividend - The Company has never declared or paid any cash dividends on its common shares and does not plan to pay cash dividends in the foreseeable future, and, therefore, uses an expected dividend yield of zero in its valuation models.

Effective January 1, 2017, the Company elected to account for forfeited awards as they occur, as permitted by Accounting Standards Update (“ASU”) 2016-09. Ultimately, the actual expenses recognized over the vesting period will be for those shares that vested. Prior to making this election, the Company estimated a forfeiture rate for awards at 0%, as the Company did not have a significant history of forfeitures.

Earnings (Loss) per Share

ASC 260, Earnings Per Share, requires dual presentation of basic and diluted earnings per share (“EPS”) with a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilution. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.

Basic net loss per share of common stock excludes dilution and 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 of common stock reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity unless inclusion of such shares would be anti-dilutive. Since the Company only incurred losses for the nine months ended June 30, 2021 and the three and nine months ended June 30, 2020, basic and diluted net loss per share is the same.

The following table provides a reconciliation of the numerators and denominators used to determine basic and diluted net income (loss) per common share for the three months ended June 30, 2021 and 2020:

	Three Months Ended June 30,
(Amounts in thousands, except per share data)	2021		2020
Numerator
Net income (loss) attributable to Stem Holdings	$	2,655	$	(826	)
Denominator
Weighted-average common shares outstanding, basic		208,137,694		66,410,900
Dilutive impact of share-based instruments		77,312,563		-
Weighted-average common shares outstanding, diluted		285,450,257		66,410,900
Net income per common share attributable to Stem Holdings
Basic	$	0.01	$	(0.01	)
Diluted		0.01		(0.01	)

Securities that could potentially dilute loss per share in the future that were not included in the computation of diluted loss per share for the nine months ended June 30, 2021 are as follows:

Potentially dilutive share-based instruments
Convertible notes	4,547,597
Options to purchase common stock	8,418,411
Unvested restricted stock awards	-
Warrants to purchase common stock	64,346,555
	77,312,563

Advertising Costs

The Company follows the policy of charging the cost of advertising to expense as incurred. Advertising expense was $430 thousand and $22 thousand three months ended June 30, 2021, and 2020, respectively. Advertising expense was $749 thousand and $47 thousand for nine months ended June 30, 2021, and 2020, respectively.

Related parties

Parties are related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.

Segment reporting

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision–making group in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision–maker is its chief executive officer. The Company currently operates in one segment.

Recent Accounting Guidance

In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350)—Simplifying the Test for Goodwill Impairment. ASU 2017-04 simplifies the accounting for goodwill impairments by eliminating the requirement to compare the implied fair value of goodwill with its carrying amount as part of step two of the goodwill impairment test referenced in Accounting Standards Codification (“ASC”) 350, Intangibles - Goodwill and Other (“ASC 350”). As a result, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. However, the impairment loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. ASU 2017-04 is effective for annual reporting periods beginning after December 15, 2019. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 removes, modifies and adds certain disclosure requirements in Topic 820 “Fair Value Measurement”. ASU 2018-13 eliminates certain disclosures related to transfers and the valuations process, modifies disclosures for investments that are valued based on net asset value, clarifies the measurement uncertainty disclosure, and requires additional disclosures for Level 3 fair value measurements. ASU 2018-13 is effective for the Company for annual and interim reporting periods beginning January 1, 2020. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases. The standard amends the existing lease accounting guidance and requires lessees to recognize a lease liability and a right-of-use asset for all leases (except for short-term leases that have a duration of one year or less) on their balance sheets. Lessees will continue to recognize lease expense in a manner similar to current accounting. For lessors, accounting for leases under the new guidance is substantially the same as in prior periods but eliminates current real estate-specific provisions and changes the treatment of initial direct costs. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparable period presented, with an option to elect certain transition relief. Full retrospective application is prohibited. The standard was adopted as of October 1, 2020. As of June 30, 2021, the Company recognized additional operating liabilities of approximately $6.2 million, with corresponding ROU assets of approximately $6.9 million.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 provides guidance for recognizing credit losses on financial instruments based on an estimate of current expected credit losses model. The amendments are effective for fiscal years beginning after December 15, 2019. Recently, the FASB issued the final ASU to delay adoption for smaller reporting companies to calendar year 2023. The Company is currently assessing the impact of the adoption of this ASU on its financial statements.

In January 2020, the FASB issued ASU 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivative and Hedging (Topic 815), which clarifies the interaction of rules for equity securities, the equity method of accounting, and forward contracts and purchase options on certain types of securities. The guidance clarifies how to account for the transition into and out of the equity method of accounting when considering observable transactions under the measurement alternative. The ASU is effective for annual reporting periods beginning after December 15, 2020, including interim reporting periods within those annual periods, with early adoption permitted. We are currently evaluating the impact of the new guidance on our consolidated financial statements.

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): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity, and also improves and amends the related EPS guidance for both Subtopics. The ASU will be effective for annual reporting periods beginning after December 15, 2021 and interim periods within those annual periods and early adoption is permitted. We are currently evaluating the impact of the new guidance on our consolidated financial statements.

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Property, Plant & Equipment

9 Months Ended

Jun. 30, 2021

Property, Plant and Equipment [Abstract]

Property, Plant & Equipment

3. Property, Plant & Equipment

Property and equipment consist of the following (in thousands):

	June 30,			September 30,
	2021			2020
Land	$	1,451		$	1,451
Automobiles		113			61
Signage		19			19
Furniture and equipment		2,945			2,485
Leasehold improvements		3,568			3,455
Buildings and property improvements		10,173			12,981
Computer software		59			59
		18,328			20,511
Accumulated depreciation		(5,230	)		(4,157	)
Property and equipment, net	$	13,098		$	16,354

Depreciation expense was approximately $0.5 and $0.5 million for the three months ended June 30, 2021 and 2020, respectively. Depreciation expense was approximately $1.4 and $1.3 million for the nine months ended June 30, 2021 and 2020, respectively. Depreciation expense is included in general and administrative expense.

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Inventory

9 Months Ended

Jun. 30, 2021

Inventory Disclosure [Abstract]

Inventory

4. Inventory

Inventory consists of the following (in thousands):

	June 30,		September 30,
	2021		2020
Raw materials	$	640	$	222
Work-in-progress		257		484
Finished goods		1,934		1,089
Total Inventory	$	2,831	$	1,795

Raw materials and work-in-progress include the costs incurred for cultivation materials and live plants. Finished goods consists of cannabis products sent to retail locations or ready to be sold. No inventory reserve was recorded for the three and nine months ended June 30, 2021 and 2020 due to management’s assessment of the inventory on hand.

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Prepaid expenses and other current assets

9 Months Ended

Jun. 30, 2021

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Prepaid expenses and other current assets

5. Prepaid expenses and other current assets

Prepaid expenses and other current assets are assets and payments previously made, that benefit future periods. The balance as of June 30, 2021 includes the Employee Retention Tax Credit (“ERTC”) program from the U.S Treasury, as part of the COVID-19 stimulus package. The ERTC program refunds a portion of taxes paid for payroll. We accrued the amounts that we qualify for, and this reduced our payroll expenses during the quarter applied for.

Prepaid and other current assets comprised of the following:

	June 30,		September 30,
	2021		2020
Prepaid expenses	$	615	$	249
ERTC credits		2,471		-
Deposits and other current assets		1,050		203
Total prepaid expenses and other current assets	$	4,136	$	452

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Equity method investments

9 Months Ended

Jun. 30, 2021

Equity Method Investments and Joint Ventures [Abstract]

Equity method investments

6. Equity method investments

SOK Management, LLC

During the nine months ended June 30, 2021, the Company sold its remaining ownership interest in SOK Management in the amount of $200,000 and was recorded as other investment income under other income on the Company’s profit and loss statement.

Tilstar Medical, LLC

In April 2019, the Company entered into an agreement to acquire 48% of the membership interest of Tilstar Medical, LLC (“TIL”). TIL is a startup operation located in Laurel, Maryland and owns a project management company which assists in procuring licenses for the production and sale of cannabis. The purchase price for the 48% interest was $550,000 to capitalize TIL which under the operating agreement occurs upon the execution of the agreement. As of September 30, 2019, the Company had funded the $550,000 and accounted for its investment using the equity method of accounting. The Company was not made aware at time of its investment in the type and magnitude of expenses that would be funded with its investment capital and is currently in the process of renegotiating the terms of the operating agreement. During the year ended September 30, 2019, Tilstar Medical along with its partner, Stem Holdings, Inc. received a letter from the Maryland Medical Cannabis commission with notification that we received stage one pre-approval for a processor license. The Companies application ranked amongst the top nine highest scoring applications for a medical cannabis processor license. Final awards will be issued during calendar year 2021. As of June 30, 2021, and September 30, 2020, the difference between the investment and the percentage of net assets attributable to the Company’s investment was approximately $0.29 and $0.28 million, respectively. During the three and nine months ended June 30, 2021 the Company recognized a minimal loss on investment related to TIL. During the three and nine months ended June 30, 2020, the Company recognized a loss of $0.01 million and $0.14 million, respectively related to TIL.

Community Growth Partners, Inc

On January 6, 2020, the Company issued a convertible promissory note to Community Growth Partners Holdings, Inc., (“CGS”) which will act as a line of credit. Subject to the terms and conditions of the note, CGS promises to pay the Company all of the outstanding principal together with interest on the unpaid principal balance upon the date that is twelve months after the effective date and shall be payable as follows: (a)The Company agrees to make several loans to CGS from time to time upon request of CGS in amounts not to exceed the principal sum of $2,000,000, (b) Payment of principal and interest shall be immediately available funds, (c) This note may be prepaid in whole or in part at any time without premium or penalty. Any partial prepayment shall be applied against the principal amount outstanding, (d) The unpaid principal amount outstanding under this note shall bear interest commencing upon the first advance at the rate of 10% per annum through the maturity date, calculated on the basis of a 365-day, until the entire indebtedness is fully paid, (e) Upon the closing of a $2,000,000 financing by the Company, all of the principal and interest shall automatically convert into equity shares of CGS at the price obtained by the qualified financing. As of September 30, 2020 portion of the note was converted into 7.0% equity. In March 2021, the balance of a note receivable was converted into an additional 7% equity leaving an equity investment of 14%.

Kaya Holdings, Corp.

On April 13, 2021, the Company executed an Investors’ Rights Agreement in conjunction with a Subscription Agreement with Kaya Holdings, Corp. The Company purchased 2,875,000 shares of Class B common stock of Kaya Holdings, Corp for a total investment of $230,000. In addition to the purchased Class B shares, the Company received 500,000 founder Class B shares resulting in a total of 3,375,000 Class B shares.

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Note Receivable

9 Months Ended

Jun. 30, 2021

Note Receivable

Note Receivable

7. Note Receivable

On January 4, 2020, the Company issued a $355,000 promissory note to Community Growth Partners Holdings, Inc., (“CGS”). CGS is a cannabis license holder in Massachusetts. Subject to the terms and conditions of the note, CGS promises to pay the Company all of the outstanding balance together with interest the date that is six months after the opening of the Great Barrington Dispensary which was opened September 2020. As of June 30, 2021 the principal and interest balance of the note is $411,934.

On October 1, 2020, the Company issued a $100,000 promissory note to Bushman Holdings, Inc., (“BHI”) BHI is a CBD Cannabis holding company in Florida. During the nine months ended June 30, 2021, the Company issued additional promissory notes totaling $210,000. Subject to the terms and conditions of the notes, BHI promises to pay the Company all outstanding balances on or before January 1, 2022. As of June 30, 2021, the outstanding balance of the promissory notes is $310,000.

On April 5, 2021, the Company issued a $250,000 non-negotiable convertible promissory note (“Note”) to Blake, Inc. The Note has a maturity date which is six months after the close of the Arkannabis, a Colorado grow facility. The note has annual interest rate of 5.75%. Per the terms of the note, the principal balance and related interest shall be made in immediately available funds in lawful currency. The terms of the note call for automatic conversion upon the closing of the Arkannabis business of the outstanding principal and interest on this Note and will convert into that number of shares of the equity securities equivalent to a non-dilitive 12.5% of the issued and outstanding shares of the Arkannabis business.

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Consolidated Asset Acquisitions

9 Months Ended

Jun. 30, 2021

Business Combination and Asset Acquisition [Abstract]

Consolidated Asset Acquisitions

8. Consolidated Asset Acquisitions

YMY Ventures LLC

In September 2018, the Company entered into an agreement to acquire 50% of the membership interest of YMY Ventures LLC (“YMY”). YMY is a startup operation located near Las Vegas, Nevada and owns licenses for the production and sale of cannabis. The purchase price for the 50% interest was $750,000, with the first $375,000 paid into escrow upon signing, with the final $375,000 due upon closing, which under the agreement occurs when the license is transferred by the Nevada Department of Taxation and receipt of approval in transfer of ownership by the Division of Public and Behavioral Health of the City of North Las Vegas. As of June 30, 2019, the Company had funded the $375,000 into escrow and had provided the joint venture with additional funds primarily in the form of payments for work performed to acquire four licenses from the Nevada Department of Taxation in the amount of approximately $690,238. As of February 28, 2019, the Nevada Department of Taxation approved the change of ownership for four medical and recreational cultivation and production licenses held by YMY Ventures now owned by Stem Holdings, Inc. Pursuant to the agreement, the escrowed amount of $375,000 was released and an additional payment of $67,500 was issued in August 2019. The balance of $307,500 was being held and negotiated with the partners due to the additional funds over and above the original obligation to provide tenant improvements of $650,000. Non-controlling interest of $790,000, in connection with this asset acquisition, is included in investment in affiliates. As of the date of this filing, the balance has been paid in full including interest and attorney’s fees.

NVD RE Corp.

In April 2018, the Company received a 37.5% interest in NVD RE Corp. (“NVD”) upon its issuance to NVD of a commitment to contribute $1.275 million to NVD, which included the purchase price of $600,000 and an additional commitment to pay tenant improvement costs of $675,000. As of September 30, 2019, the Company paid $600,000 in cash for the real estate and not only fully funded its commitment but invested an additional $377,000 in capital over and above its original obligation. NVD used the funds provided to date by the Company to construct a cannabis indoor grow building and processing plant located near Las Vegas, Nevada and to continue the buildout of the property. The Company has no further commitment to fund the entity beyond its initial equity purchase commitment. NVD leases its facilities to YMY Ventures, LLC. $1.2 million non-controlling interest in connection with this asset acquisition is included in investment in affiliates.

In the fiscal year ended September 30, 2019, NVD obtained $300,000 in proceeds from a mortgage on its property. The funds from this mortgage were advanced to the Company. As of December 31, 2020, this obligation was paid in its entirety, and $400,000 in additional proceeds were received on new mortgage.

In May 2020, the Company acquired an additional 26.25% interest in NVD by issuing 386,035 common shares at par value of $0.001 which resulted in a total investment of 63.75%.

West Coast Ventures

On March 29, 2019, the Company entered into a definitive agreement to acquire Western Coast Ventures, Inc. (“WCV”). At the time of acquisition, WCV was a shell with cash of $2,000,000 and a 51% ownership with ILCA Holdings, Inc. (“ILCA”). At the time of acquisition of WCV, ILCA was also a shell with no operations, which has been issued a limited Conditional Use Permit for a Marijuana Production Facility (a “MPF”) by the City of San Diego, California, which will only be granting a total of 40 MPFs. As consideration for the acquisition, the Company issued 2,500,000 shares of its common stock, with a fair value of approximately $4.4 million or $1.47 per share, the Company’s closing stock price on March 29, 2019. The Company recorded $2.0 million of cash acquired and a $2.4 million investment in ILCA. The Company has recorded $3.8 million intangible assets (cannabis licenses) in connection with the acquisition of WCV and a $1.35 million non-controlling interest in connection with this acquisition. Included in Intangible assets, as of June 30, 2021, and September 30, 2020, the Company reported $1.35 million related to this acquisition.

Michigan RE 1

On January 4, 2021, the Company entered into a Securities Purchase Agreement (“SPA”) with Michigan RE 1, Inc. (“MRE1”) pursuant to a private placement offering of up to an aggregate amount of $510 comprising up to 510 shares of MRE1’s common stock. On January 5, 2021, the Company was party to an Asset Purchase Agreement between Leoni Wellness, LLC (“Seller”) and Organic Guyz, LLC (“Purchaser”) whereas the Seller is engaged in the recreational cannabis business and the Purchaser desires to purchase the local municipal license to operate an adult use retailer in the City of Kalamazoo, Michigan. The purchase price to be paid by the Purchaser is $400,000. A non-refundable deposit of $250,000, except in the event of a material breach of the SPA, is due within three days of the executed SPA. The deposit will be acknowledged by an execution of a joint escrow agreement. At closing the Purchaser will pay $250,000 to the Seller by cashiers check or wire transfer. The remaining $150,000 shall be paid by the Purchaser to the Seller in accordance with a promissory note to be executed at closing. The promissory note shall be paid in full on the earlier of the date the Purchaser purchases the real property located at 3928 Portage Street, Kalamazoo, Michigan or eighteen months from the closing date. The promissory note shall be secured by an escrow agent whereby three hundred thousand (300,000) shares (“Shares”) of Stem Holdings shall be held in the benefit of Seller and a Collateral Assignment of Licenses and Permits whereby upon default on the promissory note, the Purchaser shall assign the marijuana business permit back to the Seller. Upon the maturity date of the promissory note, in the event that the borrower has not paid the principal balance of the note in full, Seller shall have the option to receive the Shares as payment or $150,000 by wire transfer. Included in Investments in affiliates, as of June 30, 2021, the Company reported $235,467 related to this investment.

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Non-Controlling Interests

9 Months Ended

Jun. 30, 2021

Noncontrolling Interest [Abstract]

Non-Controlling Interests

9. Non-Controlling Interests

Non-controlling interests in consolidated entities are as follows (in thousands):

	As of September 30, 2020
	NCI Equity Share		Net Loss Attributable to NCI			NCI in Consolidated Entities		Non-Controlling Ownership %
NVD RE Corp.	$	597	$	(48	)	$	549		50.0	%
Western Coast Ventures, Inc.		1,288		(240	)		1,048		49.0	%
YMY Ventures, Inc.		447		(204	)		243		50.0	%
	$	2,332	$	(492	)	$	1,840

		As of June 30, 2021
		NCI Equity Share		Net Loss Attributable to NCI			NCI in Consolidated Entities		Non-Controlling Ownership %
NVD RE Corp.	$	578	$	(25	)	$	553		63.8	%
Western Coast Ventures, Inc.	$	1,048		(150	)		898		49.0	%
YMY Ventures, Inc.	$	243		30			273		50.0	%
Michigan RE 1, Inc.	$	-		(25	)		(25	)	51.0	%
	$	1,869	$	(170	)	$	1,699

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Business Combination

9 Months Ended

Jun. 30, 2021

Business Combination and Asset Acquisition [Abstract]

Business Combination

10. Business Combination

Seven Leaf Ventures Corp. (“7LV”)

In March 2020, the Company acquired 100% of the voting interest in Seven Leaf Ventures Corp. (“7LV”), a private Alberta corporation, and its subsidiaries, pursuant to the terms of a share purchase agreement dated March 6, 2020. 7LV owns Foothills Health and Wellness, a medical dispensary, in the greater Sacramento, California area. In connection with the acquisition, the Company issued 12,085,770 shares of common stock to former shareholders of 7LV (“7LV Shares”). The Company also issued a replacement 10% unsecured convertible debentures in the aggregate principal amount of C$3,410 ($2,540 USD) (the “Replacement Debentures”), convertible into shares at a conversion price of C$1.67 per share at any time prior to May 3, 2021, to former holders of unsecured convertible debentures of 7LV. As part of the Acquisition, the Company assumed the obligations of 7LV with respect to the common share purchase warrants of 7LV outstanding on the closing of the acquisition, subject to appropriate adjustments to reflect the exchange ratio. Accordingly, the Company has assumed 1,022,915 common share purchase warrants (the “Warrants”), exercisable into shares at an exercise price of C$2.08 per share at any time prior to May 3, 2021, 299,975 Warrants, exercisable into shares at an exercise price of C$4.17 per share at any time prior to June 30, 2021 and 999,923 Warrants, exercisable into shares at an exercise price of C$0.50 at any time prior to October 10, 2020. Following the completion of the acquisition, 7LV is now a wholly owned subsidiary of the Company.

The table below shows the warrant liability and embedded derivative liability recorded in connection with the 7LV convertible notes and the subsequent fair value measurement during the quarter ended June 30, 2021 in USD, (in thousands):

	Warrant Liability			Derivative Liability
Balance as of September 30, 2020	$	60		$	54
Issuance		-			-
Change in fair value		(60	)		(39	)
Balance as of December 31, 2020		-			15
Issuance		-			-
Change in fair value		-			-
Balance as of March 31, 2021		-			15
Issuance		-
Change in fair value		-			(15	)
Balance as of June 30, 2021	$	-		$	-

Purchase Price Allocation

As of March 6, 2020, the Company allocated the purchase consideration to the fair value of the assets acquired and liabilities assumed as summarized in the table below (in thousands):

Consideration Paid (in thousands)
Estimated fair value of common stock issued	$	9,552
Estimated fair value of warrants issued		772
Estimated fair value of debt issued		2,540
Estimated fair value of embedded and bifurcated derivatives		244
Forgiveness of working capital advance		(150	)
Total consideration paid	$	12,958
Assets acquired: (in thousands)
Cash and cash equivalents	$	81
Fixed assets		54
Inventory		133
Goodwill		6,151
Intangible assets		7,684
Total assets acquired	$	14,103
Liabilities assumed: (in thousands)
Accrued expenses and other current liabilities		1,145
Total liabilities assumed	$	1,145
Net assets acquired (in thousands)	$	12,958

Pursuant to the Asset Purchase Agreement (“APA”) between 7LV USA Corporation and the Company, upon the one-year anniversary date of the closing the Company shall pay 7LV USA Corporation additional consideration of $1,220,000 less certain adjustments related to revenue targets per the APA less Consultant Compensation paid to the prior owners of 7LV USA Corporation. The goodwill of $5.9 million will not be deductible for income tax purposes.

Driven

In December 2020, the Company, through an Agreement and Plan of Merger became the parent of an 100% wholly owned subsidiary Driven Deliveries, Inc., (“DRVD”, “Driven” or “Driven Deliveries”), its subsidiaries, a publicly held corporation on December 29, 2020. DRVD is an e-commerce and DaaS (delivery-as-a-service) provider with proprietary logistics and omnichannel UX/CX technology. Driven utilizes its own fulfillment centers, drivers, and proprietary technology. Driven provides two service levels to its customers: (i) an “Express” delivery with a limited product selection that is usually delivered within 90 minutes or less; and (ii) a “Next Day” scheduled delivery from a larger selection of 500+ products from a Driven fulfillment center. In connection with the acquisition, the Company issued 101,968,944 shares of common stock to the existing shareholders of Driven (“DRVD Shares”). As part of the Acquisition, the Company assumed the Driven stock options outstanding on the closing of the acquisition in the amount of 4,530,495. Accordingly, the Company has assumed 30,249,184 common share purchase warrants (the “Warrants”), exercisable into shares at an average exercise price of $.54 per share. Following the completion of the acquisition, Driven is now a wholly owned subsidiary of the Company.

The table below shows the warrant liability and embedded derivative liability recorded in connection with the Driven convertible notes and the subsequent fair value measurement during the nine months ended June 30, 2021 in USD, (in thousands):

	Warrant Liability			Derivative Liability
Balance as of September 30, 2020	$	-		$	-
Warrants acquired		9,000			-
Warrants converted into equity		(4,589	)
Change in fair value		(210	)		-
Balance as of June 30, 2021	$	4,201		$	-

The following unaudited proforma condensed consolidated results of operations have been prepared as if the acquisition of Driven had occurred October 1, 2019.

	Nine months ended			Nine months ended
	June 30, 2021			June 30, 2020
Revenue	$	31,396		$	18,410
Net income (loss)	$	(10,206	)	$	(20,406	)

Purchase Price Allocation

As of December 29, 2020, the Company allocated the purchase consideration to the fair value of the assets acquired and liabilities assumed as summarized in the table below (in thousands):

Consideration Paid (in thousands)

Consideration Paid (in thousands)
Estimated fair value of common stock issued	$	42,825
Estimated fair value of warrants issued		9,000
Estimated fair value of options issued		500
Estimated fair value of debt assumed		4,389
Total consideration paid	$	56,714
Assets acquired: (in thousands)
Cash and cash equivalents	$	-
Fixed assets		47
Other Assets		1,526
Goodwill		10,840
Intangible assets		48,200
Total assets acquired	$	60,613
Liabilities assumed: (in thousands)
Accrued expenses and other current liabilities		(3,899	)
Total liabilities assumed	$	(3,899	)
Net assets acquired (in thousands)	$	56,714

During the quarter ended June 30, 2021, goodwill was increased by $1.0 million, resulting from the discovery of unrecorded Driven liabilities at the time of acquisition.

The goodwill of $10.8 million will not be deductible for income tax purposes.

