UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 2, 2018
KUSH BOTTLES, INC.
(Exact name of registrant as specified in its charter)
Nevada | 000-55418 | 46-5268202 |
(State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
1800 Newport Circle, Santa Ana, CA | 92705 |
(Address of principal executive offices) | (Zip Code) |
Registrant's telephone number, including area code: (714) 243-4311
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x
Item 1.01. | Entry into a Material Definitive Agreement. |
On May 2, 2018, Kush Bottles, Inc. (the “Company”) completed its previously announced acquisition of Summit Innovations, Inc. (“Summit”). Pursuant to the terms of the Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, Summit, KCH Energy, LLC, a wholly owned subsidiary of the Company (“Merger Sub”) and Mark Driver, in his capacity as Member Representative, Summit merged with and into Merger Sub, with Merger Sub surviving the merger as a wholly-owned subsidiary of the Company (the “Merger”).
The consideration paid to the members of Summit (the “Members”) at the closing included an aggregate of $3.2 million in cash (the “Cash Consideration”), as adjusted to reflect estimated working capital, indebtedness and transaction expenses as of the closing date, and an aggregate of 1,280,000 shares (the “Share Consideration”) of the Company’s common stock (the “Common Stock”). $500,000 of the Cash Consideration and approximately 640,000 shares of Common Stock from the Share Consideration were held back by the Company for a period of 15 months (the “Holdback Period”) for potential post-closing working capital and/or indemnification claims relating to, among other things, breaches of representations, warranties and covenants contained in the Merger Agreement. The Members may become entitled to receive earn-out consideration of up to an additional 1,280,000 shares of Common Stock, in the aggregate, based on the performance of the Summit business during a one year period following the closing.
A copy of the Merger Agreement was filed as Exhibit 2.1 to the Form 8-K filed by the Company with the Securities and Exchange Commission on April 10, 2018 and is incorporated herein by reference. The foregoing description of the Merger Agreement does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the Merger Agreement.
Concurrently with the completion of the Merger, the parties to the Merger Agreement entered into an amendment to the Merger Agreement (the “Amendment”) to correct certain scriveners’ errors, including the length of the Holdback Period. The foregoing description of the Amendment does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the Amendment, a copy of which is filed as Exhibit 2.2 hereto and is incorporated by reference herein.
Item 2.01. | Completion of Acquisition or Disposition of Assets. |
The information set forth in Item 1.01 above relating to the Merger Agreement and the transactions contemplated thereby, including the Merger, is incorporated herein by reference.
Item 3.02. | Unregistered Sales of Equity Securities. |
The information set forth in Item 1.01 above relating to the Merger Agreement and the transactions contemplated thereby is incorporated herein by reference. The issuance of shares of Common Stock to the Members was not, and will not be, registered under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to an exemption from the registration requirements provided by Section 4(a)(2) thereof and Rule 506(b) of Regulation D thereunder. The shares of Common Stock issued to the Members are and will be “restricted securities” for purposes of Rule 144 and subject to certain requirements before sale, including holding period requirements, unless sold pursuant to an effective registration statement under the Securities Act.
Item 8.01. | Other Events. |
On May 3, 2018, the Company issued a press release announcing the closing of the Merger. A copy of the press release is filed herewith as Exhibit 99.1.
Item 9.01. | Financial Statements and Exhibits. |
(a) Financial Statements of Business Acquired.
Any financial statements required by Item 9.01(a) will be filed by amendment as soon as practicable, but no later than 71 calendar days after the date on which this initial Current Report on Form 8-K was required to be filed.
(b) Pro Forma Financial Information.
Any pro forma financial information required by Item 9.01(b) will be filed by amendment as soon as practicable, but no later than 71 calendar days after the date on which this initial Current Report on Form 8-K was required to be filed.
(d) Exhibits.
* | Schedules (and similar attachments) have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish to the Securities and Exchange Commission a copy of such schedules and exhibits, or any section thereof, upon request. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
KUSH BOTTLES, INC. | ||
(Registrant) | ||
May 3, 2018 | /s/ Nicholas Kovacevich | |
(Date) | Nicholas Kovacevich Chairman and Chief Executive Officer |
INDEX TO EXHIBITS
* | Schedules (and similar attachments) have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish to the Securities and Exchange Commission a copy of such schedules and exhibits, or any section thereof, upon request. |
Exhibit 2.2
AMENDMENT TO THE AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT TO THE AGREEMENT AND PLAN OF MERGER, dated as of May 2, 2018 (this “Amendment”) among Kush Bottles, Inc., a Nevada corporation (“Parent”), KCH Energy, LLC, a Colorado limited liability company (“Merger Sub”), Summit Innovations, LLC, a Colorado limited liability company (the “Company”) and Mark Driver, an individual, solely in his capacity as the Member Representative. Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Merger Agreement (as defined below).
RECITALS
WHEREAS, the parties hereto entered into that certain Agreement and Plan of Merger, dated April 10, 2018 (the “Merger Agreement”); and
WHEREAS, the parties hereto wish to amend the Merger Agreement in accordance herewith.
AGREEMENT
In consideration of the foregoing, and intending to be legally bound, the parties hereby agree as follows:
1. | Definitions. The definition of “Holdback Release Date” in Article I of the Merger Agreement shall be amended and restated in its entirety as follows: |
“‘Holdback Release Date’ means the first Business Day following the fifteen (15) month anniversary of the Closing Date.”
2. | Section 8.02(e). Section 8.02(e) of the Merger Agreement shall be amended and restated in its entirety as follows: |
“the amount of any accounts receivable included in the Current Assets or listed on Section 3.14 of the Disclosure Schedules, to the extent such amounts do not become collectible in full by the fifteen (15) month anniversary of the Closing Date;”
3. | Section 10.01(a)(vii). Section 10.01(a)(vii) of the Merger Agreement shall be amended and restated in its entirety as follows: |
“make all elections or decisions contemplated by this Agreement and any Ancillary Document;”
4. | Ancillary Documents. From the date hereof, all references to “Transaction Documents” within the Merger Agreement shall instead be deemed references to “Ancillary Documents.” |
5. | This Amendment may be executed in two or more counterparts, all of which shall be considered one and the same instrument and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties. |
6. | As applicable, Article X of the Merger Agreement shall apply mutatis mutandis to this Amendment. |
7. | Except as expressly set forth herein, this Amendment shall not by implication or otherwise alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Merger Agreement, all of which are ratified and affirmed in all respects and shall continue in full force and effect. |
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date first above written.
COMPANY
SUMMIT INNOVATIONS, LLC
|
|||
By: |
/s/ Mark Driver |
||
Name: | Mark Driver | ||
Title: | Manager |
PARENT
KUSH BOTTLES, INC.
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By: |
/s/ Nicholas Kovacevich |
||
Name: | Nicholas Kovacevich | ||
Title: | Chairman and CEO |
MERGER SUB
KCH ENERGY, LLC
By: Kush Bottles, Inc., its sole Member
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By: |
/s/ Nicholas Kovacevich |
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Name: | Nicholas Kovacevich | ||
Title: | Chairman and CEO |
MEMBER REPRESENTATIVE
Mark Driver, solely in his capacity as Member Representative
/s/ Mark Driver |
||
Name: Mark Driver |
[Signature Page to Amendment to Agreement and Plan of Merger]
Exhibit 99.1
Kush Bottles Closes Acquisition of Summit Innovations, LLC
SANTA ANA, Calif., May 3, 2018 - Kush Bottles, Inc. (OTCQB: KSHB) (“Kush Bottles” or the “Company”), a leading provider of packaging, supplies, vaporizers, hydrocarbon