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Intangible Assets, net

9 Months Ended

Jun. 30, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets, net

11. Intangible Assets, net

Intangible assets as of June 30, 2021 and September 2020 (in thousands):

	Estimated Useful Life		Cannabis Licenses		Tradename		Customer Relationship		Non-compete		Technology		Accumulated Amortization			Net Carrying Amount
Balance as September 30, 2020			$	12,679	$	458	$	643	$	220	$	-	$	(730	)	$	13,270
YMY Ventures		15		-		-		-		-		-		(38	)		(38	)
Western Coast Ventures, Inc.		15		-		-		-		-		-		(122	)		(122	)
Yerba Buena		3-15 years		-		-		-		-		-		(129	)		(129	)
Foothill (7LV)		15		-		-		-		-		-		(392	)		(392	)
Driven Deliveries		10-15 years		44,000		1,800		600		-		1,800		(1,694	)		46,506
Other		5		-		-		-		-		-		-			-
Balance as June 30, 2021			$	56,679	$	2,258	$	1,243	$	220	$	1,800	$	(3,105	)	$	59,095

Actual amortization expense to be reported in future periods could differ from these estimates as a result of new intangible

asset acquisitions, changes in useful lives or other relevant factors or changes. Amortization expense for the three and nine months ended June 30, 2021 was $1,086 and $2,380, respectively. Amortization expense for the three and nine months ended June 30, 2020 was $172 and $430, respectively.

The following table is a runoff of expected amortization in the following 5-year period as of June 30:

2021	$	1,037
2022		4,147
2023		4,147
2024		4,147
2025		4,147
Thereafter		41,470
	$	59,095

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Accounts payable and accrued expenses

9 Months Ended

Jun. 30, 2021

Payables and Accruals [Abstract]

Accounts payable and accrued expenses

12. Accounts payable and accrued expenses

Accounts payable and accrued expenses consist of the following (in thousands):

	June 30, 2021		September 30, 2020
Accounts payable		3,399	$	1,784
Accrued credit cards		36		41
Accrued interest		152		134
Accrued payroll		928		616
Other		3,616		408
Total Accounts Payable and Accrued Expenses	$	8,131	$	2,983

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Notes Payable and Advances

9 Months Ended

Jun. 30, 2021

Debt Disclosure [Abstract]

Notes Payable and Advances

13. Notes Payable and Advances

The following table summarizes the Company’s short-term notes and advances, acquisition note payable, due to related party loans, and long-term debt, mortgages as of the quarter ended June 30, 2021, and year ended September 30, 2020:

	June 30,		September 30,
	2021		2020
Equipment financing	$	32	$	27
Insurance financing		229		177
Mortgages payable		-		923
Promissory note		425		2,298
Settlement payable		95		-
Due to related party		1		200
	$	782	$	3,625
Acquisition notes payable		538		665
Total notes payable and advances	$	1,320	$	4,290
Long-term mortgages		3,200		3,685
Total long-term debt	$	3,200	$	3,685

Equipment financing

In Effective April 29, 2018, the Company entered into a 36-month premium finance agreement in consideration for a John Deere Gator Tractor in the principal amount of $15,710. The note bears no annual interest rate and requires the Company to make thirty-six monthly payments of $442 over the term of the note. As of June 30, 2021, the obligation outstanding is $442. No amount was recorded for the premium for the non-interest-bearing feature of the note as it was immaterial. The note is secured by the equipment financed.

November 2017, the Company entered into a promissory note in the amount of $21,749 from a vendor of the Company to finance the acquisition of a security electronics system in one of its properties. The promissory note bears an interest rate of 18% per annum and contains a 10% servicing fee. The note matures 24 months after issuance and is secured by certain security electronics purchased with proceeds of the note. This vendor is now out of business, consequently, the Company recorded the balance of the note payable of $14,950 as a gain on forgiveness of debt in the nine months ended June 30, 2021.

Pursuant to the Company’s acquisition of Yerba Buena the Company assumed a note payable obligation dated July 2017 related to a tractor which had a 60-month premium finance agreement. The principal amount was $28,905. The note bears no annual interest rate and requires the Company to make sixty monthly payments of $482 over the term of the note. As of June 30, 2021, the obligation outstanding is $5,757. No amount was recorded for the premium for the non-interest-bearing feature of the note as it was immaterial. The note is secured by the equipment financed.

January 2021, the Company entered into a promissory note in the amount of $27,880 for the acquisition of a truck. The promissory note bears an interest rate of 13.29% per annum and is secured by the financed vehicle. The note has a sixty-month term with monthly payment of $642. As of June 30, 2021, the balance outstanding is $26,176.

Insurance financing

Effective February 7, 2020, the Company entered into a 12-month premium finance agreement in partial consideration for an insurance policy in the principal amount of $300,150. The note bears an annual interest rate of 7.46%. The Company paid $60,255 as a down payment on February 7, 2020, the note requires the Company to make 9 monthly payments of $22,718 over the remaining term of the note. This note was paid in full in January 2021.

Effective February 17, 2021, the Company entered into a 12-month premium finance agreement in partial consideration for an insurance policy in the principal amount of $243,284. The note bears an annual interest rate of 7.46%. The Company paid $47,100 as a down payment on February 17, 2021, the note requires the Company to make 10 monthly payments of $17,835 over the remaining term of the note. As of June 30, 2021, the obligation outstanding is $124,845.

Effective July 31, 2020, the Company entered into a 10-month premium finance agreement in partial consideration for an insurance policy in the principal amount of $53,325. The note bears an annual interest rate of 7.5%. The Company paid $15,602 as a down payment on July 31, 2020, the note requires the Company to make 10 monthly payments of $3,772 over the remaining term of the note. As of June 30, 2021, the obligation was paid in full.

Effective July 31, 2020, the Company entered into a 10-month premium finance agreement in partial consideration for an insurance policy in the principal amount of $78,056. The note bears an annual interest rate of 7.5%. The Company paid $22,984 as a down payment on July 31, 2020, the note requires the Company to make 10 monthly payments of $5,507 over the remaining term of the note. As of June 30, 2021, the obligation was paid in full.

Effective May 24, 2020, the Company entered into a 9-month premium finance agreement in partial consideration for an insurance policy in the principal amount of $16,777. The note bears an annual interest rate of 8.7%. The Company paid $3,485 as a down payment on May 24, 2020, the note requires the Company to make 9 monthly payments of $1,339 over the remaining term of the note. This note was paid in full in January 2021.

Effective July 16, 2020, the Company entered into a 9-month premium finance agreement in partial consideration for an insurance policy in the principal amount of $10,629. The note bears an annual interest rate of 11%. The Company paid $4,009 as a down payment on July 16, 2020, the note requires the Company to make 9 monthly payments of $736 over the remaining term of the note. As of June 30, 2021, the obligation was paid in full.

Effective September 30, 2020, the Company entered into a 10-month premium finance agreement in partial consideration for an insurance policy in the principal amount of $2,611. The note bears an annual interest rate of 7.0%. The Company paid $1,043 as a down payment on September 30, 2020, the note requires the Company to make 10 monthly payments of $157 over the remaining term of the note. As of June 30, 2021, the obligation outstanding is $157.

Effective November 7, 2020, the Company entered into a 10-month premium finance agreement in partial consideration for an insurance policy in the principal amount of $6,675. The note bears an annual interest rate of 11.4%. The Company paid $1,371 as a down payment on November 7, 2020, the note requires the Company to make 10 monthly payments of $530 over the remaining term of the note. As of June 30, 2021, the obligation outstanding is $1,061.

Effective December 4, 2020, the Company entered into a 10-month premium finance agreement in partial consideration for an insurance policy in the principal amount of $9,920. The note bears an annual interest rate of 12.8%. The Company paid $2,383 as a down payment on December 4, 2020, the note requires the Company to make 10 monthly payments of $754 over the remaining term of the note. As of June 30, 2021, the obligation outstanding is $3,014.

Effective February 9, 2021, the Company entered into a 12-month premium finance agreement in consideration for an insurance policy in the principal amount of $22,391. In April 2021, the Company added an additional location to the policy which increased the policy premium by $7,575. The revised policy premium is $29,967. The note bears an annual interest rate of 8.5%. The Company paid $2,488 as a down payment on March 9, 2021, the note requires the Company to make 8 monthly payments of $3,435 over the remaining term of the note. As of June 30, 2021, the obligation outstanding is $16,227.

Effective February 24, 2021, the Company entered into a 12-month premium finance agreement in partial consideration for an insurance policy in the principal amount of $13,694. The note bears an annual interest rate of 7.369%. The Company paid $3,424 as a down payment on April 19, 2021, the note requires the Company to make 9 monthly payments of $1,199 over the remaining term of the note. As of June 30, 2021, the obligation outstanding is $8,392.

Effective April 10, 2021, the Company entered into a 12-month premium finance agreement for an insurance policy in the principal amount of $78,750. The note bears an annual interest rate of 8.35%. The Company paid $15,750 as a down payment on May 10, 2021, the note requires the Company to make 9 monthly payments of $7,271 over the remaining term of the note. As of June 30, 2021, the obligation outstanding is $50,898.

Effective April 17, 2021, the Company entered into a 12-month premium finance agreement for an insurance policy in the principal amount of $23,014. The note bears an annual interest rate of 11.98%. The Company paid $4,871 as a down payment on March 16, 2021, the note requires the Company to make 10 monthly payments of $1,814 over the remaining term of the note. As of June 30, 2021, the obligation outstanding is $10,886.

Effective May 31, 2021, the Company entered into a 12-month premium finance agreement for an insurance policy in the principal amount of $8,906. The note bears an annual interest rate of 10.25%. The Company paid $2,537 as a down payment on May 28, 2021, the note requires the Company to make 9 monthly payments of $741 over the remaining term of the note. As of June 30, 2021, the obligation outstanding is $6,667.

Effective July 16, 2021, the Company entered into a 9-month premium finance agreement in partial consideration for an insurance policy in the principal amount of $10,650. The note bears an annual interest rate of 11%. The Company paid $4,113 as a down payment on June 30, 2021, the note requires the Company to make 9 monthly payments of $726 over the remaining term of the note. As of June 30, 2021, the obligation outstanding is $6,538.

Short-term mortgages payable

On January 16, 2018, the Company consummated a “Contract for Sale” for a Farm Property in Mulino Oregon (the “Mulino Property”). The purchase price was $1,700,000 which was reduced by a rental credit of approximately $135,000 which is equivalent to nine months’ rent at $15,000 a month and an additional credit of $9,500 for additional work done on the property. In connection with the purchase of the property, the Company made a cash payment as down payment plus payment of closing costs in the amount of $370,637 and issued a promissory note in the amount of $1,200,000 with a maturity of January 2020. The Company will pay monthly installments of principal and interest (at a rate of 2% per annum) in the amount of $13,500, commencing in July 2018 through the maturity date (January 2020), at which time the entire unpaid principal balance and any remaining accrued interest shall be due and payable in full. No amount was recorded for the premium for the below market rate feature of the note as it was immaterial. The note is secured by a deed of trust on the property. The Company performed an analysis and determined that the rate obtained was below market, however, no premium was recorded as the Company determined it was immaterial. As of June 30, 2021, the balance due of $922,500 including interest and fees in the amount of $144,486 was satisfied in full through the Company obtaining a new mortgage on the property (see Long-term mortgages below).

Promissory note

In January 2020, the Company issued two promissory notes with a principal balance of $500,000 to accredited investors (the “Note Holders”). The notes mature in July 2020 and has an annual rate of interest of 12%. In connection with the issuance of the promissory notes, the Company issued the Note Holders 100,000 common stock purchase warrants with a five-year term from the issuance date, $0.85 per share. As of July 2020, in consideration of the warrants being amended to $0.45 per share with an extended the term from five to a ten-year term, the maturity date has been extended to December 13, 2020. In May 2020, the Company made a principal payment of $20,000. As of June 30, 2021, these obligations were converted into equity.

In January 2020, the Company issued two promissory notes with a principal balance of $500,000 to accredited investors (the “Note Holders”). The note matures in October 2020 and has an annual rate of interest of 12%. In connection with the issuance of the promissory note, the Company issued the Note Holders 100,000 common stock purchase warrants with a five-year term from the issuance date, $0.85 per. As of July 2020, in consideration of the warrants being amended to $0.45 per share with an extended the term from five to a ten-year term, the maturity date has been extended to December 13, 2020. As of June 30, 2021, the obligation outstanding is $500,000 and the balance is $425,523, net of debt discount of $74,477. The Company was notified that the maturity dates on these notes have been extended for the near-term.

Settlement payable

As part of the Agreement and Plan of Merger with Driven Deliveries the Company assumed a settlement payable related to an employment claim where Driven shall pay certain employees a total of $250,451. This settlement is payable in equal bi-monthly payments over a period of seventeen (17) Months (36 pay periods), beginning in February 2021. As of June 30, 2021, the settlement payable is presented on the balance sheet in the amount of $95,451.

Due to related parties

During November 2017, one of the Company’s controlled subsidiaries entered into a Promissory Note with a face value of $80,000 with a corporate entity that has shareholders, officers and directors in common with the Company. The Note bears interest at a rate of 6% per annuum and was due one year from the date of issue. On June 1, 2021, the note was forgiven and fully cancelled by the issuer. As of June 30, 2021, the obligation outstanding is zero.

As of June 30, 2021, the Company had a related party loan payable of $1,000 payable to the Company’s officer.

Acquisition notes payable

In April 2019, the Company entered into promissory note with a principal balance of $400,000 related to its acquisition of Yerba Buena, Oregon LLC. The note was issued on April 8, 2019 and is due on April 8, 2021. The note has a coupon interest rate of 8%. The note required 12 monthly payments of $2,667, then an additional 12 monthly payments of $16,667 and then a final balloon payment of the remaining principal and accrued interest. In March 2021, the Company paid $61,860 of the principal balance of the promissory note. The remaining balance of $295,859 was converted into equity.

In September 2018, the Company entered into an agreement to acquire 50% of the membership interest of YMY. The purchase price for the 50% interest was approximately $0.8 million. In connection with this agreement, as of September 30, 2019, the Company has paid approximately $500,000 and recorded a note payable of $307,500. In January 2021, the Company paid the $307,500 balance of the note payable.

As part of the Agreement and Plan of Merger with Driven Deliveries the Company assumed a acquisition liabilities totaling $2,000,418. These liabilities related to a California’s Private Attorney General Act (“PAGA”) labor claims, liabilities related to a Purchase Agreement for certain assets, and a settlement related to a prior acquisition. In February 2021, the Company executed a settlement agreement to remove $850,000 of debt and retire 5,000,000,000 warrants in exchange for 500,000 common shares of restricted stock. In March 2021, the Company paid $612,291 of debt and recorded forgiveness of debt of $37,708 related to another settlement agreement. As of June 30, 2021, the total assumed liabilities are $930,763, the current portion of this obligation is $537,931.

Long-term debt, mortgages

In January 2020, the Company refinanced a mortgage payable on property located in Oregon to acquire additional funds. The mortgage bears interest at 15% per annum. Monthly interest only payments began February 1, 2020 and continue each month thereafter until paid. The entire unpaid balance is due on January 31, 2022, the maturity date of the mortgage, and is secured by the underlying property. The mortgage terms do not allow participation by the lender in either the appreciation in the fair value of the mortgaged real estate project or the results of operations of the mortgaged real estate project. The note has been cross guaranteed by the CEO and Director of the Company. As of June 30, 2021, the obligation outstanding is $400,000.

In March 2020, the Company executed a $1,585,000 mortgage payable on property located in Oregon to acquire additional funds. The mortgage bears interest at 11.55% per annum. Monthly interest only payments began April 1, 2020 and continue each month thereafter until paid. The entire unpaid balance is due on April 1, 2023, the maturity date of the mortgage, and is secured by the underlying property. The Company paid costs of approximately $120,000 to close on the mortgage. The mortgage terms do not allow participation by the lender in either the appreciation in the fair value of the mortgaged real estate project or the results of operations of the mortgaged real estate project. The note has been cross guaranteed by the CEO and Director of the Company. On May 14, 2021, the Company exercised the purchase leaseback option of the original lease and sold the property back to the original owner. As of June 30, 2021, there was no obligation related to this property.

In March 2020, the Company executed a $400,000 mortgage payable on property located in Oregon to acquire additional funds. The mortgage bears interest at 11.55% per annum. Monthly interest only payments began May 1, 2020 and continue each month thereafter until paid. The entire unpaid balance is due on April 1, 2022, the maturity date of the mortgage, and is secured by the underlying property. The Company paid costs of approximately $38,000 to close on the mortgage. The mortgage terms do not allow participation by the lender in either the appreciation in the fair value of the mortgaged real estate project or the results of operations of the mortgaged real estate project. The note has been cross guaranteed by the CEO and Director of the Company. As of June 30, 2021, the obligation outstanding is $400,000.

In March 2020, the Company refinanced a mortgage payable on property located in Oregon to acquire additional funds. The mortgage bears interest at 15% per annum. Monthly interest only payments began April 1, 2020 and continue each month thereafter until paid. The entire unpaid balance is due on March 31, 2022, the maturity date of the mortgage, and is secured by the underlying property. The mortgage terms do not allow participation by the lender in either the appreciation in the fair value of the mortgaged real estate project or the results of operations of the mortgaged real estate project. The note has been cross guaranteed by the CEO and Director of the Company. As of June 30, 2021, the obligation outstanding is $700,000.

In July 2020, the Company executed a mortgage payable on property located in Oregon to acquire additional funds. The mortgage bears interest at 14% per annum. Monthly interest only payments began August 1, 2020 and continue each month thereafter until paid. The entire unpaid balance is due on July 31, 2023, the maturity date of the mortgage, and is secured by the underlying property. The mortgage terms do not allow participation by the lender in either the appreciation in the fair value of the mortgaged real estate project or the results of operations of the mortgaged real estate project. The note has been cross guaranteed by the CEO and Director of the Company. As of June 30, 2021, the obligation outstanding is $200,000.

In April 2018, the Company received a 37.5% interest in NVD RE Corp. (“NVD”) upon its issuance to NVD of a commitment to contribute $1.275 million to NVD which included the purchase price of $600,000 and an additional commitment to pay tenant improvement costs of $675,000. In the year ended September 30, 2019, NVD obtained $300,000 in proceeds from a mortgage on its property. The funds from this mortgage were advanced to the Company. The advance is undocumented, non-interest bearing and due on demand. As of September 30, 2019, the balance due totals $300,000. In August 2020, the Company refinanced this obligation and paid the $300,000 balance. The refinanced mortgage term is 36 months and includes and interest rate of 14% and monthly interest only payments of $4,667. As of June 30, 2021, the balance due totals $400,000.

In November 2020, the Company executed a mortgage payable on property located in Mulino, Oregon to acquire additional funds. The mortgage bears interest at 15% per annum. Monthly interest only payments began December 1, 2020 and continue each month thereafter until paid. The entire unpaid balance is due on November 2022, the maturity date of the mortgage, and is secured by the underlying property. The mortgage terms do not allow participation by the lender in either the appreciation in the fair value of the mortgaged real estate project or the results of operations of the mortgaged real estate project. The note has been cross guaranteed by the CEO and Director of the Company. As of June 30, 2021, the obligation outstanding is $1,100,000.

The following is a table of the 5-year runoff of our long-term debt as of December 31:

2021	$	-
2022		2,600
2023		600
2024		-
2025		-
Thereafter		-
	$	3,200

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Convertible debt

9 Months Ended

Jun. 30, 2021

Convertible Debt

Convertible debt

14. Convertible debt

Canaccord

On December 27, 2018, the Company entered into an Agency Agreement (the “Agency Agreement”) for a private offering of up to 10,000 convertible debenture special warrants of the Company (the “CD Special Warrants”) for aggregate gross proceeds of up to CDN$10,000,000 (the “Offering”). The net proceeds of the Offering were used for expansion initiatives and general corporate purposes. The Company’s functional currency is U.S. dollars.

In December 2018 and January 2019, the Company issued 3,121 CD Special Warrants in the first closing of the Offering, at a price of CDN $1,000 per CD Special Warrant, and received aggregate gross proceeds of CDN $3.1 million or $2.3 million USD. In connection with this offering, the Company issued the agents in such offering 52,430 convertible debenture special warrants (the “Broker CD Special Warrants”) as partial satisfaction of a selling commission.

On March 14, 2019, the Company issued 962 CD Special Warrants in the second and final closing of the Offering, at a price of CDN $1,000 per CD Special Warrant, and received aggregate gross proceeds of CDN $1.0 million or $0.7 million USD. In connection with this offering, the Company issued the agents in such offering 5,600 convertible debenture special warrants (the “Broker CD Special Warrants”) as partial satisfaction of a selling commission.

The total aggregate proceeds of the Offering totaled $4.1 million CDN or $3.1 million USD.

Each CD Special Warrant will be exchanged (with no further action on the part of the holder thereof and for no further consideration) for one convertible debenture unit of the Company (a “Convertible Debenture Unit”), on the earlier of: (i) the third business day after the date on which both (A) a receipt (the “Receipt”) for a (final) document (the “Qualification Document”) qualifying the distribution of the Convertible Debentures (as defined below) and Warrants (as defined below) issuable upon exercise of the CD Special Warrants has been issued by the applicable securities regulatory authorities in the Canadian jurisdictions in which purchasers of the CD Special Warrants are resident (the “Canadian Jurisdictions”), and (B) a registration statement (the “Registration Statement”) registering the resale of the common shares underlying the Convertible Debentures and Warrants has been declared effective by the U.S. Securities and Exchange Commission (the “Registration”); and (ii) the date that is six months following the closing of the Offering. The Company has also provided certain registration rights to purchasers of the CD Special Warrants. The CD Special Warrants were exchanged for Convertible Debenture Units after six months as U.S. and Canadian registrations were not effective at that time.

Each Convertible Debenture Unit is comprised of CDN $1,000 principal amount 8.0% senior unsecured convertible debenture (each, a “Convertible Debenture”) of the Company and 167 common share purchase warrants of the Company (each, a “Warrant”). Each Warrant entitles the holder to purchase one common share of the Company (each, a “Warrant Share”) at an exercise price of CDN $3.90 per Warrant Share for a period of 24 months following the closing of the Offering.

The Company has agreed to use its best efforts to obtain the Receipt and Registration within six months following the closing of the Offering. If the Receipt and Registration have not been obtained on or before 5:00 p.m. (PST) on the date that is 120 days following the closing of the Offering, each unexercised CD Special Warrant will thereafter entitle the holder thereof to receive, upon the exercise thereof and at no additional cost, 1.05 Convertible Debenture Units per CD Special Warrant (instead of 1.0 Convertible Debenture Unit per CD Special Warrant). Until the Receipt and Registration have been obtained, securities issued in connection with the Offering (including any underlying securities issued upon conversion or exercise thereof) will be subject to a six (6)-month hold period from the date of issue. Since the CD Special Warrants were exchanged for Convertible Debenture Units after six (6) months as U.S. and Canadian registrations were not effective at that time, the holders received 1.05 Convertible Debenture Units per CD Special Warrant.

The brokered portion of the Offering (CDN $2.5 million, $1.9 million USD) was completed by a syndicate of agents (collectively, the “Agents”). The Company paid the Agents a cash commission equal to 7.0% of the gross proceeds raised in the brokered portion of the Offering. As additional consideration, the Company issued the Agents such number of non-transferable broker convertible debenture special warrants (the “Broker CD Special Warrants”) as is equal to 7.0% of the number of CD Special Warrants sold under the brokered portion of the Offering. Each Broker CD Special Warrant shall be exchanged, on the same terms as the CD Special Warrants, into broker warrants of the Company (the “Broker Warrants”). Each Broker Warrant entitles the holder to acquire one Convertible Debenture Unit at an exercise price of CDN $1,000, until the date that is 24 months from the closing date of the Offering. The distribution of the Broker Warrants issuable upon the exchange of the Broker CD Special Warrants shall also be qualified under the Qualification Document and the resale of the common shares underlying the Broker Warrants will be registered under the Registration Statement. The Company also paid the lead agent a commission noted above of CDN$157,290, corporate finance fee equal to CDN $50,000 in cash and as to $50,000 in common shares of the Company at a price per share of CDN$3.00 plus additional expenses of CDN$20,000. In addition, the Company paid the trustees legal fees of CDN$181,365. In total the Company approx. USD $0.32 million in fees and expenses associated with the offering.

The issuance of the securities was made in reliance on the exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), for the offer and sale of securities not involving a public offering, Regulation D promulgated under the Securities Act, Regulation S, in Canada to “accredited investors” within the meaning of National Instrument 45106 and other exempt purchasers in each province of Canada, except Quebec, and/or outside Canada and the United States on a basis which does not require the qualification or registration. The securities being offered have not been registered under the Securities Act and may not be offered or sold in the United States or to, or for the account or benefit of, U.S. persons absent registration or an applicable exemption from the registration requirements.

The Convertible Debenture features contain the following embedded derivatives:

● Conversion Option - The Convertible Debentures provide the holder the right to convert all or any portion of the outstanding principal into common shares of the Company at a conversion price of C$3.00 such that 333.33 common shares are issued for each C$1,000 of principal of Convertible Debentures converted.

● Contingent Put - Upon an Event of Default, the Convertible Debentures settle for cash at the outstanding principal and interest amount (at discretion of the Indenture Trustee or upon request of Holders of 25% or more of principal of the Convertible Debentures).

● Contingent Put - Upon a Change in Control, the Convertible Debentures settle for cash at the outstanding amount and principal and interest * 105% (where Holder accepts a Change of Control Offer).

The conversion option, the contingent put feature upon an Event of Default, and the contingent put feature upon a Change in Control should be bifurcated and recognized collectively as a compound embedded derivative at fair value at inception and at each quarterly reporting period.

A five percent penalty assessed for failure to timely file a registration statement to register the stock underlying the CD special warrants.

The Company valued the warrants granted using the Black-Scholes pricing model and determined that the value at grant date was approximately $424,000 USD (this includes the warrants issued as part of the penalty for failure to timely file the required registration statement under the indenture agreement). The significant assumptions used in the valuation are as follows:

Fair value of underlying common shares	$	1.78 to $2.10
Exercise price (converted to USD)	$	2.93
Dividend yield		-
Historical volatility		85	%
Risk free interest rate		1.4% to 1.9	%

The warrants are not indexed to the Company’s own stock under ASC 815, Derivatives and Hedging. As such, the warrants do not meet the scope exception in ASC 815-10-15-74(a) to derivative accounting and therefore were accounted for as a liability in accordance with the guidance in ASC 815. The warrant liability was recorded at the date of grant at fair value with subsequent changes in fair value recognized in earnings each reporting period.

In April 2020, the Company received approval of the holders Warrant holders of the warrants and the holders debenture holders of the Convertible Debentures to reprice the convertible securities issued in connection with the Company’s special warrant financing, which closed on December 27, 2018 and June 14, 2019. The share purchase warrants of the Company issued in connection with the financing will be repriced to C$1.50 per Common Share and the convertible debentures of the Company issued in connection with the financing will be repriced to C$1.15 per common share. Additionally, the Debenture holders have approved the following amendments to the terms of the convertible debentures: (i) an extension to the maturity date of the convertible debentures to three years from the date of issuance; and (ii) an amendment to permit the Company to force the conversion of the principal amount of the then outstanding convertible debentures and any accrued and unpaid interest thereof at the new conversion price on not less than June days’ prior written notice if the closing trading price of the shares of common stock of the Company’s common shares exceeds C$1.90 for a period of 10 consecutive trading days on the CSE. The Warrant holders have also approved the inclusion of an early acceleration feature in accordance with the policies of the Canadian Securities Exchange, permitting the Company to accelerate the expiry date of the warrants should the closing trading price of the Common Shares exceed C$1.87 for a period of 10 consecutive trading days on the CSE. As of June 30, 2021, the convertible debt related to the above debentures is $3,001 thousand.

The table below shows the warrant liability and embedded derivative liability recorded in connection with the Canaccord convertible notes and the subsequent fair value measurement during the nine months ended June 30, 2021 in USD, (in thousands):

	Warrant Liability			Derivative Liability
Balance at September 30, 2020	$	67		$	592
Change in fair value		(20	)		(223	)
Balance at December 31, 2020		47			369
Change in fair value		(18	)		(34	)
Balance at March 31, 2021		29			335
Change in fair value		(27	)		(199	)
Balance at June 30, 2021	$	2		$	136

7LV

During this quarter the Company tendered a repayment of the entire principal amount of its 10% unsecured convertible debentures, being C$3,260,000, through the issuance of 5,258,053 shares of common stock of the Corporation to the holders of the Debentures in accordance with the terms of the trust indenture between the Corporation and Olympia Trust Company dated December 27, 2018, as amended and supplemented. The Corporation also made a cash payment of approximately US$30,000 to the holders of the Debentures in respect of accrued and unpaid interest as of May 3, 2021, being the maturity date of the Debentures.

Driven

As part of the Agreement and Plan of Merger with Driven Deliveries the Company assumed a convertible promissory note with a principal of $1,050,000. The note accrues interest at a rate of 8% per annum. The note converts to the Company’s common stock at a rate of $0.50 per share. This note has an original issuance discount of $50,000. The proceeds of the note were paid out in two tranches, the first for $787,500 upon the execution of the note and the second for $262,500 30 days after the original funding. Each tranche will be due 12 months from the date of the funding. The Company can prepay the note as follows: if the note is outstanding for less than 90 days than 105% of the principal will be paid, at 91-120 day 110% of the principal will be paid, at 121-180 days 115% of the principal will be paid, and at 181-365 days 120% of the principal will be paid. So long as this note is outstanding, upon any issuance by the Company or any of its subsidiaries of any convertible debt security (whether such debt begins with a convertible feature or such feature is added at a later date) with any term more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to the holder in this Note, then the Company shall notify the holder of such additional or more favorable term and such term, at the holder’s option, shall become a part of this note and its supporting documentation. The types of terms contained in the other security that may be more favorable to the holder of such security include, but are not limited to, terms addressing conversion discounts, terms addressing maturity, conversion look back periods, interest rates, original issue discount percentages and warrant coverage. The Company notes the agreement included certain make-whole provisions related to the issuance of these shares which resulted in a liability. On February 26, 2021, the Company executed a conversion and satisfaction agreement resulting in the conversion of $831,110 principal balance of this promissory note. As of June 30, 2021, the outstanding balance on this obligation is $186,000, net of the debt discount of $21,802. As of the date of this filing the balance of this obligation has been fully converted.

As part of the Agreement and Plan of Merger with Driven Deliveries the Company assumed a convertible promissory note with a principal of $50,000. The note accrues interest at a rate of 10% per annum. The note converts to the Company’s common stock at a rate of $0.50 per share. The interest on the promissory note is to be paid quarterly in arrears on the fifth day of each calendar quarter. The principal amount of the note is due on the maturity date of June 30, 2021. As of June 30, 2021, the outstanding balance on this obligation is $50,000.

The table below shows the net amount of convertible notes as of June 30, 2021 in USD (in thousands):

	June 30, 2021
Principal value of 8%, convertible at $0.91 at June 30, 2021, due December 27, 2021 including penalty provision of $155,239	$	2,954
Principal value of 10%, convertible at $1.32 at June 30, 2021, due May 30, 2021 (see Note 10), as of the date of this filing the balance of this obligation has been fully converted		-
Principal value of various convertible notes, convertible at $0.50 at June 30, 2021, due June – August, 2021		100
Debt discount		-
Cumulative foreign currency impact		47
Carrying value of convertible notes	$	3,101

Additionally, as part of the Agreement and Plan of Merger with Driven Deliveries the Company assumed a convertible promissory note with a principal of $805,000 payable to a related party. The note accrues interest at a rate of 10% per annum. The note converts to the Company’s common stock at a rate of $0.50 per share. Beginning January 1, 2021, $15,000 of principal is payable per month in addition to 50% of owed interest. Beginning April 1, 2021, 10% of the Company’s monthly cash flow, as defined will also be paid and applied to the principal of the note. The principal amount of the note along with accrued interest is due on the maturity date of June 1, 2025. As of June 30, 2021, the outstanding balance on this obligation is $805,000.

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Fair Value Measurements

9 Months Ended

Jun. 30, 2021

Fair Value Disclosures [Abstract]

Fair Value Measurements

15. Fair Value Measurements

In accordance with ASC 820 (Fair Value Measurements and Disclosures), the Company uses various inputs to measure the outstanding warrants and certain embedded conversion feature associated with convertible debt on a recurring basis to determine the fair value of the liability. ASC 820 also establishes a hierarchy categorizing inputs into three levels used to measure and disclose fair value. The hierarchy gives the highest priority to quoted prices available in active markets and the lowest priority to unobservable inputs. An explanation of each level in the hierarchy is described below:

Level 1 – Unadjusted quoted prices in active markets for identical instruments that are accessible by the Company on the measurement date

Level 2 – Quoted prices in markets that are not active or inputs which are either directly or indirectly observable

Level 3 – Unobservable inputs for the instrument requiring the development of assumptions by the Company

The following table classifies the Company’s liabilities measured at fair value on a recurring basis into the fair value hierarchy as of June 30, 2021 (in thousands):

	Fair value measured at June 30, 2021
			Quoted prices in		Significant other observable		Significant unobservable
			active markets		inputs		inputs
	Fair value		(Level 1)		(Level 2)		(Level 3)
Warrant liability	$	4,444	$	-	$	-	$	4,444
Embedded derivative liability		136		-		-		136
Total fair value	$	4,580	$	-	$	-	$	4,580

There were no transfers between Level 1, 2 or 3 during the quarter ended June 30, 2021.

The following table presents changes in Level 3 liabilities measured at fair value for the nine months ended June 30, 2021. Both observable and unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category. Unrealized gains and losses associated with liabilities within the Level 3 category include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long- dated volatilities) inputs (in thousands).

				Embedded
	Warrant Liability			Derivative Liability			Total
Balance – September 30, 2020	$	257		$	592		$	849
Warrants granted for services		11			-			11
Warrants issued pursuant to acquisition (see Note 10)		9,000			-			9,000
Change in fair value		(90	)		(208	)		(298	)
Balance – December 31, 2020		9,178			384			9,562
Change in fair value		6,278			(34	)		6,244
Warrants forfeited due to settlement agreement		(4,590	)		-			(4,590	)
Balance – March 31, 2021		10,866			350			11,216
Warrants issued pursuant to subscription agreement (see Note 13)		59			-			59
Final change due to completed conversion of debt		-			(15	)		(15	)
Change in fair value		(6,481	)		(199	)		(6,680	)
Balance – June 30, 2021	$	4,444		$	136		$	4,580

A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the Company’s warrant liabilities and embedded conversion feature that are categorized within Level 3 of the fair value hierarchy as of June 30, 2021 and September 30, 2020 is as follows:

	Warrant Liability
	As of			As of
	June 30, 2021			September 30, 2020
Strike price	$	0.48		$	0.36 to 2.96
Contractual term (years)		2.82			1 to 3
Volatility (annual)		85	%		100	%
Risk-free rate		0.9	%		0.28	%
Dividend yield (per share)		0	%		0	%

	Embedded Derivative Liability
	As of June 30, 2021			As of September 30, 2020
Strike price	$	0.93		$	1.12
Contractual term (years)		1.1			1.5
Volatility (annual)		133	%		101	%
Risk-free rate		0.07	%		0.25	%
Dividend yield (per share)		0.00	%		0.00	%
Credit spread		14% to 16	%		11.21	%

The Company used a lattice based trinomial model developed by Tsiveriotis, K. and Fernades in which the three lattices incorporate (1) the Company’s underlying common stock price; (2) the value of the debt components of the convertible notes; and (3) the value of the equity component of the convertible notes. The main drivers of sensitivity for the model are volatility and the credit spread. The model used will vary by approximately 1.5% for a 4% change in volatility and will vary by less than 1% for each 1% change in credit spread.

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Shareholders’ Equity

9 Months Ended

Jun. 30, 2021

Equity [Abstract]

Shareholders’ Equity

16. Shareholders’ Equity

In 2016, the Company adopted a plan to allow the Company to compensate prospective and current employees, directors, and consultants through the issuance of equity instruments of the Company. The plan has an effective life of 10 years. The plan is administered by the board of directors of the Company until such time as the board transfers responsibility to a committee of the board. The plan is limited to issuing common shares of the Company up to 15% of the total shares then outstanding. No limitations exist on any other instruments issuable under the plan. In the event of a change in control of the Company, all unvested instruments issued under the plan become immediately vested.

Pursuant to the shareholders meeting on June 25, 2021, the Company has amended its certificate of incorporation to increase the number of authorized Company Common Shares from 300,000,000 to 750,000,000.

Preferred shares

The Company had two series of preferred shares designated with no preferred shares issued and outstanding as of June 30, 2021 and September 30, 2020.

Common shares

During the quarter ended December 31, 2020, the Company issued 1,868,750 shares of its common stock valued at $561,000 as stock-based compensation.

During the quarter ended December 31, 2020, the Company issued 1,569,570 shares of its common stock related to various consulting agreements for a fair value of approximately $589,000 or $0.38 per share.

During the quarter ended December 31, 2020, the Company cancelled 525,400 common shares related convertible notes.

During the quarter ended December 31, 2020, the Company converted $91,459 of its accrued interest related to convertible debt in exchange for 207,861 shares of the company’s common stock. The Company also issued 293,700 common shares in satisfaction of rent payments owed of $117,480.

As part of the Agreement and Plan of Merger with Driven Deliveries the Company issued 101,968,944 common shares.

During the quarter ended March 31, 2021, the Company issued 1,464,009 shares of its common stock valued at $868,250 as stock-based compensation.

During the quarter ended March 31, 2021, the Company issued 1,262,500 shares of its common stock related to various consulting agreements for a fair value of approximately $1,097,500 or $0.87 per share.

During the quarter ended March 31, 2021, the Company issued 300,000 shares of its common stock with a fair value of $210,000 on behalf of its Michigan joint venture partner into escrow pursuant to a security agreement related to the commercial lease.

During the quarter ended March 31, 2021, the Company converted $1,975,965 of principal balance related to convertible debt in exchange for 4,054,206 shares of the company’s common stock. The Company also issued 164,366 common shares in satisfaction of interest payments owed of $121,631.

During the quarter ended March 31, 2021, the Company issued 500,000 shares of its common stock in connection with a settlement agreement for settlement liability of $5,439,855.

Pursuant to a prospectus the Company has been tendered $1.0 million and will issue 2,332,506 common shares.

During the quarter ended March 31, 2021, the Company raised $4,934,376 for the issuance of 12,097,065 shares of its common stock in connection with a private placement memorandum.

During the quarter ended June 30, 2021, the Company raised $630,000 for the issuance of 1,523,257 shares of its common stock in connection with a private placement memorandum.

During the quarter ended June 30, 2021, the Company issued 950,000 shares of its common stock related to various consulting agreements for a fair value of approximately $525,000 or $0.55 per share.

During the quarter ended June 30, 2021, the Company issued 581,750 shares of its common stock valued at $246,000 as stock-based compensation.

During the quarter ended June 30, 2021, the Company converted $2,838,000 of principal balance related to convertible debt in exchange for 5,426,053 shares of the company’s common stock.

During the quarter ended June 30, 2021, the Company issued 10,000 shares of its common stock in connection with the exercise of the company’s stock option plan.

During the quarter ended June 30, 2021, the Company issued 90,909 shares of its common stock valued at $40,000 in connection with commission expense.

During the quarter ended June 30, 2021, the Company cancelled 694,233 common shares related to investment.

During the quarter ended June 30, 2021, the Company issued 16,942,350 shares of its common stock valued at $7,278,000 pursuant to its Canadian prospectus.

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Stock Based Compensation

9 Months Ended

Jun. 30, 2021

Compensation Related Costs [Abstract]

Stock Based Compensation

17. Stock Based Compensation

Stock Options

The fair value of the Company’s common stock was based upon the publicly quoted price on the date that the final approval of the awards was obtained. The Company does not expect to pay dividends in the foreseeable future so therefore the expected dividend yield is 0%. The expected term for stock options granted with service conditions represents the average period the stock options are expected to remain outstanding and is based on the expected term calculated using the approach prescribed by the Securities and Exchange Commission’s Staff Accounting Bulletin for “plain vanilla” options for options granted in 2019. The expected term for stock options granted with performance and/or market conditions represents the period estimated by management by which the performance conditions will be met. The Company obtained the risk-free interest rate from publicly available data published by the Federal Reserve. The Company uses a methodology in estimating its volatility percentage from a computation that was based on a comparison of average volatility rates of similar companies to a computation based on the standard deviation of the Company’s own underlying stock price’s daily logarithmic returns. During the nine months ended June 30, 2021, pursuant to an employment agreement the Company issued 100,000 stock options.

The fair value of options granted during the nine months ended June 30, 2021, and 2020 were estimated using the following weighted-average assumptions:

Options:

	June 30, 2021			June 30, 2020
Exercise price	$	0.40		$	0.80 - $4.00
Expected term (years)		3.5			0.5 - 4.0
Expected stock price volatility		93	%		108.8% - 188.6	%
Risk-free rate of interest		0.28	%		1.56	%
Expected dividend rate		0	%		0%

	Number of Shares			Weighted Average Exercise Price		Total Intrinsic Value		Weighted Average Remaining Contractual Life (in years)
Outstanding as of October 1, 2019		3,210,416		$	2.45	$	-		2.1
Granted		2,362,500		$	0.33	$	-		2.89
Outstanding as of September 30, 2020		5,572,916		$	1.77	$	-		1.6
Granted		100,000		$	0.40	$	-		2.8
Outstanding as of December 31, 2020		5,672,916		$	1.73	$	-		1.4
Granted		-		$	-	$	-		-
Outstanding as of March 31, 2021		5,672,916		$	1.73	$	-		1.18
Granted		250,000		$	0.40	$	-		3.94
Expired		(2,285,000	)	$	2.39	$	-		-
Outstanding as of June 30, 2021		3,637,916		$	2.13	$	-		1.57

A summary of option activity under the Company’s stock option plan for the nine months ended June 30, 2021 is presented below:

Estimated future stock-based compensation expense relating to unvested stock options was nominal as of June 30, 2021 and 2020. Weighted average remaining contractual life of the options is .9 years.

Stock-based Compensation Expense

Stock-based compensation expense for the three months ended June 30, 2021 and 2020 was comprised of the following (in thousands):

	Three months ended June 30,
	2021		2020
Stock grants	$	525	$	6
Stock options		353		-
Warrants		-		-
Total stock-based compensation	$	878	$	6

Stock-based compensation expense for the nine months ended June 30, 2021 and 2020 was comprised of the following (in thousands):

	Nine months ended June 30,
	2021		2020
Stock grants	$	3,642	$	1,193
Stock options		492		615
Warrants		150		105
Total stock-based compensation	$	4,284	$	1,913

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Commitments and contingencies

9 Months Ended

Jun. 30, 2021

Commitments and Contingencies Disclosure [Abstract]

Commitments and contingencies

18. Commitments and contingencies

As noted earlier in Note 1, the Company, engages in a business that constitutes an illegal act under the laws of the United States Federal Government. This raises several possible issues which may impact the Company’s overall operations, not the least of which are related to traditional banking and other key operational risks. Since cannabis remains illegal on the federal level, and most traditional banks are federally insured, those financial institutions will not service cannabis businesses. In states where medical or recreational marijuana is legal, dispensary owners, manufacturers, and anybody who “touches the plant,” continue to face a host of operational hurdles. While local, state-chartered banks and credit unions now accept cannabis commerce, there remains a reluctance by traditional banks to do business with them. Aside from a huge inconvenience and the need to find creative ways to manage financial flow, payroll logistics, and payment of taxes, his also poses tremendous risks to controls as a result of operating a lucrative business in cash. This lack of access to traditional banking may inhibit industry growth. In the period ended June 30, 2021, the Company’s has accounts with a Florida bank and several credit unions located in Washington and California.

Despite the uncertainties surrounding the Federal government’s position on legalized marijuana, the Company does not believe these risks will have a substantive impact on its planned operations in the near term.

In July 2016, the Company entered into a 10-year lease for a commercial building from an unrelated third party in Springfield, Oregon. The lease requires the Company to pay a starting base rental fee of $7,033 plus an additional estimated $315 per month in real estate taxes in which the base rental fee escalates each year by approximately 2%. All taxes (including reconciling real estate taxes), maintenance and utilities are included at the end of each year as a one-time payment. In addition, the Company also remitted $14,000 for a security deposit to the landlord. No amounts have been recorded for deferred rent in these financial statements as the amount was deemed immaterial by the Company. The Company has subleased this space pursuant to a 10-year lease. On February 22, 2018, both parties executed a lease addendum that adds contiguous property for 12,322 square feet. The term commences November 1, 2017 and continues through November 31, 2026 at a starting rate of $3,525 a month that escalates after the first year. The Company subleases this property to a related party (see disclosures below under “Springfield Suites”). As of June 30, 2021, Company eliminates this rental income in consolidation.

In September 2019, the Company entered into a 4-year lease for the occupancy of the Company’s new corporate office located in Boca Raton, Florida. The lease requires the Company to pay a starting base rental fee of $4,285 per month with yearly increases thereafter. As of November 23, 2020, the Company added an additional 2,000 rentable square feet to its current lease under the same terms and conditions.

In January 2019, the Company entered into a 5-year lease for the occupancy of real estate and a building located in Hillsboro, Oregon. The lease requires the Company to pay a starting base rental fee of $9,696 per month with yearly increases thereafter.

Pursuant to the execution of a sale lease back agreement with the Company’s Wallis property, a/k/a Never Again, the Company in May 2021, entered into a 15-year lease for the Wallis commercial building from an unrelated third party located in New York, NY. The lease requires the Company to pay a starting base rental fee of $31,500 plus an additional estimated triple net charges per month including real estate taxes in which the base rental fee escalates each year by approximately 2.5%. All taxes (including reconciling real estate taxes), maintenance and utilities are included and paid monthly and reserved until payments are due. In addition, the Company also remitted $60,000 for a security deposit to the landlord.

As of June 30, 2021, the Company has acquired interests in several entities more fully described in Note 6 and Note 8. As part of those interests, the Company has commitments to fund the acquisition of licenses and permits to allow for the cultivation and sale of cannabis and related products in the United States. As of June 30, 2021, Company estimates that its investees will need up to approximately $200,000 to complete the acquisition of licenses and permits, to fund the buildout or expansion of facilities to fully operate in their respective cannabis markets, which will encompass several years of development.

In December 2020, the Company filed a preliminary short form document with the securities regulatory authorities in each of the provinces of British Columbia, Alberta and Ontario in connection with a marketed public offering of units of the Company. The Offering is being led by Canaccord Genuity Corp. Each Unit shall be comprised of one common share in the capital of the Company and one common share purchase warrant of the Company Each Warrant is exercisable into one common share at an exercise price to be determined in the context of the market. The final pricing of each Unit, the exercise price of each Warrant, and the term of each Warrant will be determined in the context of the market prior to the filing of the final short form document in respect of the Offering. The net proceeds raised under the Offering will be used for working capital and general corporate purposes.

The Company, as of June 30, 2021 executed an Agency Agreement and in consideration of the services rendered by the Agent and in connection with the Offering, the Company has agreed to pay the Agent, on the Closing Date a commission equal to 7% of the gross proceeds of the Offering (including in respect of any exercise of the Over-Allotment Option, if any) payable in cash (the “Agent’s Commission”), subject to a reduced fee equal to 1% for Units ‎sold to certain purchasers designated by the Company on a president’s list (the “President’s ‎List”). In addition the Agent will receive ‎a number of share purchase warrants (the “Broker Warrants”) to purchase up to that number of shares of common stock of the Company (each, a “Broker Share”) that is equal to 7% of the aggregate number of Units issued under the Offering ‎(including any Additional Units (as hereinafter defined) issued upon exercise of the Over-Allotment Option, if any), subject to a ‎reduced number of Broker Warrants equal to 3.5% of the Units sold to purchasers on the President’s List‎, at an exercise price of $0.55 CAD per Broker Share, exercisable for a period of 24 months following the Closing Date. Pursuant to the Agency Agreement, the Company also agreed to pay to the Agent a corporate finance fee of $100,000 CAD (the “Corporate Finance Fee”), such Corporate Finance Fee to be payable as to $50,000 CAD in cash and as to $50,000 CAD by the issuance of 90,909 shares of common stock of the Company (the “Corporate Finance Fee Shares”) at the Offering Price. After deducting the Agent’s Commission ‎(assuming no President’s List purchasers)‎, the estimated expenses of the Offering of $350,000 CAD and the cash portion of the Corporate Finance Fee, which will be paid out of the general funds of the Company‎. The Company has also granted to the Agent an over-allotment option (the “Over-Allotment Option”), exercisable in whole or in part, at the Agent’s sole discretion, to purchase up to an additional 15% of the number of Units sold pursuant to the Offering, being up to an additional 2,590,909 Units in the case of the Maximum Offering (the “Additional Units”), each Additional Unit to be comprised of one Unit Share and one Warrant, at the Offering Price to cover the Agent’s over-allocation position, if any, and for market stabilization purposes. The Over-Allotment Option is exercisable, in whole or in part, at any time or times until the date that is 30 days immediately following the Closing Date. A purchaser who acquires Additional Units forming part of the Agent’s over-allocation position acquires such Additional Units under this Prospectus, regardless of whether the over-allocation position is ultimately filled through the exercise of the Over-Allotment Option or secondary market purchases. If the Over-Allotment Option is exercised in full, the total Price to the Public, Agent’s Commission and Net Proceeds to the Company (before deducting expenses of the Offering and assuming no President’s List purchasers) will be $9,200,000 CAD, $644,000 CAD and $8,556,000 CAD, respectively, in the case of the Minimum Offering and, ‎$10,925,000 CAD, $764,750 CAD and $10,160,250 CAD, respectively, in the case of the Maximum Offering. Pursuant to the terms of the Agency Agreement, all subscription funds received from subscribers will be retained in trust by the Agent until the Minimum Offering is obtained. Once the Minimum Offering has been obtained, the sale of the Units shall be completed in accordance with the Agency Agreement. To date, all funds have been subscribed and will be held in escrow for final approval.

During the quarter ended June 30, 2021 the Company entered into an offering led by Canaccord Genuity Corp. (the “Agent”) on a ‘commercially reasonable efforts’ basis and consisted of the sale of 16,926,019 Units (including 1,471,291 Units pursuant to the partial exercise of the over-allotment option by the Agent) at a price of C$0.55 per Unit for aggregate gross proceeds of C$10,309,210 (including C$809,210.05 pursuant to the partial exercise of the over-allotment option by the Agent). Each Unit is comprised of one share in the common stock of the Company (each a “Unit Share”) and one share purchase warrant of the Company (each, a “Warrant”). Each Warrant is exercisable to acquire one share in the common stock of the Company (each, a “Warrant Share”) until April 23, 2023 at a price per Warrant Share of C$0.68, subject to adjustment in certain events. The net proceeds raised under the Offering will be used for working capital and in furtherance of some or all of the business objectives described in the final short form prospectus of the Company dated April 19, 2021 (the “Final Prospectus”). The Company has given notice to list the Unit Shares and the Warrant Shares on the Canadian Securities Exchange (the “Exchange”). Listing will be subject to the Company fulfilling all of the requirements of the Exchange. Concurrent with the Offering, the Company also conducted a non-brokered offering in the United States of 972,092 units of the Company at a price of US$0.43 per unit for aggregate gross proceeds of approximately US$420,000 under the terms of a registration statement on Form S-1, as amended, filed with the United States Securities and Exchange Commission under the U.S. Securities Act on January 5, 2021.

Legal Proceedings

D.H. Flamingo, Inc. v. Department of Taxation, et. al.

On February 27, 2020, a subsidiary of the Company (YMY Ventures, LLC) was served with a Summons and Second Amended Complaint in a matter pending in the District Court of Clark County Nevada (Case # A-19-787004-B) which is styled “D.H. Flamingo, Inc. v. Department of Taxation, et. al.” (the DOT Litigation”). In this matter, the Plaintiff is alleging that certain parties (including YMY Ventures, LLC) received Conditional Recreational Marijuana Establishment Licenses, while certain other parties (including Plaintiff) were denied licenses. In the matter, Plaintiff seeks declaratory relief, injunctive relief, relief from violation of procedural and substantive due process, violation of equal protection, unjust enrichment, judicial review of the entire matter, together with a Petition for Writ of Mandamus. The Plaintiff seeks damages in an unspecified amount. Thereafter, on April 20, 2020, YMY Ventures, LLC filed a Notice of Non-Participation and Request for Dismissal. The Company believes it will ultimately be dismissed from the action without any liability exposure. Notwithstanding, there is no guarantee at this time that this will occur, and the ultimate result of the matter could potentially be the loss of YMY Ventures, LLC’s Conditional Recreational Marijuana Establishment License. The Company believes that this result would be highly unlikely and that the matter will be fully resolved as to YMY Ventures, LLC in the near term.

Chord Advisors, LLC v. Stem Holdings, Inc., et. al.

On June 5, 2020 Chord Advisors, LLC (“Chord”) filed a Complaint in the Circuit Court of the Fifteenth Judicial District in and for Palm Beach County, Florida (Case # 502020CA006097) alleging that Stem Holdings, Inc. owes Chord approximately $260,000 on account of fees for accounting services accrued pursuant to a Letter of Agreement dated October 2019. On July 6, 2020, the Company filed an Answer and Affirmative Defenses to the Complaint. As of April 16, 2021, a joint stipulation for the order of dismissal with prejudice was recorded.

Lili Enterprises, LLC adv. YMY Ventures and OPCO, LLC

In July 2020, a dispute arose with the Company’s joint venture partner in connection with the Company’s operations in the State of Nevada. In this regard, the Company’s joint venture partner claims that it is owed certain amounts totaling approximately $307,500 pursuant to the joint venture Operating Agreement. On the other hand, the Company claims that the joint venture partner is in breach of its agreements with the Company and that the Company has heretofore advanced over $1 million in excess of its commitments under the Operating Agreement. The operative agreements require the disputes to be arbitrated. The parties have engaged an arbitrator and the matters are set for an arbitration hearing in February 2021. The Company has now settled with its joint venture partner with respect to the operating agreement, however, the Company is now in negotiating with its partner on recovering the amount of money spent in excess of its obligation for over funding the operation for tenant improvements.

Herbalcure vs Driven Deliveries, Inc.

On May 6, 2021, Herbalcure Corporation filed a Complaint for preliminary and permanent injunction in the Superior Court of California Central District County of Los Angeles (Case # 21STCV17099) alleging that Driven Deliveries owes Herbalcure Corporation approximately $1,700,000 on account of gross receipts tax, sales tax, and services accrued. Currently, the Company is in negotiations to mitigate the alleged amount owed. The Company settled the gross receipts and sales tax liability that was owed.

TrueFarma

This arbitration arose from the plaintiff’s claim that Driven adversely impacted their business. The total damages that the plaintiff is seeking is $1.0mm, which management believes has absolutely no merit. Additionally, management believes the Company can resolve this with a dismissal before costs are incurred.

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Subsequent events

9 Months Ended

Jun. 30, 2021

Subsequent Events [Abstract]

Subsequent events

19. Subsequent events

Subsequent to June 30, 2021, the Company entered into an Advisory Services Agreement, and as part of that agreement for services agreed to compensation of $12,500 a month, the issuance of 90,000 shares of the Company’s common stock and 750,000 options priced at $0.36.

Subsequent to June 30, 2021, the Company entered into a 12-month professional services agreement, and as part of that agreement for services agreed to issue 500,000 shares of the Company’s common stock.

Subsequent to June 30, 2021, the Company tendered the amount of $555,054 including principal and interest in payment of a note leaving a net principal balance totaling $352,862.

Subsequent to June 30, 2021, the Company issued 181,190 shares as payment in kind for six months of accrued interest on convertible notes.

Subsequent to June 30, 2021, the Company issued 866,000 for various consulting and service agreements.

Subsequent to June 30, 2021, Treevana Wellness, a Georgia based company was awarded a Medical Cannabis License of which the Company has a 2.5% equity investment in consideration for services.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Jun. 30, 2021

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The unaudited condensed financial statements included herein are unaudited. Such financial statements, in the opinion of management, contain all adjustments necessary to present fairly the financial position and results of operations as of and for the periods indicated. All such adjustments are of a normal recurring nature. These interim results are not necessarily indicative of the results to be expected for the year ending September 30, 2021 or for any other period. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, and because of this, for further information, readers should refer to the financial statements and footnotes included in its amended Form 10-K for the fiscal year ended September 30, 2020 filed on December 28, 2020. The Company believes that the disclosures are adequate to make the interim information presented not misleading.

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 application of accounting policies and the reported amounts of assets, liabilities, income, and expenses. The most significant estimates included in these condensed consolidated financial statements are those associated with the assumptions used to value equity instruments, valuation of its long live assets for impairment testing, valuation of intangible assets, and the valuation of inventory. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable given the circumstances that exist at the time the financial statements are prepared. Actual results may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.

Reclassifications

Reclassifications

Certain amounts in the Company’s condensed consolidated financial statements for prior periods have been reclassified to conform to the current period presentation. These reclassifications have not changed the results of operations of prior periods.

Principles of Consolidation

Principles of Consolidation

The Company’s policy is to consolidate all entities that it controls by ownership of a majority of the outstanding voting stock. In addition, the Company consolidates entities that meet the definition of a variable interest entity (“VIE”) for which it is the primary beneficiary. The primary beneficiary is the party who has the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and who has an obligation to absorb losses of the entity or a right to receive benefits from the entity that could potentially be significant to the entity. For consolidated entities that are less than wholly owned, the third party’s holding of equity interest is presented as noncontrolling interests in the Company’s Consolidated Balance Sheets and Consolidated Statements of Changes in Stockholders’ Equity. The portion of net loss attributable to the noncontrolling interests is presented as net loss attributable to noncontrolling interests in the Company’s Consolidated Statements of Operations.

In August 2016, the Company and certain shareholders of the Company entered into a “Multi Party” Agreement, in which the Company became obligated to lease or acquire three separate real estate assets, and separately, if certain events occur, additional real estate assets held by entities related to those shareholders. The Agreement also gives the Company the right of first refusal in regard to certain properties owned by the persons and entities affiliated with the parties of the Agreement so long as certain targets are met. In the quarter ended June 30, 2019, the Company issued 12,500,000 shares of its common stock for the acquisition of Consolidated Ventures of Oregon, LLC (“CVO”) and Opco Holdings, LLC (“Opco”) which comprise the entities within the Multi Party Agreement. On September 6, 2020, the Company received the regulatory approval to transfer all the licenses held under both CVO and Opco. Subsequently, the Company has completed the acquisition and as a result, the Company is no longer engaged primarily in property rental operations but has taken over the operations of its primary renters, which is the cultivation, production and sale of cannabis and related productions. Since CVO and Opco are related to the Company, the acquisition was not accounted for as a business combination at fair value under the codification sections of ASC 805. The assets and liabilities were transferred to the Company at their historical cost and the Company has included the operations of Opco and CVO for all periods presented for this period ended June 30, 2021.

The accompanying condensed consolidated financial statements include the accounts of Stem Holdings, Inc. and its wholly owned subsidiaries, Stem Holdings Oregon, Inc., Stem Holdings IP, Inc., Opco, LLC, Stem Holdings Agri, Inc., Opco Holdings, Inc., 7LV USA Corporation, and Consolidated Ventures of Oregon, Inc., and Driven Deliveries, Inc. In addition, the Company has consolidated YMY Ventures, WCV, LLC and NVD RE, Inc. under the variable interest requirements.

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents. The Company’s cash is primarily maintained in checking accounts. These balances may, at times, exceed the U.S. Federal Deposit Insurance Corporation insurance limits. As of June 30, 2021, and 2020, the Company had no cash equivalents or short-term investments. The Company has not experienced any losses on deposits of cash and cash equivalents.

Accounts Receivable

Accounts Receivable

Accounts receivable is shown on the face of the consolidated balance sheets, net of an allowance for doubtful accounts. The Company analyzes the aging of accounts receivable, historical bad debts, customer creditworthiness and current economic trends, in determining the allowance for doubtful accounts. The Company does not accrue interest receivable on past due accounts receivable. As of June 30, 2021, the reserve for doubtful accounts was $79 thousand.

Inventory

Inventory

Inventory is comprised of raw materials, finished goods and work-in-progress such as pre-harvested cannabis plants and by-products to be extracted. The costs of growing cannabis including but not limited to labor, utilities, nutrition, and irrigation, are capitalized into inventory until the time of harvest.

Inventory is stated at the lower of cost or net realizable value, determined using weighted average cost. Cost includes expenditures directly related to manufacturing and distribution of the products. Primary costs include raw materials, packaging, direct labor, overhead, shipping and the depreciation of manufacturing equipment and production facilities determined at normal capacity. Manufacturing overhead and related expenses include salaries, wages, employee benefits, utilities, maintenance, and property taxes.

Net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. At the end of each reporting period, the Company performs an assessment of inventory obsolescence to measure inventory at the lower of cost or net realizable value. Factors considered in the determination of obsolescence include slow-moving or non-marketable items.

Prepaid Expenses and Other Current Assets

Prepaid Expenses and Other Current Assets

Prepaid expenses consist of various payments that the Company has made in advance for goods or services to be received in the future. These prepaid expenses include consulting, advertising, insurance, and service or other contracts requiring up-front payments.

Property and Equipment

Property and Equipment

Property, equipment, and leasehold improvements are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Repairs and maintenance expenditures that do not extend the useful lives of related assets are expensed as incurred.

Expenditures for major renewals and improvements are capitalized, while minor replacements, maintenance, and repairs, which do not extend the asset lives, are charged to operations as incurred. Upon sale or disposition, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in operations. The Company continually monitors events and changes in circumstances that could indicate that the carrying balances of its property, equipment and leasehold improvements may not be recoverable in accordance with the provisions of ASC 360, “Property, Plant, and Equipment.” When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. See “Note 3 – Property, Equipment and Leasehold Improvements”.

Property and equipment are stated at cost less accumulated depreciation. Depreciation is provided on a straight-line method over the estimated useful lives of the assets. The Company estimates useful lives as follows:

Buildings	20 years
Leasehold improvements	Shorter of term of lease or economic life of improvement
Furniture and equipment	5 years
Signage	5 years
Software and related	5 years

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

The Company reviews the carrying value of its long-lived assets, which include property and equipment, for indicators of impairment whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable. The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company’s overall strategy with respect to the manner or use of the acquired assets or changes in the Company’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company’s stock price for a sustained period of time; and (vi) regulatory changes. The Company evaluates assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events. The Company does not test for impairment in the year of acquisition of properties, as long as those properties are acquired from unrelated third parties.

The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. In cases where estimated future net undiscounted cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of the asset or asset group. Fair value is generally determined using the assets expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated and amortized prospectively over the newly determined remaining estimated useful lives.

Equity Method Investments

Equity Method Investments

Investments in unconsolidated affiliates are accounted for under the equity method of accounting, as appropriate. The Company accounts for investments in limited partnerships or limited liability corporations, whereby the Company owns a minimum of 5.0% of the investee’s outstanding voting stock, under the equity method of accounting. These investments are recorded at the amount of the Company’s investment and adjusted each period for the Company’s share of the investee’s income or loss, and dividends paid.

During the quarter ended June 30, 2021, the Company recognized an investment loss of $84 thousand related to TIL and CGP (see Note 6).

Asset Acquisitions

Asset Acquisitions

The Company has adopted ASU 2017-01, which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as businesses acquisitions. As a result of adopting ASU 2017-01, acquisitions of real estate and cannabis licenses do not meet the definition of a business combination and were deemed asset acquisitions, and the Company therefore capitalized these acquisitions, including its costs associated with these acquisitions.

Goodwill and Intangible Assets

Goodwill and Intangible Assets

Goodwill. Goodwill represents the excess acquisition cost over the fair value of net tangible and intangible assets acquired. Goodwill is not amortized and is subject to annual impairment testing on or between annual tests if an event or change in circumstance occurs that would more likely than not reduce the fair value of a reporting unit below its carrying value. In testing for goodwill impairment, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, the Company concludes that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is not required. If the Company concludes otherwise, the Company is required to perform the two-step impairment test. The goodwill impairment test is performed at the reporting unit level by comparing the estimated fair value of a reporting unit with its respective carrying value. If the estimated fair value exceeds the carrying value, goodwill at the reporting unit level is not impaired. If the estimated fair value is less than the carrying value, further analysis is necessary to determine the amount of impairment, if any, by comparing the implied fair value of the reporting unit’s goodwill to the carrying value of the reporting unit’s goodwill.

Intangible Assets. Intangible assets deemed to have finite lives are amortized on a straight-line basis over their estimated useful lives, where the useful life is the period over which the asset is expected to contribute directly, or indirectly, to our future cash flows. Intangible assets are reviewed for impairment on an interim basis when certain events or circumstances exist. For amortizable intangible assets, impairment exists when the carrying amount of the intangible asset exceeds its fair value. At least annually, the remaining useful life is evaluated.

An intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value. In testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely than not that an impairment exists. If it is determined that it is not more likely than not that an impairment exists, a quantitative impairment test is not necessary. If the Company concludes otherwise, it is required to perform a quantitative impairment test. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset that is amortized over the remaining useful life of that asset, if any. Subsequent reversal of impairment losses is not permitted.

During the quarter ended June 30, 2021, and 2020, the Company determined that there were not any impairments related to intangible assets.

Business Combinations

Business Combinations

The Company applies the provisions of ASC 805 in the accounting for acquisitions. ASC 805 requires the Company to recognize separately from goodwill the assets acquired, and the liabilities assumed at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While the Company uses its best estimates and assumptions to accurately apply preliminary value to assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, these estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company records adjustments in the current period, rather than a revision to a prior period. Upon the conclusion of the measurement period or final determination of the values of the assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded in the consolidated statements of operations. Accounting for business combinations requires management to make significant estimates and assumptions, especially at the acquisition date, including estimates for intangible assets, contractual obligations assumed, restructuring liabilities, pre-acquisition contingencies, and contingent consideration, where applicable. Although the Company believes the assumptions and estimates made have been reasonable and appropriate, they are based in part on historical experience and information obtained from management of the acquired companies and are inherently uncertain. Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates, or actual results.

Contingent Consideration

Contingent Consideration

The Company accounts for “contingent consideration” according to FASB ASC 805, “Business Combinations” (“FASB ASC 805”). Contingent consideration typically represents the acquirer’s obligation to transfer additional assets or equity interests to the former owners of the acquiree if specified future events occur or conditions are met. FASB ASC 805 requires that contingent consideration be recognized at the acquisition-date fair value as part of the consideration transferred in the transaction. FASB ASC 805 uses the fair value definition in Fair Value Measurements, which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As defined in FASB ASC 805, contingent consideration is (i) an obligation of the acquirer to transfer additional assets or equity interests to the former owners of an acquiree as part of the exchange for control of the acquiree, if specified future events occur or conditions are met or (ii) the right of the acquirer to the return of previously transferred consideration if specified conditions are met.

Warrant Liability

Warrant Liability

The Company accounts for certain common stock warrants outstanding as a liability at fair value and adjusts the instruments to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s consolidated statements of operations. The fair value of the warrants issued by the Company has been estimated using a Black Scholes model.

Embedded Conversion Features

Embedded Conversion Features

The Company evaluates embedded conversion features within convertible debt to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in the statement of operations. If the conversion feature does not require recognition of a bifurcated derivative, the convertible debt instrument is evaluated for consideration of any beneficial conversion feature (“BCF”) requiring separate recognition. When the Company records a BCF, the intrinsic value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument (offset to additional paid-in capital) and amortized to interest expense over the life of the debt.

Income Taxes

Income Taxes

The provision for income taxes is determined in accordance with ASC 740, “Income Taxes”. The Company files a consolidated United States federal income tax return. The Company provides for income taxes based on enacted tax law and statutory tax rates at which items of income and expense are expected to be settled in our income tax return. Certain items of revenue and expense are reported for Federal income tax purposes in different periods than for financial reporting purposes, thereby resulting in deferred income taxes. Deferred taxes are also recognized for operating losses that are available to offset future taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company has incurred net operating losses for financial-reporting and tax-reporting purposes. As of June 30, 2021, and 2020, such net operating losses were offset entirely by a valuation allowance.

The Company recognizes uncertain tax positions based on a benefit recognition model. Provided that the tax position is deemed more likely than not of being sustained, the Company recognizes the largest amount of tax benefit that is greater than 50.0% likely of being ultimately realized upon settlement. The tax position is derecognized when it is no longer more likely than not of being sustained. The Company classifies income tax related interest and penalties as interest expense and selling, general and administrative expense, respectively, on the consolidated statements of operations.

In December 2017, the Tax Cuts and Jobs Act (TCJA or the Act) was enacted, which significantly changes U.S. tax law. In accordance with ASC 740, “Income Taxes”, the Company is required to account for the new requirements in the period that includes the date of enactment. The Act reduced the overall corporate income tax rate to 21.0%, created a territorial tax system (with a one-time mandatory transition tax on previously deferred foreign earnings), broadened the tax base and allowed for the immediate capital expensing of certain qualified property.

In December 2020, the Company issued a significant number of new shares in its acquisition of Driven (see Note 10). The effect of these issuances is most likely, the Company and Driven have experienced the requisite change of control as promulgated under the US Internal Revenue Code section 382. The effect of this will be that going forward, the ability of the Company and Driven to utilize their respective U.S. Federal net operating loss carryforwards from prior to December 29, 2020 will be limited in its usage. In order to determine the specific effect, the Company must perform the computations required under the Internal Revenue Code, which have not yet been performed. The Company expects it will perform the required computations in the coming fiscal year.

Revenue Recognition

Revenue Recognition

The Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (Topic 606), the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Revenue for the Company’s product sales has not been adjusted for the effects of a financing component as the Company expects, at contract inception, that the period between when the Company’s transfers control of the product and when the Company receives payment will be one year or less. Product shipping and handling costs are included in cost of product sales.

Effective October 1, 2019, the Company adopted the requirements of ASU 2014-09 (ASC 606) and related amendments, using the modified retrospective method. The adoption of ASC 606 did not have a significant impact on the Company’s revenue recognition policy as revenues related to wholesale and retail revenue are recorded upon transfer of merchandise to the customer, which was the effective policy under ASC 605 previously.

The following policies reflect specific criteria for the various revenue streams of the Company:

Cannabis Dispensary, Cultivation and Production

Revenue is recognized upon transfer of retail merchandise to the customer upon sale transaction, at which time its performance obligation is complete. Revenue is recognized upon delivery of product to the wholesale customer, at which time the Company’s performance obligation is complete. Terms are generally between cash on delivery to 30 days for the Company’s wholesale customers.

The Company’s sales environment is somewhat unique, in that once the product is sold to the customer (retail) or delivered (wholesale) there are essentially no returns allowed or warranty available to the customer under the various state laws.

Delivery

1) Identify the contract with a customer

The Company sells retail products directly to customers. In these sales there is no formal contract with the customer. These sales have commercial substance and there are no issues with collectability as the customer pays the cost of the goods at the time of purchase or delivery.

2) Identify the performance obligations in the contract

The Company sells its products directly to consumers. In this case these sales represent a performance obligation with the sales and any necessary deliveries of those products.

3) Determine the transaction price

The sales that are done directly to the customer have no variable consideration or financing component. The transaction price is the cost that those goods are being sold for plus any additional delivery costs.

4) Allocate the transaction price to performance obligations in the contract

For the goods that the Company sells directly to customers, the transaction price is allocated between the cost of the goods and any delivery fees that may be incurred to deliver to the customer.

5) Recognize revenue when or as the Company satisfies a performance obligation

For the sales of the Company’s own goods the performance obligation is complete once the customer has received the product.

Leases

Leases

The Company recognizes rental revenue from tenants, including rental abatements, lease incentives and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of the related leases when collectability is reasonably assured.

The Company makes estimates of the collectability of its tenant receivables related to base rents, straight-line rent, and other revenues. In the current fiscal year, the Company began significant rental operations. The Company considers such things as historical bad debts, tenant creditworthiness, current economic trends, facility operating performance, lease structure, developments relevant to a tenant’s business, and changes in tenants’ payment patterns in its analysis of accounts receivable and its evaluation of the adequacy of the allowance for doubtful accounts. Specifically, for straight-line rent receivables, the Company’s assessment includes an estimation of a tenant’s ability to fulfill its rental obligations over the remaining lease term.

On October 1, 2020, the Company adopted ASC 842 and elected to apply the new standard at the adoption date and recognize a cumulative effect as an adjustment to retained earnings. Upon calculation the effect on retained earnings was immaterial and no adjustment was deemed necessary. Leases with an initial term of twelve months or less are not recorded on the balance sheet. For lease agreements entered into or reassessed after the adoption of Topic 842, we combine the lease and non-lease components in determining the lease liabilities and right of use (“ROU”) assets.

Our lease agreements generally do not provide an implicit borrowing rate, therefore an internal incremental borrowing rate is determined based on information available at lease commencement date for purposes of determining the present value of lease payments. We used the incremental borrowing rate on June 30, 2021 for all leases that commenced prior to that date. In determining this rate, which is used to determine the present value of future lease payments, we estimate the rate of interest we would pay on a collateralized basis, with similar payment terms as the lease and in a similar economic environment.

Under Topic 842, operating lease expense is generally recognized evenly over the term of the lease. Lease costs were $337 thousand and $763 thousand, respectively for the three and nine months ended June 30, 2021. There was sublease rental income of $8 thousand and $17 thousand, respectively for the three and nine months ended June 30, 2021. The Company has eleven operating leases consisting with remaining lease terms ranging from 23 months to 180 months.

Lease Costs

	Three Months
	Ended
	June 30, 2021
Components of total lease costs:
Operating lease expense	$	337
Total lease costs	$	337

Lease positions as of June 30, 2021

ROU lease assets and lease liabilities for our operating leases were recorded in the consolidated condensed balance sheet as follows:

	June 30,
	2021
Assets
Right of use asset	$	6,927
Total assets	$	6,927
Liabilities
Operating lease liabilities – short term	$	1,509
Operating lease liabilities – long term		5,401
Total lease liability	$	6,910

Lease Terms and Discount Rate

Weighted average remaining lease term (in years) – operating lease	10
Weighted average discount rate – operating lease	9.40	%

Cash Flows

	Nine Months
	Ended
	June 30,2021
Cash paid for amounts included in the measurement of lease liabilities:
ROU amortization	$	763
Cash paydowns of operating liability	$	(763	)
Supplemental non-cash amounts of lease liabilities arising from obtaining:
ROU asset	$	6,927
Lease Liability	$	6,910

The future minimum lease payments under the leases are as follows:

2021	$	391
2022		1,676
2023		1,249
2024		899
2025		851
Thereafter		5,871
Total future minimum lease payments		10,937
Less: Lease imputed interest		(4,027	)
Total	$	6,910

Disaggregation of Revenue

Disaggregation of Revenue

In the three and nine months ended June 30, 2021, revenue reported is primarily from the sale of cannabis and related products accounted for under ASC 606.

The following table illustrates our revenue by type related to the three months ended June 30, 2021, and 2020, respectively:

Three Months Ended June 30,	2021			2020
Revenue
Wholesale	$	1,555		$	1,597
Retail		10,795			4,516
Rental		8			11
Other		78			17
Total revenue		12,436			6,141
Discounts and returns		(1,850	)		(943	)
Net Revenue	$	10,586		$	5,198

The following table illustrates our revenue by type related to the nine months ended June 30, 2021, and 2020, respectively:

Nine Months Ended June 30,	2021			2020
Revenue
Wholesale	$	3,879		$	2,904
Retail		26,721			7,365
Rental		17			26
Product Sales		229			-
Other		336			20
Total revenue		31,182			10,315
Discounts and returns		(4,609	)		(1,498	)
Net Revenue	$	26,573		$	8,817

Geographical Concentrations

Geographical Concentrations

As of June 30, 2021, the Company is primarily engaged in the production and sale of cannabis, which is only legal for recreational use in 15 states and D.C., with lesser legalization, such as for medical use in an additional 21 states and D.C., as of the time of these consolidated financial statements. In addition, the United States Congress has passed legislation, specifically the Agriculture Improvement Act of 2018 (also known as the “Farm Bill”) that has removed production and consumption of hemp and associated products from Schedule 1 of the Controlled Substances Act.

Cost of Goods Sold

Cost of Goods Sold

Cost of sales represents costs directly related to manufacturing and distribution of the Company’s products. Primary costs include raw materials, packaging, direct labor, overhead, shipping and handling and the depreciation of manufacturing equipment and production facilities. Manufacturing overhead and related expenses include salaries, wages, employee benefits, utilities, maintenance, and property taxes. The Company recognizes the cost of sales as the associated revenues are recognized.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

As defined in the authoritative guidance, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

To estimate fair value, the Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable.

The authoritative guidance establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (“Level 1” measurements) and the lowest priority to unobservable inputs (“Level 3” measurements). The three levels of the fair value hierarchy are as follows:

Level 1 — Observable inputs such as quoted prices in active markets at the measurement date for identical, unrestricted assets or liabilities.

Level 2 — Other inputs that are observable, directly, or indirectly, such as quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 — Unobservable inputs for which there is little or no market data and which the Company makes its own assumptions about how market participants would price the assets and liabilities.

In instances in which multiple levels of inputs are used to measure fair value, hierarchy classification is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

Stock-based Compensation

Stock-based Compensation

The Company accounts for share-based payment awards exchanged for services at the estimated grant date fair value of the award. Stock options issued under the Company’s long-term incentive plans are granted with an exercise price equal to no less than the market price of the Company’s stock at the date of grant and expire up to ten years from the date of grant. These options generally vest on the grant date or over a one- year period.

The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model and the assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.

Expected Term - The expected term of options represents the period that the Company’s stock-based awards are expected to be outstanding based on the simplified method, which is the half-life from vesting to the end of its contractual term.

Expected Volatility - The Company computes stock price volatility over expected terms based on its historical common stock trading prices.

Risk-Free Interest Rate - The Company bases the risk-free interest rate on the implied yield available on U. S. Treasury zero-coupon issues with an equivalent remaining term.

Expected Dividend - The Company has never declared or paid any cash dividends on its common shares and does not plan to pay cash dividends in the foreseeable future, and, therefore, uses an expected dividend yield of zero in its valuation models.

Effective January 1, 2017, the Company elected to account for forfeited awards as they occur, as permitted by Accounting Standards Update (“ASU”) 2016-09. Ultimately, the actual expenses recognized over the vesting period will be for those shares that vested. Prior to making this election, the Company estimated a forfeiture rate for awards at 0%, as the Company did not have a significant history of forfeitures.

Earnings (Loss) per Share

Earnings (Loss) per Share

ASC 260, Earnings Per Share, requires dual presentation of basic and diluted earnings per share (“EPS”) with a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilution. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.

Basic net loss per share of common stock excludes dilution and 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 of common stock reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity unless inclusion of such shares would be anti-dilutive. Since the Company only incurred losses for the nine months ended June 30, 2021 and the three and nine months ended June 30, 2020, basic and diluted net loss per share is the same.

The following table provides a reconciliation of the numerators and denominators used to determine basic and diluted net income (loss) per common share for the three months ended June 30, 2021 and 2020:

	Three Months Ended June 30,
(Amounts in thousands, except per share data)	2021		2020
Numerator
Net income (loss) attributable to Stem Holdings	$	2,655	$	(826	)
Denominator
Weighted-average common shares outstanding, basic		208,137,694		66,410,900
Dilutive impact of share-based instruments		77,312,563		-
Weighted-average common shares outstanding, diluted		285,450,257		66,410,900
Net income per common share attributable to Stem Holdings
Basic	$	0.01	$	(0.01	)
Diluted		0.01		(0.01	)

Securities that could potentially dilute loss per share in the future that were not included in the computation of diluted loss per share for the nine months ended June 30, 2021 are as follows:

Potentially dilutive share-based instruments
Convertible notes	4,547,597
Options to purchase common stock	8,418,411
Unvested restricted stock awards	-
Warrants to purchase common stock	64,346,555
	77,312,563

Advertising Costs

Advertising Costs

The Company follows the policy of charging the cost of advertising to expense as incurred. Advertising expense was $430 thousand and $22 thousand three months ended June 30, 2021, and 2020, respectively. Advertising expense was $749 thousand and $47 thousand for nine months ended June 30, 2021, and 2020, respectively.

Related parties

Related parties

Parties are related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.

Segment reporting

Segment reporting

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision–making group in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision–maker is its chief executive officer. The Company currently operates in one segment.

Recent Accounting Guidance

Recent Accounting Guidance

In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350)—Simplifying the Test for Goodwill Impairment. ASU 2017-04 simplifies the accounting for goodwill impairments by eliminating the requirement to compare the implied fair value of goodwill with its carrying amount as part of step two of the goodwill impairment test referenced in Accounting Standards Codification (“ASC”) 350, Intangibles - Goodwill and Other (“ASC 350”). As a result, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. However, the impairment loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. ASU 2017-04 is effective for annual reporting periods beginning after December 15, 2019. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 removes, modifies and adds certain disclosure requirements in Topic 820 “Fair Value Measurement”. ASU 2018-13 eliminates certain disclosures related to transfers and the valuations process, modifies disclosures for investments that are valued based on net asset value, clarifies the measurement uncertainty disclosure, and requires additional disclosures for Level 3 fair value measurements. ASU 2018-13 is effective for the Company for annual and interim reporting periods beginning January 1, 2020. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases. The standard amends the existing lease accounting guidance and requires lessees to recognize a lease liability and a right-of-use asset for all leases (except for short-term leases that have a duration of one year or less) on their balance sheets. Lessees will continue to recognize lease expense in a manner similar to current accounting. For lessors, accounting for leases under the new guidance is substantially the same as in prior periods but eliminates current real estate-specific provisions and changes the treatment of initial direct costs. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparable period presented, with an option to elect certain transition relief. Full retrospective application is prohibited. The standard was adopted as of October 1, 2020. As of June 30, 2021, the Company recognized additional operating liabilities of approximately $6.2 million, with corresponding ROU assets of approximately $6.9 million.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 provides guidance for recognizing credit losses on financial instruments based on an estimate of current expected credit losses model. The amendments are effective for fiscal years beginning after December 15, 2019. Recently, the FASB issued the final ASU to delay adoption for smaller reporting companies to calendar year 2023. The Company is currently assessing the impact of the adoption of this ASU on its financial statements.

In January 2020, the FASB issued ASU 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivative and Hedging (Topic 815), which clarifies the interaction of rules for equity securities, the equity method of accounting, and forward contracts and purchase options on certain types of securities. The guidance clarifies how to account for the transition into and out of the equity method of accounting when considering observable transactions under the measurement alternative. The ASU is effective for annual reporting periods beginning after December 15, 2020, including interim reporting periods within those annual periods, with early adoption permitted. We are currently evaluating the impact of the new guidance on our consolidated financial statements.

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): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity, and also improves and amends the related EPS guidance for both Subtopics. The ASU will be effective for annual reporting periods beginning after December 15, 2021 and interim periods within those annual periods and early adoption is permitted. We are currently evaluating the impact of the new guidance on our consolidated financial statements.

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Jun. 30, 2021

Accounting Policies [Abstract]

Schedule of Estimated Useful Life of Assets

Buildings	20 years
Leasehold improvements	Shorter of term of lease or economic life of improvement
Furniture and equipment	5 years
Signage	5 years
Software and related	5 years

Schedule of Lease Costs

	Three Months
	Ended
	June 30, 2021
Components of total lease costs:
Operating lease expense	$	337
Total lease costs	$	337

Schedule of ROU Lease Assets and Lease Liabilities

ROU lease assets and lease liabilities for our operating leases were recorded in the consolidated condensed balance sheet as follows:

	June 30,
	2021
Assets
Right of use asset	$	6,927
Total assets	$	6,927
Liabilities
Operating lease liabilities – short term	$	1,509
Operating lease liabilities – long term		5,401
Total lease liability	$	6,910

Schedule of Lease Terms and Discount Rate

Weighted average remaining lease term (in years) – operating lease	10
Weighted average discount rate – operating lease	9.40	%

Schedule of Cash Flow Related to Lease

	Nine Months
	Ended
	June 30,2021
Cash paid for amounts included in the measurement of lease liabilities:
ROU amortization	$	763
Cash paydowns of operating liability	$	(763	)
Supplemental non-cash amounts of lease liabilities arising from obtaining:
ROU asset	$	6,927
Lease Liability	$	6,910

Schedule of Future Minimum Lease Payments

The future minimum lease payments under the leases are as follows:

2021	$	391
2022		1,676
2023		1,249
2024		899
2025		851
Thereafter		5,871
Total future minimum lease payments		10,937
Less: Lease imputed interest		(4,027	)
Total	$	6,910

Schedule of Disaggregation of Revenue

The following table illustrates our revenue by type related to the three months ended June 30, 2021, and 2020, respectively:

Three Months Ended June 30,	2021			2020
Revenue
Wholesale	$	1,555		$	1,597
Retail		10,795			4,516
Rental		8			11
Other		78			17
Total revenue		12,436			6,141
Discounts and returns		(1,850	)		(943	)
Net Revenue	$	10,586		$	5,198

The following table illustrates our revenue by type related to the nine months ended June 30, 2021, and 2020, respectively:

Nine Months Ended June 30,	2021			2020
Revenue
Wholesale	$	3,879		$	2,904
Retail		26,721			7,365
Rental		17			26
Product Sales		229			-
Other		336			20
Total revenue		31,182			10,315
Discounts and returns		(4,609	)		(1,498	)
Net Revenue	$	26,573		$	8,817

Schedule of Basic and Diluted Net Income (Loss) Per Share

The following table provides a reconciliation of the numerators and denominators used to determine basic and diluted net income (loss) per common share for the three months ended June 30, 2021 and 2020:

	Three Months Ended June 30,
(Amounts in thousands, except per share data)	2021		2020
Numerator
Net income (loss) attributable to Stem Holdings	$	2,655	$	(826	)
Denominator
Weighted-average common shares outstanding, basic		208,137,694		66,410,900
Dilutive impact of share-based instruments		77,312,563		-
Weighted-average common shares outstanding, diluted		285,450,257		66,410,900
Net income per common share attributable to Stem Holdings
Basic	$	0.01	$	(0.01	)
Diluted		0.01		(0.01	)

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Property, Plant & Equipment (Tables)

9 Months Ended

Jun. 30, 2021

Property, Plant and Equipment [Abstract]

Schedule of Property, Plant and Equipment

Property and equipment consist of the following (in thousands):

	June 30,			September 30,
	2021			2020
Land	$	1,451		$	1,451
Automobiles		113			61
Signage		19			19
Furniture and equipment		2,945			2,485
Leasehold improvements		3,568			3,455
Buildings and property improvements		10,173			12,981
Computer software		59			59
		18,328			20,511
Accumulated depreciation		(5,230	)		(4,157	)
Property and equipment, net	$	13,098		$	16,354

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Inventory (Tables)

9 Months Ended

Jun. 30, 2021

Inventory Disclosure [Abstract]

Schedule of Inventory

Inventory consists of the following (in thousands):

	June 30,		September 30,
	2021		2020
Raw materials	$	640	$	222
Work-in-progress		257		484
Finished goods		1,934		1,089
Total Inventory	$	2,831	$	1,795

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Prepaid expenses and other current assets (Tables)

9 Months Ended

Jun. 30, 2021

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Schedule of Prepaid Expenses and Other Current Assets

Prepaid and other current assets comprised of the following:

	June 30,		September 30,
	2021		2020
Prepaid expenses	$	615	$	249
ERTC credits		2,471		-
Deposits and other current assets		1,050		203
Total prepaid expenses and other current assets	$	4,136	$	452

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Non-Controlling Interests (Tables)

9 Months Ended

Jun. 30, 2021

Noncontrolling Interest [Abstract]

Schedule of Non-Controlling Interests in Consolidated Entities

Non-controlling interests in consolidated entities are as follows (in thousands):

	As of September 30, 2020
	NCI Equity Share		Net Loss Attributable to NCI			NCI in Consolidated Entities		Non-Controlling Ownership %
NVD RE Corp.	$	597	$	(48	)	$	549		50.0	%
Western Coast Ventures, Inc.		1,288		(240	)		1,048		49.0	%
YMY Ventures, Inc.		447		(204	)		243		50.0	%
	$	2,332	$	(492	)	$	1,840

		As of June 30, 2021
		NCI Equity Share		Net Loss Attributable to NCI			NCI in Consolidated Entities		Non-Controlling Ownership %
NVD RE Corp.	$	578	$	(25	)	$	553		63.8	%
Western Coast Ventures, Inc.	$	1,048		(150	)		898		49.0	%
YMY Ventures, Inc.	$	243		30			273		50.0	%
Michigan RE 1, Inc.	$	-		(25	)		(25	)	51.0	%
	$	1,869	$	(170	)	$	1,699

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Business Combination (Tables)

9 Months Ended

Jun. 30, 2021

Business Acquisition [Line Items]

Schedule of Proforma Condensed Consolidated Results of Operations

The following unaudited proforma condensed consolidated results of operations have been prepared as if the acquisition of Driven had occurred October 1, 2019.

	Nine months ended			Nine months ended
	June 30, 2021			June 30, 2020
Revenue	$	31,396		$	18,410
Net income (loss)	$	(10,206	)	$	(20,406	)

Seven Leaf Ventures Corp [Member]

Business Acquisition [Line Items]

Schedule of Level 3 Liabilities Measured at Fair Value

The table below shows the warrant liability and embedded derivative liability recorded in connection with the 7LV convertible notes and the subsequent fair value measurement during the quarter ended June 30, 2021 in USD, (in thousands):

	Warrant Liability			Derivative Liability
Balance as of September 30, 2020	$	60		$	54
Issuance		-			-
Change in fair value		(60	)		(39	)
Balance as of December 31, 2020		-			15
Issuance		-			-
Change in fair value		-			-
Balance as of March 31, 2021		-			15
Issuance		-
Change in fair value		-			(15	)
Balance as of June 30, 2021	$	-		$	-

Schedule of Purchasre Consideration to Fair value of assets Aquired and Liabilities Assumed

As of March 6, 2020, the Company allocated the purchase consideration to the fair value of the assets acquired and liabilities assumed as summarized in the table below (in thousands):

Consideration Paid (in thousands)
Estimated fair value of common stock issued	$	9,552
Estimated fair value of warrants issued		772
Estimated fair value of debt issued		2,540
Estimated fair value of embedded and bifurcated derivatives		244
Forgiveness of working capital advance		(150	)
Total consideration paid	$	12,958
Assets acquired: (in thousands)
Cash and cash equivalents	$	81
Fixed assets		54
Inventory		133
Goodwill		6,151
Intangible assets		7,684
Total assets acquired	$	14,103
Liabilities assumed: (in thousands)
Accrued expenses and other current liabilities		1,145
Total liabilities assumed	$	1,145
Net assets acquired (in thousands)	$	12,958

Driven Deliveries Inc [Member]

Business Acquisition [Line Items]

Schedule of Level 3 Liabilities Measured at Fair Value

The table below shows the warrant liability and embedded derivative liability recorded in connection with the Driven convertible notes and the subsequent fair value measurement during the nine months ended June 30, 2021 in USD, (in thousands):

	Warrant Liability			Derivative Liability
Balance as of September 30, 2020	$	-		$	-
Warrants acquired		9,000			-
Warrants converted into equity		(4,589	)
Change in fair value		(210	)		-
Balance as of June 30, 2021	$	4,201		$	-

Schedule of Purchasre Consideration to Fair value of assets Aquired and Liabilities Assumed

As of December 29, 2020, the Company allocated the purchase consideration to the fair value of the assets acquired and liabilities assumed as summarized in the table below (in thousands):

Consideration Paid (in thousands)

Consideration Paid (in thousands)
Estimated fair value of common stock issued	$	42,825
Estimated fair value of warrants issued		9,000
Estimated fair value of options issued		500
Estimated fair value of debt assumed		4,389
Total consideration paid	$	56,714
Assets acquired: (in thousands)
Cash and cash equivalents	$	-
Fixed assets		47
Other Assets		1,526
Goodwill		10,840
Intangible assets		48,200
Total assets acquired	$	60,613
Liabilities assumed: (in thousands)
Accrued expenses and other current liabilities		(3,899	)
Total liabilities assumed	$	(3,899	)
Net assets acquired (in thousands)	$	56,714

During the quarter ended June 30, 2021, goodwill was increased by $1.0 million, resulting from the discovery of unrecorded Driven liabilities at the time of acquisition.

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Intangible Assets, net (Tables)

9 Months Ended

Jun. 30, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets

Intangible assets as of June 30, 2021 and September 2020 (in thousands):

	Estimated Useful Life		Cannabis Licenses		Tradename		Customer Relationship		Non-compete		Technology		Accumulated Amortization			Net Carrying Amount
Balance as September 30, 2020			$	12,679	$	458	$	643	$	220	$	-	$	(730	)	$	13,270
YMY Ventures		15		-		-		-		-		-		(38	)		(38	)
Western Coast Ventures, Inc.		15		-		-		-		-		-		(122	)		(122	)
Yerba Buena		3-15 years		-		-		-		-		-		(129	)		(129	)
Foothill (7LV)		15		-		-		-		-		-		(392	)		(392	)
Driven Deliveries		10-15 years		44,000		1,800		600		-		1,800		(1,694	)		46,506
Other		5		-		-		-		-		-		-			-
Balance as June 30, 2021			$	56,679	$	2,258	$	1,243	$	220	$	1,800	$	(3,105	)	$	59,095

Actual amortization expense to be reported in future periods could differ from these estimates as a result of new intangible

Schedule of Expected Amortization

The following table is a runoff of expected amortization in the following 5-year period as of June 30:

2021	$	1,037
2022		4,147
2023		4,147
2024		4,147
2025		4,147
Thereafter		41,470
	$	59,095

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Accounts payable and accrued expenses (Tables)

9 Months Ended

Jun. 30, 2021

Payables and Accruals [Abstract]

Schedule of Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following (in thousands):

	June 30, 2021		September 30, 2020
Accounts payable		3,399	$	1,784
Accrued credit cards		36		41
Accrued interest		152		134
Accrued payroll		928		616
Other		3,616		408
Total Accounts Payable and Accrued Expenses	$	8,131	$	2,983

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Notes Payable and Advances (Tables)

9 Months Ended

Jun. 30, 2021

Debt Disclosure [Abstract]

Schedule of Short-term Notes and Advances

The following table summarizes the Company’s short-term notes and advances, acquisition note payable, due to related party loans, and long-term debt, mortgages as of the quarter ended June 30, 2021, and year ended September 30, 2020:

	June 30,		September 30,
	2021		2020
Equipment financing	$	32	$	27
Insurance financing		229		177
Mortgages payable		-		923
Promissory note		425		2,298
Settlement payable		95		-
Due to related party		1		200
	$	782	$	3,625
Acquisition notes payable		538		665
Total notes payable and advances	$	1,320	$	4,290
Long-term mortgages		3,200		3,685
Total long-term debt	$	3,200	$	3,685

Schedule of Maturities of Long Term Debt

The following is a table of the 5-year runoff of our long-term debt as of December 31:

2021	$	-
2022		2,600
2023		600
2024		-
2025		-
Thereafter		-
	$	3,200

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Convertible debt (Tables)

9 Months Ended

Jun. 30, 2021

Convertible Debt

Schedule of Assumptions Value Warrant Granted

Fair value of underlying common shares	$	1.78 to $2.10
Exercise price (converted to USD)	$	2.93
Dividend yield		-
Historical volatility		85	%
Risk free interest rate		1.4% to 1.9	%

Schedule of Convertible Notes

The table below shows the warrant liability and embedded derivative liability recorded in connection with the Canaccord convertible notes and the subsequent fair value measurement during the nine months ended June 30, 2021 in USD, (in thousands):

	Warrant Liability			Derivative Liability
Balance at September 30, 2020	$	67		$	592
Change in fair value		(20	)		(223	)
Balance at December 31, 2020		47			369
Change in fair value		(18	)		(34	)
Balance at March 31, 2021		29			335
Change in fair value		(27	)		(199	)
Balance at June 30, 2021	$	2		$	136

Schedule of Convertible Notes

The table below shows the net amount of convertible notes as of June 30, 2021 in USD (in thousands):

	June 30, 2021
Principal value of 8%, convertible at $0.91 at June 30, 2021, due December 27, 2021 including penalty provision of $155,239	$	2,954
Principal value of 10%, convertible at $1.32 at June 30, 2021, due May 30, 2021 (see Note 10), as of the date of this filing the balance of this obligation has been fully converted		-
Principal value of various convertible notes, convertible at $0.50 at June 30, 2021, due June – August, 2021		100
Debt discount		-
Cumulative foreign currency impact		47
Carrying value of convertible notes	$	3,101

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Fair Value Measurements (Tables)

9 Months Ended

Jun. 30, 2021

Fair Value Disclosures [Abstract]

Schedule of Liabilities Measured at Fair Value on a Recurring Basis

The following table classifies the Company’s liabilities measured at fair value on a recurring basis into the fair value hierarchy as of June 30, 2021 (in thousands):

	Fair value measured at June 30, 2021
			Quoted prices in		Significant other observable		Significant unobservable
			active markets		inputs		inputs
	Fair value		(Level 1)		(Level 2)		(Level 3)
Warrant liability	$	4,444	$	-	$	-	$	4,444
Embedded derivative liability		136		-		-		136
Total fair value	$	4,580	$	-	$	-	$	4,580

Schedule of Level 3 Liabilities Measured at Fair Value

				Embedded
	Warrant Liability			Derivative Liability			Total
Balance – September 30, 2020	$	257		$	592		$	849
Warrants granted for services		11			-			11
Warrants issued pursuant to acquisition (see Note 10)		9,000			-			9,000
Change in fair value		(90	)		(208	)		(298	)
Balance – December 31, 2020		9,178			384			9,562
Change in fair value		6,278			(34	)		6,244
Warrants forfeited due to settlement agreement		(4,590	)		-			(4,590	)
Balance – March 31, 2021		10,866			350			11,216
Warrants issued pursuant to subscription agreement (see Note 13)		59			-			59
Final change due to completed conversion of debt		-			(15	)		(15	)
Change in fair value		(6,481	)		(199	)		(6,680	)
Balance – June 30, 2021	$	4,444		$	136		$	4,580

Summary of Weighted Average Significant Unobservable Inputs

A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the Company’s warrant liabilities and embedded conversion feature that are categorized within Level 3 of the fair value hierarchy as of June 30, 2021 and September 30, 2020 is as follows:

	Warrant Liability
	As of			As of
	June 30, 2021			September 30, 2020
Strike price	$	0.48		$	0.36 to 2.96
Contractual term (years)		2.82			1 to 3
Volatility (annual)		85	%		100	%
Risk-free rate		0.9	%		0.28	%
Dividend yield (per share)		0	%		0	%

	Embedded Derivative Liability
	As of June 30, 2021			As of September 30, 2020
Strike price	$	0.93		$	1.12
Contractual term (years)		1.1			1.5
Volatility (annual)		133	%		101	%
Risk-free rate		0.07	%		0.25	%
Dividend yield (per share)		0.00	%		0.00	%
Credit spread		14% to 16	%		11.21	%

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Stock Based Compensation (Tables)

9 Months Ended

Jun. 30, 2021

Compensation Related Costs [Abstract]

Schedule of Fair Value of Options Granted

The fair value of options granted during the nine months ended June 30, 2021, and 2020 were estimated using the following weighted-average assumptions:

Options:

	June 30, 2021			June 30, 2020
Exercise price	$	0.40		$	0.80 - $4.00
Expected term (years)		3.5			0.5 - 4.0
Expected stock price volatility		93	%		108.8% - 188.6	%
Risk-free rate of interest		0.28	%		1.56	%
Expected dividend rate		0	%		0%

Summary of Stock Option Activity

	Number of Shares			Weighted Average Exercise Price		Total Intrinsic Value		Weighted Average Remaining Contractual Life (in years)
Outstanding as of October 1, 2019		3,210,416		$	2.45	$	-		2.1
Granted		2,362,500		$	0.33	$	-		2.89
Outstanding as of September 30, 2020		5,572,916		$	1.77	$	-		1.6
Granted		100,000		$	0.40	$	-		2.8
Outstanding as of December 31, 2020		5,672,916		$	1.73	$	-		1.4
Granted		-		$	-	$	-		-
Outstanding as of March 31, 2021		5,672,916		$	1.73	$	-		1.18
Granted		250,000		$	0.40	$	-		3.94
Expired		(2,285,000	)	$	2.39	$	-		-
Outstanding as of June 30, 2021		3,637,916		$	2.13	$	-		1.57

Schedule of Stock-based Compensation Expenses

Stock-based compensation expense for the three months ended June 30, 2021 and 2020 was comprised of the following (in thousands):

	Three months ended June 30,
	2021		2020
Stock grants	$	525	$	6
Stock options		353		-
Warrants		-		-
Total stock-based compensation	$	878	$	6

	Nine months ended June 30,
	2021		2020
Stock grants	$	3,642	$	1,193
Stock options		492		615
Warrants		150		105
Total stock-based compensation	$	4,284	$	1,913

 

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Incorporation and Operations and Going Concern (Details Narrative) - USD ($) $ in Thousands	9 Months Ended
	Jun. 30, 2021	Sep. 30, 2020
SEC Schedule, 12-18, Supplemental Information, Property-Casualty Insurance Underwriters [Line Items]
Properties, Description	As of June 30, 2021, the Company has acquired eight commercial properties and leases two properties, located in Oregon and Nevada, and has entered into leases for these related entities (see Note 18). As of June 30, 2021, the buildout of these properties to support cannabis related operations was either complete or near completion.
Common stock, shares authorized	750,000,000	750,000,000
Cash and Cash Equivalents, at Carrying Value	$ 9,106	$ 2,129
Working capital	2,300
Retained Earnings (Accumulated Deficit)	$ 60,531	$ 51,386
Minimum [Member] | Common Stock [Member]
SEC Schedule, 12-18, Supplemental Information, Property-Casualty Insurance Underwriters [Line Items]
Common stock, shares authorized	300,000,000
Maximum [Member] | Common Stock [Member]
SEC Schedule, 12-18, Supplemental Information, Property-Casualty Insurance Underwriters [Line Items]
Common stock, shares authorized	750,000,000

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Schedule of Estimated Useful Life of Assets (Details)	9 Months Ended
	Jun. 30, 2021
Property, Plant and Equipment [Line Items]
Property and equipment estimated useful life, description	Depreciation is calculated using the straight-line method over the estimated useful lives of the assets.
Buildings [Member]
Property, Plant and Equipment [Line Items]
Property and equipment estimated useful life	20 years
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property and equipment estimated useful life, description	Shorter of term of lease or economic life of improvement
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Property and equipment estimated useful life	5 years
Signage [Member]
Property, Plant and Equipment [Line Items]
Property and equipment estimated useful life	5 years
Software And Related [Member]
Property, Plant and Equipment [Line Items]
Property and equipment estimated useful life	5 years

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Schedule of Lease Costs (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Jun. 30, 2021	Jun. 30, 2021
Accounting Policies [Abstract]
Operating lease expense	$ 337	$ 763
Total lease costs	$ 337

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Schedule of ROU Lease Assets and Lease Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Sep. 30, 2020
Accounting Policies [Abstract]
Total assets	$ 6,927
Operating lease liabilities – short term	1,509
Operating lease liabilities – long term	5,401
Total lease liability	$ 6,910

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Schedule of Lease Terms and Discount Rate (Details)	Jun. 30, 2021
Accounting Policies [Abstract]
Weighted average remaining lease term (in years) - operating lease	10 years
Weighted average discount rate - operating lease	9.40%

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Schedule of Cash Flow Related to Lease (Details) $ in Thousands	9 Months Ended
	Jun. 30, 2021 USD ($)
Accounting Policies [Abstract]
ROU amortization	$ 763
Cash paydowns of operating liability	(763)
ROU asset	(6,927)
Lease Liability	$ 6,910

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Schedule of Future Minimum Lease Payments (Details) $ in Thousands	Jun. 30, 2021 USD ($)
Accounting Policies [Abstract]
2021	$ 391
2022	1,676
2023	1,249
2024	899
2025	851
Thereafter	5,871
Total future minimum lease payments	10,937
Less: Lease imputed interest	(4,027)
Total	$ 6,910

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Schedule of Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Policyholder Account Balance [Line Items]
Total Revenue	$ 12,436	$ 6,141	$ 31,182	$ 10,315
Discounts and allowances	(1,850)	(943)	(4,609)	(1,498)
Net revenue	10,586	5,198	26,573	8,817
Wholesale [Member]
Policyholder Account Balance [Line Items]
Total Revenue	1,555	1,597	3,879	2,904
Retail [Member]
Policyholder Account Balance [Line Items]
Total Revenue	10,795	4,516	26,721	7,365
Rental [Member]
Policyholder Account Balance [Line Items]
Total Revenue	8	11	17	26
Other [Member]
Policyholder Account Balance [Line Items]
Total Revenue	$ 78	$ 17	336	20
Product Sales [Member]
Policyholder Account Balance [Line Items]
Total Revenue			$ 229

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Schedule of Basic and Diluted Net Income (Loss) Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Accounting Policies [Abstract]
Net income (loss) attributable to Stem Holdings	$ 2,655	$ (826)	$ (9,146)	$ (8,567)
Weighted-average common shares outstanding, basic	208,137,694	66,410,900	138,026,212	58,762,599
Dilutive impact of share-based instruments	77,312,563
Weighted-average common shares outstanding, diluted	285,450,257	66,410,900	138,026,212	58,762,599
Net income per common share attributable to Stem Holdings
Basic	$ 0.01	$ (0.01)	$ (0.07)	$ (0.15)
Diluted	$ 0.01	$ (0.01)	$ (0.07)	$ (0.15)

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Schedule of Potentially Dilute Securities Excluded From Computation of Diluted Loss Per Share (Details)	9 Months Ended
	Jun. 30, 2021 shares
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	77,312,563
Convertible Notes [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	4,547,597
Options to Purchase Common Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	8,418,411
Unvested Restricted Stock Awards [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount
Warrants to Purchase Common Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	64,346,555

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Summary of Significant Accounting Policies (Details Narrative) - USD ($)	3 Months Ended			9 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2021	Jun. 30, 2020	Sep. 30, 2020
Property, Plant and Equipment [Line Items]
Stock issued during the period			12,500,000
Accounts receivable, reserve for doubtful accounts	$ 79,000			$ 79,000
Property and equipment, useful life				Depreciation is calculated using the straight-line method over the estimated useful lives of the assets.
Equity method investment, ownership percentage	5.00%			5.00%
Gain from equity method investees		$ (1,000)			$ (253,000)
Goodwill and intangible asset impairment				$ 0	0
Corporate income tax rate				21.00%
Operating Lease, Cost	337,000			$ 763,000
Sublease Income	8,000			$ 17,000
Estimated forfeiture rate for awards				0.00%
Advertising expense	430,000	$ 22,000		$ 749,000	$ 47,000
Operating lease liabilities	6,910,000			6,910,000
Right of use of asset	6,927,000			6,927,000
Accounting Standards Update 2016-02 [Member]
Property, Plant and Equipment [Line Items]
Operating lease liabilities	6,200,000			6,200,000
Right of use of asset	$ 6,900,000			$ 6,900,000
Minimum [Member]
Property, Plant and Equipment [Line Items]
Remaining lease terms				23 months
Maximum [Member]
Property, Plant and Equipment [Line Items]
Remaining lease terms				180 months
Tilstar Medical, LLC [Member]
Property, Plant and Equipment [Line Items]
Gain from equity method investees				$ 84,000
Community Growth Partners Holdings, Inc., [Member]
Property, Plant and Equipment [Line Items]
Gain from equity method investees				$ 84,000

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Schedule of Property, Plant and Equipment (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Sep. 30, 2020
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 18,328	$ 20,511
Accumulated depreciation	(5,230)	(4,157)
Property and equipment, net	13,098	16,354
Land [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	1,451	1,451
Automobiles [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	113	61
Signage [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	19	19
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	2,945	2,485
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	3,568	3,455
Building and Building Improvements [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	10,173	12,981
Computer Software [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 59	$ 59

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Property, Plant & Equipment (Details Narrative) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Property, Plant and Equipment [Abstract]
Depreciation expense	$ 0.5	$ 0.5	$ 1.4	$ 1.3

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Schedule of Inventory (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Sep. 30, 2020
Inventory Disclosure [Abstract]
Raw materials	$ 640	$ 222
Work-in-progress	257	484
Finished goods	1,934	1,089
Total Inventory	$ 2,831	$ 1,795

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Inventory (Details Narrative) $ in Thousands	9 Months Ended
	Jun. 30, 2020 USD ($)
Inventory Disclosure [Abstract]
Inventory reserve	$ 0

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Schedule of Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Sep. 30, 2020
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Prepaid expenses	$ 615	$ 249
ERTC credits	2,471
Deposits and other current assets	1,050	203
Total prepaid expenses and other current assets	$ 4,136	$ 452

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Equity method investments (Details Narrative) - USD ($)		1 Months Ended	9 Months Ended
	Jan. 06, 2020	Apr. 30, 2019	Jun. 30, 2021	Jun. 30, 2020	Apr. 13, 2021	Sep. 30, 2020	Sep. 30, 2019
Entity Listings [Line Items]
Gain (Loss) on Investments			$ 10,000.00
Tilstar Medical, LLC [Member]
Entity Listings [Line Items]
Acquisition, percentage		48.00%
Community Growth Partners Holdings, Inc., [Member]
Entity Listings [Line Items]
Acquisition, percentage						7.00%
SOK Management, LLC [Member]
Entity Listings [Line Items]
Other investment income			200,000
Tilstar Medical, LLC [Member]
Entity Listings [Line Items]
Payments to Acquire Businesses, Gross		$ 550,000
Decommissioning Fund Investments							$ 550,000
Cash			$ 290,000			$ 280,000
Gain (Loss) on Investments				$ 140,000
Community Growth Partners Holdings, Inc., [Member]
Entity Listings [Line Items]
Debt instrument conversion terms	the Company issued a convertible promissory note to Community Growth Partners Holdings, Inc., (“CGS”) which will act as a line of credit. Subject to the terms and conditions of the note, CGS promises to pay the Company all of the outstanding principal together with interest on the unpaid principal balance upon the date that is twelve months after the effective date and shall be payable as follows: (a)The Company agrees to make several loans to CGS from time to time upon request of CGS in amounts not to exceed the principal sum of $2,000,000, (b) Payment of principal and interest shall be immediately available funds, (c) This note may be prepaid in whole or in part at any time without premium or penalty. Any partial prepayment shall be applied against the principal amount outstanding, (d) The unpaid principal amount outstanding under this note shall bear interest commencing upon the first advance at the rate of 10% per annum through the maturity date, calculated on the basis of a 365-day, until the entire indebtedness is fully paid, (e) Upon the closing of a $2,000,000 financing by the Company, all of the principal and interest shall automatically convert into equity shares of CGS at the price obtained by the qualified financing. As of September 30, 2020 portion of the note was converted into 7.0% equity. In March 2021, the balance of a note receivable was converted into an additional 7% equity leaving an equity investment of 14%.
Loans receivable	$ 2,000,000
Debt instrument, interest rate	10.00%
Equity leaving percentage						14.00%
Kaya Holdings Corp [Member] | Common Class B [Member] | Subscription Agreement [Member]
Entity Listings [Line Items]
Shares purchased					2,875,000
Total investment amount					$ 230,000
Addtional shares purchased					500,000
Total shares purchased					3,375,000

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Note Receivable (Details Narrative) - USD ($)		9 Months Ended
	Apr. 05, 2021	Jun. 30, 2021	Oct. 02, 2020	Jan. 06, 2020	Jan. 04, 2020
Entity Listings [Line Items]
Debt instrument, maturity date description		June – August, 2021
Convertible Promissory Note [Member]
Entity Listings [Line Items]
Debt instrument, face amount	$ 250,000
Debt instrument, maturity date description	The Note has a maturity date which is six months after the close of the Arkannabis, a Colorado grow facility.
Debt instrument interest rate stated percentage	5.75%
Debt instrument, description	The terms of the note call for automatic conversion upon the closing of the Arkannabis business of the outstanding principal and interest on this Note and will convert into that number of shares of the equity securities equivalent to a non-dilitive 12.5% of the issued and outstanding shares of the Arkannabis business.
Community Growth Partners Holdings, Inc., [Member]
Entity Listings [Line Items]
Promissory note issued, value					$ 355,000
Debt instrument, face amount		$ 411,934
Debt instrument interest rate stated percentage				10.00%
Bushman Holdings, Inc., [Member]
Entity Listings [Line Items]
Promissory note issued, value			$ 100,000
Debt instrument, face amount		310,000
Additional promissory notes		$ 210,000

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Consolidated Asset Acquisitions (Details Narrative) - USD ($)						1 Months Ended				3 Months Ended		9 Months Ended			12 Months Ended
	Jan. 05, 2021	Jan. 04, 2021	Mar. 29, 2019	Feb. 28, 2019	Apr. 30, 2018	Dec. 31, 2020	May 31, 2020	Sep. 30, 2018	Apr. 30, 2018	Dec. 31, 2020	Dec. 31, 2019	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2019	Sep. 30, 2019	Sep. 30, 2020	Aug. 31, 2019
Business Acquisition [Line Items]
Shares issued for acquisition, shares												101,968,944
Equity interest percentage												5.00%
Stock issued for acquisition, value										$ 43,190,000	$ 394,000
Cash acquired amount													$ 349,000
Intangible assets												59,095,000				$ 13,270,000
Investment amount												1,388,000				767,000
Definitive Agreement [Member]
Business Acquisition [Line Items]
Equity interest percentage			51.00%
YMY Ventures LLC [Member]
Business Acquisition [Line Items]
Purchase price of business								$ 750,000
Shares issued escrow amount				$ 375,000										$ 375,000			$ 67,500
Balance amount of additional funds				307,500
Payments for tenant improvements cost				650,000
Non-controlling interest related to acquisition				$ 790,000
YMY Ventures LLC [Member] | First Due [Member]
Business Acquisition [Line Items]
Purchase price of business								375,000
YMY Ventures LLC [Member] | Final Due [Member]
Business Acquisition [Line Items]
Purchase price of business								$ 375,000
YMY Ventures LLC [Member] | Escrow [Member]
Business Acquisition [Line Items]
Payments to acquire license														$ 690,238
NVD RE Corp [Member]
Business Acquisition [Line Items]
Purchase price of business															$ 600,000
Payments for tenant improvements cost					$ 675,000				$ 675,000
Non-controlling interest related to acquisition									1,200,000
Payments to acquire equity investment									1,275,000
Additional invested capital over original obligation					$ 377,000				$ 377,000
Proceeds from mortgage property						$ 400,000									$ 300,000
Shares issued for acquisition, shares							386,035
Share price per share							$ 0.001
Investment percentage							63.75%
Western Coast Ventures (WCV) [Member] | Definitive Agreement [Member]
Business Acquisition [Line Items]
Shares issued for acquisition, shares			2,500,000
Share price per share			$ 1.47
Surplus working capital			$ 2,000,000
Stock issued for acquisition, value			4,400,000
Cash acquired amount			2,000,000.0
Payments to acquired intangible assets			3,800,000
Intangible assets												$ 1,350,000				$ 1,350,000
ILCA Holdings Inc [Member]
Business Acquisition [Line Items]
Investment			$ 2,400,000
Michigan RE1 [Member] | Securities Purchase Agreement [Member]
Business Acquisition [Line Items]
Purchase price of business	$ 400,000
Shares issued for acquisition, shares		510
Agreegate Amount	250,000	$ 510
Non-refundable deposit	250,000
Investment amount	$ 235,467
Michigan RE1 [Member] | Promissory Note [Member] | Securities Purchase Agreement [Member]
Business Acquisition [Line Items]
Shares issued for acquisition, shares	300,000
Agreegate Amount	$ 150,000
Principal amount	$ 150,000
YMY Ventures LLC [Member]
Business Acquisition [Line Items]
Acquisition, percentage								50.00%
NVD RE Corp [Member]
Business Acquisition [Line Items]
Acquisition, percentage					37.50%		26.25%		37.50%

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Schedule of Non-Controlling Interests in Consolidated Entities (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Sep. 30, 2020	Sep. 30, 2019
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
NCI Equity Share			1,869			2,332
Net Loss Attributable to NCI	$ (66)	$ (121)	$ (170)	$ (466)		$ (492)
NCI in Consolidated Entities	1,699		$ 1,699		$ 1,840
NVD RE Corp [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
NCI Equity Share			578		597
Net Loss Attributable to NCI			$ (25)		$ (48)
NCI in Consolidated Entities	$ 553		$ 553		$ 549
Non-Controlling Ownership, percentage	63.80%		63.80%		50.00%
ILCA [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
NCI Equity Share					1,288
Net Loss Attributable to NCI					$ (240)
NCI in Consolidated Entities					$ 1,048
Non-Controlling Ownership, percentage					49.00%
YMY Ventures, Inc [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
NCI Equity Share			243		447
Net Loss Attributable to NCI			$ 30		$ (204)
NCI in Consolidated Entities	$ 273		$ 273		$ 243
Non-Controlling Ownership, percentage	50.00%		50.00%		50.00%
Western Coast Ventures, Inc. [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
NCI Equity Share			1,048
Net Loss Attributable to NCI			$ (150)
NCI in Consolidated Entities	$ 898		$ 898
Non-Controlling Ownership, percentage	49.00%		49.00%
Michigan RE1 Inc [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
NCI Equity Share
Net Loss Attributable to NCI			$ (25)
NCI in Consolidated Entities	$ (25)		$ (25)
Non-Controlling Ownership, percentage	51.00%		51.00%

XML

Schedule of Level 3 Liabilities Measured at Fair Value (Details) - USD ($)	3 Months Ended			9 Months Ended
	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2020	Jun. 30, 2021
Business Acquisition [Line Items]
Beginning balance	$ 11,216,000	$ 9,562,000	$ 849,000	$ 849,000
Change in fair value	(6,680,000)	6,244,000	(298,000)
Ending balance	4,580,000	11,216,000	9,562,000	4,580,000
Warrants granted for servies			11,000
Warrants issued pursuant to acquisition (see Note 9)			9,000,000
Warrants forfeited due to settlement agreement		(4,590,000)
Warrants issued pursuant to subscription agreement	59,000
Final change due to completed conversion of debt	(15,000)
WarrantLiabilityOneMember
Business Acquisition [Line Items]
Beginning balance	10,866,000	9,178,000	257,000	257,000
Change in fair value	(6,481,000)	6,278,000	(90,000)
Ending balance	4,444,000	10,866,000	9,178,000	4,444,000
Warrants granted for servies			11,000
Warrants issued pursuant to acquisition (see Note 9)			9,000,000
Warrants forfeited due to settlement agreement		(4,590,000)
Warrants issued pursuant to subscription agreement	59,000
Final change due to completed conversion of debt
Embedded Derivative Liability [Member]
Business Acquisition [Line Items]
Beginning balance	350,000	384,000	592,000	592,000
Change in fair value	(199,000)	(34,000)	(208,000)
Ending balance	136,000	350,000	384,000	136,000
Warrants granted for servies
Warrants issued pursuant to acquisition (see Note 9)
Warrants forfeited due to settlement agreement
Warrants issued pursuant to subscription agreement
Final change due to completed conversion of debt	(15,000)
Seven Leaf Ventures Corp [Member] | Warrant Liability [Member]
Business Acquisition [Line Items]
Beginning balance			60,000	60,000
Issuance of convertible notes
Change in fair value			(60,000)
Ending balance
Seven Leaf Ventures Corp [Member] | Derivative Liability [Member]
Business Acquisition [Line Items]
Beginning balance	15,000	15,000	54,000	54,000
Issuance of convertible notes
Change in fair value	(15,000)		(39,000)
Ending balance		$ 15,000	15,000
Driven Deliveries Inc [Member] | Warrant Liability [Member]
Business Acquisition [Line Items]
Beginning balance
Change in fair value				(210,000)
Ending balance	4,201,000			4,201,000
Warrants acquired				9,000,000
Warrants converted into equity				(4,589,000)
Driven Deliveries Inc [Member] | Derivative Liability [Member]
Business Acquisition [Line Items]
Beginning balance
Change in fair value
Ending balance
Warrants acquired

XML

Schedule of Purchasre Consideration to Fair value of assets Aquired and Liabilities Assumed (Details) - USD ($) $ in Thousands	Dec. 29, 2020	Mar. 06, 2020	Jun. 30, 2021	Sep. 30, 2020
Business Acquisition [Line Items]
Goodwill			$ 18,061	$ 7,221
Seven Leaf Ventures Corp [Member]
Business Acquisition [Line Items]
Estimated fair value of common stock issued		$ 9,552
Estimated fair value of warrants issued		772
Estimated fair value of debt issued		2,540
Estimated fair value of embedded and bifurcated derivatives		244
Forgiveness of working capital advance		(150)
Total consideration paid		12,958
Cash and cash equivalents		81
Property and equipment (Fixed assets)		54
Inventory		133
Goodwill		6,151
Intangible assets		7,684
Total assets acquired		14,103
Accounts payable, accrued expenses and other current liabilities		1,145
Total liabilities assumed		1,145
Net assets acquired		12,958
Driven Deliveries Inc [Member]
Business Acquisition [Line Items]
Estimated fair value of common stock issued	$ 42,825
Estimated fair value of warrants issued	9,000
Estimated fair value of options issued	500
Estimated fair value of debt assumed	4,389
Total consideration paid	56,714
Cash and cash equivalents
Property and equipment (Fixed assets)	47
Goodwill	10,840
Intangible assets	48,200
Other Assets	1,526
Total assets acquired	60,613
Accounts payable, accrued expenses and other current liabilities	(3,899)
Total liabilities assumed	(3,899)
Net assets acquired	$ 56,714

XML

Schedule of Proforma Condensed Consolidated Results of Operations (Details) - USD ($) $ in Thousands	9 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Business Combination and Asset Acquisition [Abstract]
Revenue	$ 31,396	$ 18,410
Net income (loss)	$ (10,206)	$ (20,406)

XML

Business Combination (Details Narrative)			3 Months Ended	9 Months Ended
	Dec. 29, 2020 USD ($) $ / shares shares	Mar. 06, 2020 shares	Jun. 30, 2021 USD ($) $ / shares shares	Jun. 30, 2021 USD ($) $ / shares shares	Jun. 30, 2021 CAD ($) $ / shares shares	Mar. 31, 2021 shares	Dec. 31, 2020 shares	Sep. 30, 2020 shares	Sep. 30, 2019 shares
Business Acquisition [Line Items]
Debt instrument, conversion price | $ / shares			$ 0.50	$ 0.50
Purchase price | $			$ 40,000
Stock options outstanding			3,637,916	3,637,916	3,637,916	5,672,916	5,672,916	5,572,916	3,210,416
Increase in goodwill | $			$ 1,000,000.0
Seven Leaf Ventures Corp [Member] | Asset Purchase Agreement [Member]
Business Acquisition [Line Items]
Purchase price | $				$ 1,220,000
Seven Leaf Ventures Corp [Member]
Business Acquisition [Line Items]
Percentage of voting interest acquired		100.00%
Number of shares issued for purchase price		12,085,770
Note payable, interest rate		10.00%
Business acquisition, planned restructuring activities, description		the Company assumed the obligations of 7LV with respect to the common share purchase warrants of 7LV outstanding on the closing of the acquisition, subject to appropriate adjustments to reflect the exchange ratio. Accordingly, the Company has assumed 1,022,915 common share purchase warrants (the “Warrants”), exercisable into shares at an exercise price of C$2.08 per share at any time prior to May 3, 2021, 299,975 Warrants, exercisable into shares at an exercise price of C$4.17 per share at any time prior to June 30, 2021 and 999,923 Warrants, exercisable into shares at an exercise price of C$0.50 at any time prior to October 10, 2020. Following the completion of the acquisition, 7LV is now a wholly owned subsidiary of the Company.
Seven Leaf Ventures Corp [Member] | Asset Purchase Agreement [Member]
Business Acquisition [Line Items]
Goodwill not be deductible for income tax purposes | $			5,900,000	5,900,000
Seven Leaf Ventures Corp [Member] | Unsecured Convertible Debentures [Member]
Business Acquisition [Line Items]
Unsecured convertible debentures | $			$ 2,540	$ 2,540
Number of warrants to purchase shares			1,022,915	1,022,915	1,022,915
Seven Leaf Ventures Corp [Member] | Unsecured Convertible Debentures [Member] | CAD Dollar [Member]
Business Acquisition [Line Items]
Unsecured convertible debentures | $					$ 3,410
Debt instrument, conversion price | $ / shares					$ 1.67
Warrants exercise price | $ / shares					$ 2.08
Seven Leaf Ventures Corp [Member] | Unsecured Convertible Debentures One [Member]
Business Acquisition [Line Items]
Number of warrants to purchase shares			299,975	299,975	299,975
Seven Leaf Ventures Corp [Member] | Unsecured Convertible Debentures One [Member] | CAD Dollar [Member]
Business Acquisition [Line Items]
Warrants exercise price | $ / shares					$ 4.17
Seven Leaf Ventures Corp [Member] | Unsecured Convertible Debentures Two [Member]
Business Acquisition [Line Items]
Number of warrants to purchase shares			999,923	999,923	999,923
Seven Leaf Ventures Corp [Member] | Unsecured Convertible Debentures Two [Member] | CAD Dollar [Member]
Business Acquisition [Line Items]
Warrants exercise price | $ / shares					$ 0.50
Driven Deliveries Inc [Member]
Business Acquisition [Line Items]
Percentage of voting interest acquired	100.00%
Number of shares issued for purchase price	101,968,944
Number of warrants to purchase shares	30,249,184
Warrants exercise price | $ / shares	$ 0.54
Goodwill not be deductible for income tax purposes | $	$ 10,800,000
Stock options outstanding	4,530,495

XML

Schedule of Intangible Assets (Details) - USD ($) $ in Thousands	9 Months Ended		12 Months Ended
	Jun. 30, 2021	Jun. 30, 2021	Sep. 30, 2020
Indefinite-lived Intangible Assets [Line Items]
Accumulated Amortization	$ (3,105)		$ (730)
Balance, beginning	13,270
Accumulated Amortization	3,105		730
Balance, beginning	$ 59,095	$ 59,095	13,270
Minimum [Member] | Driven Deliveries Inc [Member]
Indefinite-lived Intangible Assets [Line Items]
Finite-Lived Intangible Asset, Useful Life	10 years
Maximum [Member] | Driven Deliveries Inc [Member]
Indefinite-lived Intangible Assets [Line Items]
Finite-Lived Intangible Asset, Useful Life	15 years
YMY Ventures LLC [Member]
Indefinite-lived Intangible Assets [Line Items]
Accumulated Amortization	$ 38
Finite-Lived Intangible Asset, Useful Life	15 years
Balance, beginning	$ 38
Accumulated Amortization	(38)
Balance, beginning	(38)
Western Coast Ventures (WCV) [Member]
Indefinite-lived Intangible Assets [Line Items]
Accumulated Amortization	$ 122
Finite-Lived Intangible Asset, Useful Life	15 years
Balance, beginning	$ 122
Accumulated Amortization	(122)
Balance, beginning	(122)
Yerba Buena L L C [Member]
Indefinite-lived Intangible Assets [Line Items]
Accumulated Amortization	129
Balance, beginning	129
Accumulated Amortization	(129)
Balance, beginning	$ (129)
Yerba Buena L L C [Member] | Minimum [Member]
Indefinite-lived Intangible Assets [Line Items]
Finite-Lived Intangible Asset, Useful Life	3 years
Yerba Buena L L C [Member] | Maximum [Member]
Indefinite-lived Intangible Assets [Line Items]
Finite-Lived Intangible Asset, Useful Life	15 years
Foot Hills [Member]
Indefinite-lived Intangible Assets [Line Items]
Accumulated Amortization	$ 392
Finite-Lived Intangible Asset, Useful Life	15 years
Balance, beginning	$ 392
Accumulated Amortization	(392)
Balance, beginning	(392)
Driven Deliveries Inc [Member]
Indefinite-lived Intangible Assets [Line Items]
Accumulated Amortization	1,694
Balance, beginning	46,506
Accumulated Amortization	(1,694)
Balance, beginning	(46,506)
Other [Member]
Indefinite-lived Intangible Assets [Line Items]
Accumulated Amortization
Finite-Lived Intangible Asset, Useful Life	5 years
Balance, beginning
Accumulated Amortization
Balance, beginning
Cannabis Licenses [Member]
Indefinite-lived Intangible Assets [Line Items]
Balance, beginning	12,679
Balance, beginning	56,679	56,679	12,679
Cannabis Licenses [Member] | YMY Ventures LLC [Member]
Indefinite-lived Intangible Assets [Line Items]
Balance, beginning
Balance, beginning
Cannabis Licenses [Member] | Western Coast Ventures (WCV) [Member]
Indefinite-lived Intangible Assets [Line Items]
Balance, beginning
Balance, beginning
Cannabis Licenses [Member] | Yerba Buena L L C [Member]
Indefinite-lived Intangible Assets [Line Items]
Balance, beginning
Balance, beginning
Cannabis Licenses [Member] | Foot Hills [Member]
Indefinite-lived Intangible Assets [Line Items]
Balance, beginning
Balance, beginning
Cannabis Licenses [Member] | Driven Deliveries Inc [Member]
Indefinite-lived Intangible Assets [Line Items]
Balance, beginning	44,000
Balance, beginning	(44,000)
Cannabis Licenses [Member] | Other [Member]
Indefinite-lived Intangible Assets [Line Items]
Balance, beginning
Balance, beginning
Trade Name [Member]
Indefinite-lived Intangible Assets [Line Items]
Balance, beginning	458
Balance, beginning	2,258	2,258	458
Trade Name [Member] | YMY Ventures LLC [Member]
Indefinite-lived Intangible Assets [Line Items]
Balance, beginning
Balance, beginning
Trade Name [Member] | Western Coast Ventures (WCV) [Member]
Indefinite-lived Intangible Assets [Line Items]
Balance, beginning
Balance, beginning
Trade Name [Member] | Yerba Buena L L C [Member]
Indefinite-lived Intangible Assets [Line Items]
Balance, beginning
Balance, beginning
Trade Name [Member] | Foot Hills [Member]
Indefinite-lived Intangible Assets [Line Items]
Balance, beginning
Balance, beginning
Trade Name [Member] | Driven Deliveries Inc [Member]
Indefinite-lived Intangible Assets [Line Items]
Balance, beginning	1,800
Balance, beginning	(1,800)
Trade Name [Member] | Other [Member]
Indefinite-lived Intangible Assets [Line Items]
Balance, beginning
Balance, beginning
Customer Relationship [Member]
Indefinite-lived Intangible Assets [Line Items]
Balance, beginning	643
Balance, beginning	1,243	1,243	643
Customer Relationship [Member] | YMY Ventures LLC [Member]
Indefinite-lived Intangible Assets [Line Items]
Balance, beginning
Balance, beginning
Customer Relationship [Member] | Western Coast Ventures (WCV) [Member]
Indefinite-lived Intangible Assets [Line Items]
Balance, beginning
Balance, beginning
Customer Relationship [Member] | Yerba Buena L L C [Member]
Indefinite-lived Intangible Assets [Line Items]
Balance, beginning
Balance, beginning
Customer Relationship [Member] | Foot Hills [Member]
Indefinite-lived Intangible Assets [Line Items]
Balance, beginning
Balance, beginning
Customer Relationship [Member] | Driven Deliveries Inc [Member]
Indefinite-lived Intangible Assets [Line Items]
Balance, beginning	600
Balance, beginning	(600)
Customer Relationship [Member] | Other [Member]
Indefinite-lived Intangible Assets [Line Items]
Balance, beginning
Balance, beginning
Non Compete [Member]
Indefinite-lived Intangible Assets [Line Items]
Balance, beginning	220
Balance, beginning	220	220	220
Non Compete [Member] | YMY Ventures LLC [Member]
Indefinite-lived Intangible Assets [Line Items]
Balance, beginning
Balance, beginning
Non Compete [Member] | Western Coast Ventures (WCV) [Member]
Indefinite-lived Intangible Assets [Line Items]
Balance, beginning
Balance, beginning
Non Compete [Member] | Yerba Buena L L C [Member]
Indefinite-lived Intangible Assets [Line Items]
Balance, beginning
Balance, beginning
Non Compete [Member] | Foot Hills [Member]
Indefinite-lived Intangible Assets [Line Items]
Balance, beginning
Balance, beginning
Non Compete [Member] | Driven Deliveries Inc [Member]
Indefinite-lived Intangible Assets [Line Items]
Balance, beginning
Balance, beginning
Non Compete [Member] | Other [Member]
Indefinite-lived Intangible Assets [Line Items]
Balance, beginning
Balance, beginning
Technology [Member]
Indefinite-lived Intangible Assets [Line Items]
Balance, beginning
Balance, beginning	1,800	$ 1,800
Technology [Member] | YMY Ventures LLC [Member]
Indefinite-lived Intangible Assets [Line Items]
Balance, beginning
Balance, beginning
Technology [Member] | Western Coast Ventures (WCV) [Member]
Indefinite-lived Intangible Assets [Line Items]
Balance, beginning
Balance, beginning
Technology [Member] | Yerba Buena L L C [Member]
Indefinite-lived Intangible Assets [Line Items]
Balance, beginning
Balance, beginning
Technology [Member] | Foot Hills [Member]
Indefinite-lived Intangible Assets [Line Items]
Balance, beginning
Balance, beginning
Technology [Member] | Driven Deliveries Inc [Member]
Indefinite-lived Intangible Assets [Line Items]
Balance, beginning	1,800
Balance, beginning	(1,800)
Technology [Member] | Other [Member]
Indefinite-lived Intangible Assets [Line Items]
Balance, beginning
Balance, beginning

XML

Schedule of Expected Amortization (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Sep. 30, 2020
Goodwill and Intangible Assets Disclosure [Abstract]
2021	$ 1,037
2022	4,147
2023	4,147
2024	4,147
2025	4,147
Thereafter	41,470
Intangible assets	$ 59,095	$ 13,270

XML

Intangible Assets, net (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense	$ 1,086	$ 172	$ 2,380	$ 430

XML

Schedule of Accounts Payable and Accrued Expenses (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Sep. 30, 2020
Payables and Accruals [Abstract]
Accounts payable	$ 3,399	$ 1,784
Accrued credit cards	36	41
Accrued interest	152	134
Accrued payroll	928	616
Other	3,616	408
Total Accounts Payable and Accrued Expenses	$ 8,131	$ 2,983

XML

Schedule of Short-term Notes and Advances (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Sep. 30, 2020
Debt Disclosure [Abstract]
Equipment financing	$ 32	$ 27
Insurance financing	229	177
Mortgages payable		923
Promissory note	425	2,298
Settlement payable	95
Due to related party	1	200
Short-term notes and advances	782	3,625
Acquisition notes payable	538	665
Total notes payable and advances	1,320	4,290
Long-term mortgages	3,200	3,685
Total long-term debt	$ 3,200	$ 3,685

XML

Schedule of Maturities of Long Term Debt (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Sep. 30, 2020
Debt Disclosure [Abstract]
2021
2022	2,600
2023	600
2024
2025
Thereafter
Total long-term debt	$ 3,200	$ 3,685

XML

Notes Payable and Advances (Details Narrative) - USD ($)																			1 Months Ended														3 Months Ended	9 Months Ended
	Jul. 16, 2021	May 31, 2021	Apr. 17, 2021	Apr. 10, 2021	Feb. 24, 2021	Feb. 17, 2021	Feb. 09, 2021	Dec. 04, 2020	Nov. 07, 2020	Sep. 30, 2020	Jul. 31, 2020	Jul. 16, 2020	May 24, 2020	Feb. 07, 2020	Apr. 30, 2018	Apr. 29, 2018	Jan. 16, 2018	Jul. 31, 2017	Jun. 30, 2021	Feb. 28, 2021	Jan. 31, 2021	Nov. 30, 2020	Aug. 31, 2020	Jul. 31, 2020	Jun. 30, 2020	Jan. 31, 2020	Sep. 30, 2019	Apr. 30, 2019	Sep. 30, 2018	Jul. 31, 2018	Apr. 30, 2018	Nov. 30, 2017	Jun. 30, 2019	Jun. 30, 2021	Jun. 30, 2020	Dec. 29, 2020	May 31, 2020
Short-term Debt [Line Items]
Acquisition of purchase price																																		$ 425,000	$ 433,000
Outstanding obligation, net of debt discount										$ 3,685,000									$ 3,200,000															3,200,000
Settlement payable																			95,000															$ 95,000
Debt instrument, maturity description																																		June – August, 2021
Payments of notes payable																																		$ 1,634,000	1,300,000
Number of common shares																																	12,500,000
Due to Related Parties										200,000									1,000															1,000
NVD RE Corp [Member]
Short-term Debt [Line Items]
Debt monthly payments																							$ 4,667
Notes payable																							$ 300,000				$ 300,000
Debt instrument, interest rate															37.50%																37.50%
Due to Related Parties															$ 1,275,000																$ 1,275,000
Purchase price															600,000																600,000
Payments for Tenant Improvements															$ 675,000																$ 675,000
Private Attorney General Act [Member]
Short-term Debt [Line Items]
Assumed liabilities, current portion																			2,000,418															2,000,418
Driven Deliveries Inc [Member]
Short-term Debt [Line Items]
Number of warrants issued to purchase common stock																																				30,249,184
Warrants exercise price																																				$ 0.54
Outstanding obligation, net of debt discount																			95,451															95,451
Settlement payable																			250,451															$ 250,451
Settlement payable description																																		This settlement is payable in equal bi-monthly payments over a period of seventeen (17) Months (36 pay periods), beginning in February 2021.
Officer [Member]
Short-term Debt [Line Items]
Related party loans payable																																		$ 1,000
Two Thousand Tractor [Member]
Short-term Debt [Line Items]
Notes payable																			5,757															5,757
Notes Payable One [Member]
Short-term Debt [Line Items]
Notes payable																			442															442
Promissory Note [Member]
Short-term Debt [Line Items]
Debt instrument face amount																																$ 21,749
Notes payable																			14,950															14,950
Debt instrument, interest rate																																18.00%
Servicing fee percentage																																10.00%
Promissory Note [Member] | Yerba Buena Oregon L L C [Member]
Short-term Debt [Line Items]
Debt instrument face amount																			61,860									$ 400,000						61,860
Debt instrument, interest rate																												8.00%
Debt instrument, maturity description																												The note was issued on April 8, 2019 and is due on April 8, 2021.
Debt instrument conversion amount																			295,859
Promissory Note [Member] | Shareholders Officers And Directors [Member]
Short-term Debt [Line Items]
Debt instrument face amount																																$ 80,000
Notes payable																			0															0
Debt instrument, interest rate																																6.00%
Debt instrument, term																																1 year
Promissory Note [Member] | Twelve Months [Member] | Yerba Buena Oregon L L C [Member]
Short-term Debt [Line Items]
Debt monthly payments																												$ 2,667
Promissory Note [Member] | Twelve Months One [Member] | Yerba Buena Oregon L L C [Member]
Short-term Debt [Line Items]
Debt monthly payments																												$ 16,667
Building acquired fron related party with equity, net of lien acquired.
Short-term Debt [Line Items]
Debt instrument face amount																					$ 27,880
Debt monthly payments																					$ 642
Notes payable																			26,176															26,176
Debt instrument, interest rate																					13.29%
Short Term Mortgages Payable [Member]
Short-term Debt [Line Items]
Notes payable																			922,500															922,500
Debt instrument, interest rate																														2.00%
Purchase price of premises																	$ 1,700,000
Rental credit																	135,000
Monthly payments																	15,000													$ 13,500
Amount granted for improvement of property																	9,500
Acquisition of purchase price																	370,637
Promissory note amount																	$ 1,200,000
Interest and fees																																		144,486
Two Promissory Note [Member]
Short-term Debt [Line Items]
Warrants exercise price											$ 0.45													$ 0.45
Warrants description											As of July 2020, in consideration of the warrants being amended to $0.45 per share with an extended the term from five to a ten-year term, the maturity date has been extended to December 13, 2020.
Debt instrument, principal payment																																					$ 20,000
Two Promissory Note [Member] | Minimum [Member]
Short-term Debt [Line Items]
Warrants term											5 years													5 years
Two Promissory Note [Member] | Maximum [Member]
Short-term Debt [Line Items]
Warrants term											10 years													10 years
Two Promissory Note [Member] | Accredited Investors [Member]
Short-term Debt [Line Items]
Debt instrument face amount																										$ 500,000
Debt instrument, interest rate																										12.00%
Number of warrants issued to purchase common stock																										100,000
Warrants term																										5 years
Warrants exercise price																										$ 0.85
Two Promissory Note One [Member]
Short-term Debt [Line Items]
Notes payable																			425,523															425,523
Warrants exercise price											$ 0.45													$ 0.45
Warrants description											As of July 2020, in consideration of the warrants being amended to $0.45 per share with an extended the term from five to a ten-year term, the maturity date has been extended to December 13, 2020
Outstanding obligation, net of debt discount																			74,477															74,477
Two Promissory Note One [Member] | Minimum [Member]
Short-term Debt [Line Items]
Warrants term											5 years													5 years
Two Promissory Note One [Member] | Maximum [Member]
Short-term Debt [Line Items]
Warrants term											10 years													10 years
Two Promissory Note One [Member] | Accredited Investors [Member]
Short-term Debt [Line Items]
Debt instrument face amount																										$ 500,000
Debt instrument, interest rate																										12.00%
Number of warrants issued to purchase common stock																										100,000
Warrants term																										5 years
Warrants exercise price																										$ 0.85
Acquisition Notes Payable [Member]
Short-term Debt [Line Items]
Notes payable																					$ 307,500
Acquisition of purchase price																													$ 800,000
Acquisition description																													the Company entered into an agreement to acquire 50% of the membership interest of YMY. The purchase price for the 50% interest was approximately $0.8 million. In connection with this agreement, as of September 30, 2019, the Company has paid approximately $500,000 and recorded a note payable of $307,500.
Payments of notes payable																											$ 500,000
Long Term Debt Mortgages [Member]
Short-term Debt [Line Items]
Notes payable																			400,000															400,000
Mortgage payable, interest rate																						15.00%		14.00%	11.55%	15.00%
Mortgage payable final due date																								Jul. 31, 2023	Apr. 01, 2023	Jan. 31, 2022
Description of collateral																						The note has been cross guaranteed by the CEO and Director of the Company.		The note has been cross guaranteed by the CEO and Director of the Company.	The note has been cross guaranteed by the CEO and Director of the Company.	The note has been cross guaranteed by the CEO and Director of the Company.
Mortgage payable																									$ 1,585,000										1,585,000
Value of mortgage paid																									$ 120,000
Long Term Debt Mortgages One [Member]
Short-term Debt [Line Items]
Mortgage payable, interest rate																									11.55%
Mortgage payable final due date																									Apr. 01, 2022
Mortgage payable																									$ 400,000										$ 400,000
Value of mortgage paid																									$ 38,000
Long Term Debt Mortgages Two [Member]
Short-term Debt [Line Items]
Notes payable																			400,000															400,000
Mortgage payable, interest rate																									15.00%
Mortgage payable final due date																									Mar. 31, 2022
Description of collateral																									The note has been cross guaranteed by the CEO and Director of the Company.
Long Term Debt Mortgages Three [Member]
Short-term Debt [Line Items]
Notes payable																			700,000															700,000
Long Term Debt Mortgages Four [Member]
Short-term Debt [Line Items]
Notes payable																			200,000															200,000
Long-term Debt [Member]
Short-term Debt [Line Items]
Notes payable																			400,000															400,000
Long Term Debt Mortgages Five [Member]
Short-term Debt [Line Items]
Notes payable																			1,100,000															1,100,000
Thirty Six Month Premium Finance Agreement [Member] | Notes Payable [Member]
Short-term Debt [Line Items]
Debt instrument face amount																$ 15,710
Debt monthly payments																$ 442
Prepaid Expenses and Other Current Assets [Policy Text Block] | Notes Payable [Member]
Short-term Debt [Line Items]
Debt instrument face amount																		$ 28,905
Debt monthly payments																		$ 482
Twelve Month Premium Finance Agreement [Member] | Notes Payable [Member]
Short-term Debt [Line Items]
Deb instrument, down payment						$ 47,100								$ 60,255
Twelve Month Premium Finance Agreement [Member] | Notes Payable One [Member]
Short-term Debt [Line Items]
Debt instrument face amount														300,150
Debt monthly payments														$ 22,718
Debt instrument, interest rate														7.46%
Twelve Month Premium Finance Agreement [Member] | Notes Payable Two [Member]
Short-term Debt [Line Items]
Debt instrument face amount						243,284
Debt monthly payments						$ 17,835
Notes payable																			124,845															124,845
Debt instrument, interest rate						7.46%
Twelve Month Premium Finance Agreement [Member] | Notes Payable Ten [Member]
Short-term Debt [Line Items]
Debt instrument face amount								$ 22,391
Debt monthly payments							$ 3,435
Notes payable																			16,227															16,227
Debt instrument, interest rate							8.50%
Deb instrument, down payment							$ 2,488
Debt instrument, increase in face amount								7,575
Revised Policy premium								29,967
Twelve Month Premium Finance Agreement [Member] | Notes Payable Eleven [Member]
Short-term Debt [Line Items]
Debt monthly payments					$ 1,199
Notes payable																			8,392															8,392
Deb instrument, down payment					3,424
Twelve Month Premium Finance Agreement [Member] | Notes Payable Twelve [Member]
Short-term Debt [Line Items]
Debt monthly payments				$ 7,271
Notes payable																			50,898															50,898
Deb instrument, down payment				15,750
Twelve Month Premium Finance Agreement [Member] | Notes Payable Thirteen [Member]
Short-term Debt [Line Items]
Debt monthly payments			$ 1,814
Notes payable																			10,886															10,886
Deb instrument, down payment			4,871
Twelve Month Premium Finance Agreement [Member] | Notes Payable Fourteen [Member]
Short-term Debt [Line Items]
Debt monthly payments		$ 741
Notes payable																			6,667															6,667
Deb instrument, down payment		2,537
Ten Month Premium Finance Agreement [Member] | Notes Payable Three [Member]
Short-term Debt [Line Items]
Debt instrument face amount											$ 53,325													$ 53,325
Debt monthly payments											$ 3,772
Debt instrument, interest rate											7.50%													7.50%
Deb instrument, down payment											$ 15,602
Ten Month Premium Finance Agreement [Member] | Notes Payable Seven [Member]
Short-term Debt [Line Items]
Debt monthly payments										157
Ten Month Premium Finance Agreement [Member] | Notes Payable Eight [Member]
Short-term Debt [Line Items]
Debt monthly payments									$ 530
Notes payable																			1,061															1,061
Ten Month Premium Finance Agreement [Member] | Notes Payable Nine [Member]
Short-term Debt [Line Items]
Debt instrument face amount								9,920
Debt monthly payments								$ 754
Notes payable																			3,014															3,014
Debt instrument, interest rate								12.80%
Deb instrument, down payment								$ 2,383
Ten Month Premium Finance Agreement [Member] | Notes Payable Eleven [Member]
Short-term Debt [Line Items]
Debt instrument face amount					$ 13,694
Debt instrument, interest rate					7.369%
Ten Month Premium Finance Agreement [Member] | Notes Payable Twelve [Member]
Short-term Debt [Line Items]
Debt instrument face amount				$ 78,750
Debt instrument, interest rate				8.35%
Ten Month Premium Finance Agreement [Member] | Notes Payable Thirteen [Member]
Short-term Debt [Line Items]
Debt instrument face amount			$ 23,014
Debt instrument, interest rate			11.98%
Ten Month Premium Finance Agreement [Member] | Notes Payable Fourteen [Member]
Short-term Debt [Line Items]
Debt instrument face amount		$ 8,906
Debt instrument, interest rate		10.25%
Ten Month Premium Finance Agreement One [Member] | Notes Payable Four [Member]
Short-term Debt [Line Items]
Debt instrument face amount											78,056													$ 78,056
Debt monthly payments											$ 5,507
Debt instrument, interest rate											7.50%													7.50%
Deb instrument, down payment											$ 22,984
Ten Month Premium Finance Agreement One [Member] | Notes Payable Seven [Member]
Short-term Debt [Line Items]
Debt instrument face amount										$ 2,611
Debt instrument, interest rate										7.00%
Deb instrument, down payment										$ 1,043
Ten Month Premium Finance Agreement One [Member] | Notes Payable Eight [Member]
Short-term Debt [Line Items]
Debt instrument face amount									$ 6,675
Debt instrument, interest rate									11.40%
Deb instrument, down payment									$ 1,371
Nine Month Premium Finance Agreement [Member] | Notes Payable Five [Member]
Short-term Debt [Line Items]
Debt instrument face amount													$ 16,777
Debt monthly payments													$ 1,339
Debt instrument, interest rate													8.70%
Deb instrument, down payment													$ 3,485
Nine Month Premium Finance Agreement [Member] | Notes Payable Six [Member]
Short-term Debt [Line Items]
Debt instrument face amount												$ 10,629
Debt monthly payments												$ 736
Debt instrument, interest rate												11.00%
Deb instrument, down payment												$ 4,009
Nine Month Premium Finance Agreement [Member] | Notes Payable Fifteen [Member]
Short-term Debt [Line Items]
Debt instrument face amount	$ 10,650
Debt monthly payments	726
Notes payable	$ 6,538
Debt instrument, interest rate	11.00%
Deb instrument, down payment	$ 4,113
Settlement Agreement [Member] | Private Attorney General Act [Member]
Short-term Debt [Line Items]
Payments for debt																			612,291	$ 850,000
Warrants																				5,000,000,000
Number of common shares																				500,000
Debt forgiveness																			37,708
Assumed liabilities																			$ 930,763															$ 930,763

XML

Schedule of Assumptions Value Warrant Granted (Details) - Warrants Granted [Member] - Convertible Debt [Member]	Jun. 30, 2021 Integer $ / shares
Measurement Input, Exercise Price [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Fair value of underlying common shares | $ / shares	$ 2.93
Measurement Input, Expected Dividend Rate [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Fair value assumptions measurement input percentages
Measurement Input, Option Volatility [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Fair value assumptions measurement input percentages	85
Minimum [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Fair value of underlying common shares | $ / shares	$ 1.78
Minimum [Member] | Measurement Input, Risk Free Interest Rate [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Fair value assumptions measurement input percentages	1.4
Maximum [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Fair value of underlying common shares | $ / shares	$ 2.10
Maximum [Member] | Measurement Input, Risk Free Interest Rate [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Fair value assumptions measurement input percentages	1.9

XML

Schedule of Convertible Notes (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended				9 Months Ended
	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2020	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Change in fair value	$ 199			$ (570)	$ 441	$ (428)
Conversion price	$ 0.50				$ 0.50
Debt instrument, description					June – August, 2021
Convertible Notes [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Debt instrument, interest rate	8.00%				8.00%
Conversion price	$ 0.91				$ 0.91
Debt instrument maturity date					Dec. 27, 2021
Penalty provision	$ 155,239				$ 155,239
Principal value of 8%, convertible at $0.91 at March 31, 2021, due December 27, 2021 including penalty provision of $155,239	2,954				2,954
Principal value of 10%, convertible at $1.32 at March 31, 2021, due May 30, 2021 (see Note 9), as of the date of this filing the balance of this obligation has been fully converted
Principal value of various convertible notes, convertible at $0.50 at December 31, 2020, due June - August, 2021	100				100
Debt discount
Cumulative foreign currency impact	47				47
Carrying value of convertible notes	$ 3,101				$ 3,101
Convertible Notes One [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Debt instrument, interest rate	10.00%				10.00%
Conversion price	$ 1.32				$ 1.32
Debt instrument maturity date					May 30, 2021
Warrant Liability [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Beginning balance	$ 335	$ 47	$ 67		$ 67
Change in fair value	(27)	(18)	(20)
Ending balance	136	335	47		136
Derivative Liability [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Beginning balance	29	369	592		592
Change in fair value	(199)	(34)	(223)
Ending balance	$ 2	$ 29	$ 369		$ 2

XML

Convertible debt (Details Narrative)						1 Months Ended				3 Months Ended	9 Months Ended
	Feb. 26, 2021 USD ($)	Jan. 02, 2021 USD ($)	Mar. 14, 2019 USD ($) $ / shares shares	Mar. 14, 2019 CAD ($) shares	Dec. 27, 2018 CAD ($) shares	Jun. 30, 2021 USD ($) $ / shares	Jun. 30, 2019 USD ($) $ / shares shares	Jun. 30, 2019 CAD ($) shares	Jan. 31, 2019 $ / shares shares	Jun. 30, 2019 $ / shares shares	Jun. 30, 2021 USD ($) $ / shares shares	Jun. 30, 2021 CAD ($) shares	Jun. 30, 2020 USD ($)	Jun. 30, 2021 CAD ($)	May 03, 2021 USD ($)	Apr. 02, 2021	Dec. 29, 2020 $ / shares shares	Sep. 30, 2020 USD ($)	Apr. 30, 2020 $ / shares	Mar. 06, 2020
Entity Listings [Line Items]
Conversion price | $ / shares						$ 0.50					$ 0.50
Shares issued | shares										12,500,000
Accrued interest						$ 152,000					$ 152,000							$ 134,000
Debt discount											606,000
Seven Leaf Ventures Corp [Member]
Entity Listings [Line Items]
Debt instrument, interest rate																				10.00%
Driven Deliveries Inc [Member]
Entity Listings [Line Items]
Number of warrants to purchase shares | shares																	30,249,184
Warrants exercise price | $ / shares																	$ 0.54
Warrant Holders [Member]
Entity Listings [Line Items]
Convertible debenture						3,001,000					$ 3,001,000
Unsecured Convertible Debt [Member] | Seven Leaf Ventures Corp [Member]
Entity Listings [Line Items]
Debt instrument, interest rate											10.00%	10.00%
Repayment of debt												$ 32,600
Shares issued | shares											52,580.53	52,580.53
Accrued interest															$ 300
Eight Percetage Convertible Promissory Note [Member] | Driven Deliveries Inc [Member]
Entity Listings [Line Items]
Debt instrument face amount						1,050,000					$ 1,050,000
Original issuance discount						50,000					$ 50,000
Debt instrument conversion amount	$ 831,110
Debt discount						21,802
Eight Percetage Convertible Promissory Note [Member] | Driven Deliveries Inc [Member] | Execution Of Note [Member]
Entity Listings [Line Items]
Proceeds from note						$ 787,500
Eight Percetage Convertible Promissory Note [Member] | Driven Deliveries Inc [Member] | Outstanding Less Than Ninty Days [Member]
Entity Listings [Line Items]
Prepayment percentage						105.00%
Eight Percetage Convertible Promissory Note [Member] | Driven Deliveries Inc [Member] | Outstanding Between Nintyone To Onehundredtwenty Days [Member]
Entity Listings [Line Items]
Prepayment percentage						110.00%
Eight Percetage Convertible Promissory Note [Member] | Driven Deliveries Inc [Member] | Outstanding Between Onehundredtwentyone To Onehundredeighty Days [Member]
Entity Listings [Line Items]
Prepayment percentage						115.00%
Eight Percetage Convertible Promissory Note [Member] | Driven Deliveries Inc [Member] | Outstanding Between Onehundredeightyone To Threehundredsixtyfive Days [Member]
Entity Listings [Line Items]
Prepayment percentage						120.00%
Ten Percetage Convertible Promissory Note [Member] | Driven Deliveries Inc [Member]
Entity Listings [Line Items]
Debt instrument, interest rate						10.00%					10.00%			10.00%
Conversion price | $ / shares						$ 0.50					$ 0.50
Debt instrument face amount						$ 50,000					$ 50,000
Debt maturity date						Jun. 30, 2021
Notes payable						$ 50,000					$ 50,000
Ten Percetage Convertible Promissory Note [Member] | Driven Deliveries Inc [Member] | Thirty Days After Original Funding [Member]
Entity Listings [Line Items]
Proceeds from note						$ 262,500
Lien amount. | Driven Deliveries Inc [Member]
Entity Listings [Line Items]
Debt instrument, interest rate						10.00%					10.00%			10.00%		10.00%
Debt instrument, interest rate		50.00%
Debt maturity date						Jun. 01, 2025
Notes payable		$ 15,000				$ 805,000					$ 805,000
CAD Dollar [Member] | Warrant Holders [Member]
Entity Listings [Line Items]
Conversion price | $ / shares																			$ 1.90
Shares Issued, Price Per Share | $ / shares																			1.87
CAD Dollar [Member] | Convertible Debentures [Member] | Warrant Holders [Member]
Entity Listings [Line Items]
Warrants exercise price | $ / shares																			1.50
Shares Issued, Price Per Share | $ / shares																			$ 1.15
Canaccord Genuity Inc [Member]
Entity Listings [Line Items]
Debt instrument principal and interest percentage											105.00%	105.00%
Canaccord Genuity Inc [Member] | Common Stock [Member]
Entity Listings [Line Items]
Finance fee						$ 50,000					$ 50,000
Canaccord Genuity Inc [Member] | Agents [Member]
Entity Listings [Line Items]
Cash commission percentage											7.00%	7.00%
Canaccord Genuity Inc [Member] | Indenture Trustee [Member]
Entity Listings [Line Items]
Debt instrument principal and interest percentage											25.00%	25.00%
Canaccord Genuity Inc [Member] | Eight Percentage Converitble Notes [Member]
Entity Listings [Line Items]
Proceeds from private offerings											$ 3,100,000
Canaccord Genuity Inc [Member] | Eight Percentage Senior Unsecured Convertible Debenture [Member]
Entity Listings [Line Items]
Debt instrument, interest rate						8.00%					8.00%			8.00%
Debt instrument description											upon the exercise thereof and at no additional cost, 1.05 Convertible Debenture Units per CD Special Warrant (instead of 1.0 Convertible Debenture Unit per CD Special Warrant). Until the Receipt and Registration have been obtained, securities issued in connection with the Offering (including any underlying securities issued upon conversion or exercise thereof) will be subject to a six (6)-month hold period from the date of issue. Since the CD Special Warrants were exchanged for Convertible Debenture Units after six (6) months as U.S. and Canadian registrations were not effective at that time, the holders received 1.05 Convertible Debenture Units per CD Special Warrant.	upon the exercise thereof and at no additional cost, 1.05 Convertible Debenture Units per CD Special Warrant (instead of 1.0 Convertible Debenture Unit per CD Special Warrant). Until the Receipt and Registration have been obtained, securities issued in connection with the Offering (including any underlying securities issued upon conversion or exercise thereof) will be subject to a six (6)-month hold period from the date of issue. Since the CD Special Warrants were exchanged for Convertible Debenture Units after six (6) months as U.S. and Canadian registrations were not effective at that time, the holders received 1.05 Convertible Debenture Units per CD Special Warrant.
Payment of brokered portion of offering						$ 1,900,000					$ 1,900,000
Canaccord Genuity Inc [Member] | CAD Dollar [Member]
Entity Listings [Line Items]
Issuance of common stock convertible debentures												$ 1,000
Conversion price | $ / shares						$ 3.00					$ 3.00
Debt converted into shares | shares											333.33	333.33
Fair value of options grant											$ 424,000
Canaccord Genuity Inc [Member] | CAD Dollar [Member] | Common Stock [Member]
Entity Listings [Line Items]
Finance fee														$ 50,000
Canaccord Genuity Inc [Member] | CAD Dollar [Member] | Eight Percentage Converitble Notes [Member]
Entity Listings [Line Items]
Proceeds from private offerings												$ 4,100,000
Canaccord Genuity Inc [Member] | CAD Dollar [Member] | Eight Percentage Senior Unsecured Convertible Debenture [Member]
Entity Listings [Line Items]
Warrants exercise price | $ / shares						3.90					$ 3.90
Convertible debenture														1,000
Payment of brokered portion of offering														$ 2,500,000
Canaccord Genuity Inc [Member] | Broker C D Special Warrant [Member] | Agents [Member]
Entity Listings [Line Items]
Cash commission percentage											7.00%	7.00%
Canaccord Genuity Inc [Member] | Broker Warrants [Member]
Entity Listings [Line Items]
Offering fee and expenses											$ 320,000
Canaccord Genuity Inc [Member] | Broker Warrants [Member] | CAD Dollar [Member]
Entity Listings [Line Items]
Warrants exercise price | $ / shares						$ 1,000					$ 1,000
Commission fee												$ 157,290
Commission and finance fee plus additional expenses												20,000
Legal fee												$ 181,365
Private Offering [Member] | Canaccord Genuity Inc [Member] | C D Special Warrant [Member]
Entity Listings [Line Items]
Issuance of common stock convertible debentures, shares | shares					10,000
Number of warrants to purchase shares | shares			962				3,121		3,121	3,121
Issuance of common stock convertible debentures			$ 700,000				$ 2,300,000
Private Offering [Member] | Canaccord Genuity Inc [Member] | C D Special Warrant [Member] | CAD Dollar [Member]
Entity Listings [Line Items]
Proceeds from private offerings					$ 10,000,000
Warrants exercise price | $ / shares			$ 1,000				$ 1,000		$ 1,000	$ 1,000
Issuance of common stock convertible debentures				$ 1,000,000.0				$ 3,100,000
Private Offering [Member] | Canaccord Genuity Inc [Member] | Broker C D Special Warrant [Member]
Entity Listings [Line Items]
Issuance of common stock convertible debentures, shares | shares			5,600	5,600			52,430	52,430	52,430

XML

Schedule of Liabilities Measured at Fair Value on a Recurring Basis (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Sep. 30, 2020
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Warrant liability	$ 4,444	$ 257
Embedded derivative liability	136
Total fair value	4,580
Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Warrant liability
Embedded derivative liability
Total fair value
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Warrant liability
Embedded derivative liability
Total fair value
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Warrant liability	4,444
Embedded derivative liability	136
Total fair value	$ 4,580

XML

Summary of Weighted Average Significant Unobservable Inputs (Details)	9 Months Ended	12 Months Ended
	Jun. 30, 2021 Integer $ / shares	Sep. 30, 2020 Integer $ / shares
Warrant Liability [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrant Liability Strike price | $ / shares	$ 0.48
Warrant Liability Contractual term (years)	2 years 9 months 25 days
Warrant Liability [Member] | Measurement Input, Price Volatility [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrant Liability Measurement input	85	100
Warrant Liability [Member] | Measurement Input, Risk Free Interest Rate [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrant Liability Measurement input	0.9	0.28
Warrant Liability [Member] | Measurement Input, Expected Dividend Rate [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrant Liability Measurement input	0	0
Warrant Liability [Member] | Minimum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrant Liability Strike price | $ / shares		$ 0.36
Warrant Liability Contractual term (years)		1 year
Warrant Liability [Member] | Maximum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrant Liability Strike price | $ / shares		$ 2.96
Warrant Liability Contractual term (years)		3 years
Embedded Derivative Liability [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Embedded Derivative Liability Strike price | $ / shares	$ 0.93	$ 1.12
Embedded Derivative Liability Contractual term (years)	1 year 1 month 6 days	1 year 6 months
Embedded Derivative Liability [Member] | Measurement Input, Price Volatility [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Embedded Derivative Liability Measurement input	133	101
Embedded Derivative Liability [Member] | Measurement Input, Risk Free Interest Rate [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Embedded Derivative Liability Measurement input	0.07	0.25
Embedded Derivative Liability [Member] | Measurement Input, Expected Dividend Rate [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Embedded Derivative Liability Measurement input	0.00	0.00
Embedded Derivative Liability [Member] | Measurement Input, Credit Spread [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Embedded Derivative Liability credit spread		11.21
Embedded Derivative Liability [Member] | Minimum [Member] | Measurement Input, Credit Spread [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Embedded Derivative Liability credit spread	14
Embedded Derivative Liability [Member] | Maximum [Member] | Measurement Input, Credit Spread [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Embedded Derivative Liability credit spread	16

XML

Fair Value Measurements (Details Narrative)	9 Months Ended
	Jun. 30, 2021
Fair Value Disclosures [Abstract]
Pricing model description	The Company used a lattice based trinomial model developed by Tsiveriotis, K. and Fernades in which the three lattices incorporate (1) the Company’s underlying common stock price; (2) the value of the debt components of the convertible notes; and (3) the value of the equity component of the convertible notes. The main drivers of sensitivity for the model are volatility and the credit spread. The model used will vary by approximately 1.5% for a 4% change in volatility and will vary by less than 1% for each 1% change in credit spread.

XML

Shareholders’ Equity (Details Narrative) - USD ($)		3 Months Ended				9 Months Ended
	Jun. 25, 2021	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2020	Jun. 30, 2019	Jun. 30, 2021
Class of Stock [Line Items]
Plan description						the Company adopted a plan to allow the Company to compensate prospective and current employees, directors, and consultants through the issuance of equity instruments of the Company. The plan has an effective life of 10 years. The plan is administered by the board of directors of the Company until such time as the board transfers responsibility to a committee of the board. The plan is limited to issuing common shares of the Company up to 15% of the total shares then outstanding. No limitations exist on any other instruments issuable under the plan. In the event of a change in control of the Company, all unvested instruments issued under the plan become immediately vested.
Precentge of common shares issuable						15.00%
Common stock increase in authorized shares, description	Pursuant to the shareholders meeting on June 25, 2021, the Company has amended its certificate of incorporation to increase the number of authorized Company Common Shares from 300,000,000 to 750,000,000.
Common stock issued for stock compensation			1,464,009	1,868,750
Common stock issued for stock compensation, value			$ 868,250	$ 561,000
Stock issued during the period					12,500,000
Acquisition of Driven Deliveries, Inc., shares						101,968,944
Common stock issuable, shares		1,000,000.0				1,000,000.0
Common stock issuable		2,332,506				2,332,506
Private Placement [Member]
Class of Stock [Line Items]
Stock issued during the period		1,523,257	12,097,065
Stock issued during the period, value		$ 630,000	$ 4,934,376
Consulting Agreements [Member]
Class of Stock [Line Items]
Stock issued during the period		950,000
Stock issued during the period, value		$ 525,000
Related To Rent [Member]
Class of Stock [Line Items]
Common stock issued for stock compensation			164,366	293,700
Common stock issued for stock compensation, value			$ 121,631	$ 117,480
Related to Deposit [Member]
Class of Stock [Line Items]
Stock issued during the period			300,000
Stock issued during the period, value		$ 210,000
Accrued Interest Related to Convertible Notes [Member]
Class of Stock [Line Items]
Common stock issued in connection with conversion of notes payable			$ 1,975,965	$ 91,459
Common stock issued in connection with conversion of notes payable, shares			4,054,206	207,861
Common Stock [Member]
Class of Stock [Line Items]
Common stock issued for stock compensation		581,750
Shares Issued, Value, Share-based Payment Arrangement, after Forfeiture		$ 246,000
Conversion of stock, amount issued		$ 2,838,000
Conversion od debt, shares issued		5,426,053
Shares cancelled		694,233
Common Stock [Member] | Commission Expense [Member]
Class of Stock [Line Items]
Stock issued during the period		90,909
Stock issued during the period, value		$ 40,000
Common Stock [Member] | Stock Option Plan [Member]
Class of Stock [Line Items]
Stock issued during the period		10,000
Consulting Agreements [Member]
Class of Stock [Line Items]
Stock issued during the period			1,262,500	1,569,570
Stock issued during the period, value			$ 1,097,500	$ 589,000
Shares issued price per share		$ 0.55	$ 0.87	$ 0.38		$ 0.55
Consulting Agreements [Member] | Convertible Common Stock [Member]
Class of Stock [Line Items]
Number of shares cancelled				525,400
Settlement Agreements [Member]
Class of Stock [Line Items]
Stock issued during the period			500,000
Stock issued during the period, value			$ 5,439,855
Canadian Prospectus [Member] | Common Stock [Member]
Class of Stock [Line Items]
Stock issued during the period		16,942,350
Stock issued during the period, value		$ 7,278,000

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Schedule of Fair Value of Options Granted (Details) - Options [Member] - $ / shares	9 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Expected term (years)	3 years 6 months
Expected stock price volatility		93.00%
Risk-free rate of interest	0.28%	1.56%
Expected dividend rate	0.00%	0.00%
Minimum [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Exercise price	$ 0.40	$ 0.80
Expected term (years)		6 months
Expected stock price volatility		108.80%
Maximum [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Exercise price		$ 4.00
Expected term (years)		4 years
Expected stock price volatility		188.60%

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Summary of Stock Option Activity (Details) - USD ($)	3 Months Ended			12 Months Ended
	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2020	Sep. 30, 2020
Compensation Related Costs [Abstract]
Number of Options, Outstanding Beginning Balance	5,672,916	5,672,916	5,572,916	3,210,416
Weighted Average Exercise Price, Outstanding Beginning Balance	$ 1.73	$ 1.73	$ 1.77	$ 2.45
Aggregate Intrinsic Value, Beginning Balance
Weighted Average Remaining Contractual Term, Beginning Balance	1 year 2 months 4 days	1 year 4 months 24 days	1 year 7 months 6 days	2 years 1 month 6 days
Number of Options, Granted	250,000		100,000	2,362,500
Weighted Average Exercise Price, Granted	$ 0.40		$ 0.40	$ 0.33
Weighted Average Remaining Contractual Term, Granted	3 years 11 months 8 days		2 years 9 months 18 days	2 years 10 months 20 days
Number of Options, Granted	(2,285,000)
Weighted Average Exercise Price, Expired	$ 2.39
Number of Options, Outstanding Ending Balance	3,637,916	5,672,916	5,672,916	5,572,916
Weighted Average Exercise Price, Outstanding Ending Balance	$ 2.13	$ 1.73	$ 1.73	$ 1.77
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Intrinsic Value
Weighted Average Remaining Contractual Term, Ending Balance	1 year 6 months 25 days

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Schedule of Stock-based Compensation Expenses (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Total stock-based compensation	$ 878	$ 6	$ 4,284	$ 1,913
Stock Grants [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Total stock-based compensation	525	6	3,642	1,193
Stock Options [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Total stock-based compensation	353		492	615
Warrants [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Total stock-based compensation			$ 150	$ 105

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Stock Based Compensation (Details Narrative) - shares	3 Months Ended	9 Months Ended
	Jun. 30, 2021	Jun. 30, 2021
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Stock options issued	10,000
Stock Options [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Expected dividend yield		0.00%
Weighted average remaining contractual life		10 months 24 days
Stock Options [Member] | Employment Agreement [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Stock options issued		100,000

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Commitments and contingencies (Details Narrative)				1 Months Ended					3 Months Ended			9 Months Ended
	May 06, 2021 USD ($)	Jun. 05, 2020 USD ($)	Feb. 22, 2018 USD ($) ft²	May 31, 2021 USD ($)	Jul. 31, 2020 USD ($)	Sep. 30, 2019 USD ($)	Jan. 31, 2019 USD ($)	Jul. 31, 2016 USD ($)	Jun. 30, 2021 USD ($) $ / shares shares	Jun. 30, 2020 USD ($)	Jun. 30, 2019 shares	Jun. 30, 2021 USD ($) $ / shares shares	Jun. 30, 2021 CAD ($) shares	Jun. 30, 2020 USD ($)	Jun. 30, 2021 CAD ($) $ / shares shares	Nov. 23, 2020 ft²
Loss Contingencies [Line Items]
Lease term				15 years		4 years	5 years	10 years
Base rental fees				$ 31,500		$ 4,285	$ 9,696	$ 7,033
Real estate taxes								$ 315
Percentage of base rental fees escalation								2.00%
Security deposit to landlord								$ 14,000
Operating lease, description			On February 22, 2018, both parties executed a lease addendum that adds contiguous property for 12,322 square feet. The term commences November 1, 2017 and continues through November 31, 2026 at a starting rate of $3,525 a month that escalates after the first year
Area of land | ft²			12,322													2,000
Starting rate of amount			$ 3,525
Base rental fee percentage				250.00%
Acquisition of licenses and permits												$ 200,000
Stock issued during the period | shares											12,500,000
Professional fees									$ 927,000	$ 257,000		2,836,000		$ 1,780,000
Joint venture amount					$ 307,500
Excess of its commitments					$ 1,000,000
Canaccord Genuity Corp [Member]
Loss Contingencies [Line Items]
Sale of stock shares | shares									16,926,019
Chord Advisors L L C [Member]
Loss Contingencies [Line Items]
Professional fees		$ 260,000
Herbalcure Corporation [Member]
Loss Contingencies [Line Items]
Alleged value	$ 1,700,000
TrueFarma [Member]
Loss Contingencies [Line Items]
Alleged value												$ 1,000,000.0
CAD Dollar [Member] | Canaccord Genuity Corp [Member]
Loss Contingencies [Line Items]
Sale of stock value per share | $ / shares									$ 0.55			$ 0.55
Sale of stock value									$ 10,309,210
Warrant [Member] | Canaccord Genuity Corp [Member]
Loss Contingencies [Line Items]
Warrants to pruchase | shares															1
Warrant expiration date															Apr. 23, 2023
Warrant [Member] | CAD Dollar [Member] | Canaccord Genuity Corp [Member]
Loss Contingencies [Line Items]
Warrants exercise price | $ / shares									$ 0.68			$ 0.68
IPO [Member]
Loss Contingencies [Line Items]
Aggregate number of shares issued percentage												7.00%	7.00%
IPO [Member] | Canaccord Genuity Corp [Member]
Loss Contingencies [Line Items]
Stock issued during the period, value									$ 420,000
Stock issued during the period | shares									972,092
Shares issued price per share | $ / shares									$ 0.43			$ 0.43
IPO [Member] | Broker Warrants [Member]
Loss Contingencies [Line Items]
Percentage units sold to purchasers												3.50%	3.50%
Warrants exercise price | $ / shares															$ 0.55
Over-Allotment Option [Member] | Canaccord Genuity Corp [Member]
Loss Contingencies [Line Items]
Sale of stock shares | shares									1,471,291
Over-Allotment Option [Member] | CAD Dollar [Member] | Canaccord Genuity Corp [Member]
Loss Contingencies [Line Items]
Sale of stock value									$ 809,210
Over-Allotment Option [Member] | Agency Agreement [Member] | Maximum [Member]
Loss Contingencies [Line Items]
Percentage of additional shares percentage												15.00%	15.00%
Additional offering shares | shares												2,590,909	2,590,909
Over-Allotment Option [Member] | Agency Agreement [Member] | CAD Dollar [Member] | Maximum [Member]
Loss Contingencies [Line Items]
Offering price													$ 10,925,000
Agent's commission													764,750
Net proceeds													10,160,250
Over-Allotment Option [Member] | Agency Agreement [Member] | CAD Dollar [Member] | Minimum [Member]
Loss Contingencies [Line Items]
Offering price													9,200,000
Agent's commission													644,000
Net proceeds													$ 8,556,000
Land Lord [Member]
Loss Contingencies [Line Items]
Security deposit to landlord				$ 60,000
Agent [Member] | Agency Agreement [Member]
Loss Contingencies [Line Items]
Stock issued during the period | shares												90,909	90,909
Agent [Member] | Agency Agreement [Member] | CAD Dollar [Member]
Loss Contingencies [Line Items]
Finance fee															$ 100,000
Cash															$ 50,000
Stock issued during the period, value													$ 50,000
Estimated offering cost													$ 350,000

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Subsequent events (Details Narrative) - USD ($)		3 Months Ended			9 Months Ended
	Jul. 02, 2021	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2021	Jun. 30, 2020	Mar. 31, 2021	Dec. 31, 2020	Sep. 30, 2020	Sep. 30, 2019
Subsequent Event [Line Items]
Share based compensation		$ 878,000	$ 6,000		$ 4,284,000	$ 1,913,000
Issuance of options		3,637,916			3,637,916		5,672,916	5,672,916	5,572,916	3,210,416
Issuance of options price per share		$ 2.13			$ 2.13		$ 1.73	$ 1.73	$ 1.77	$ 2.45
Stock issued during the period				12,500,000
Equity investment percentage		5.00%			5.00%
Subsequent Event [Member]
Subsequent Event [Line Items]
Shares issued for the payment of convertible notes	181,190
Subsequent Event [Member] | Treevana Wellness Company [Member]
Subsequent Event [Line Items]
Equity investment percentage	2.50%
Subsequent Event [Member] | Advisory Service Agreement [Member]
Subsequent Event [Line Items]
Share based compensation	$ 12,500
Number of shares issued	90,000
Issuance of options	750,000
Issuance of options price per share	$ 0.36
Subsequent Event [Member] | Professional Service Agreement [Member]
Subsequent Event [Line Items]
Stock issued during the period	500,000
Debt instrument, face amount	$ 555,054
Debt instrument principle amount	$ 352,862
Subsequent Event [Member] | Various Consulting And Service Agreement [Member]
Subsequent Event [Line Items]
Stock issued during the period	866,000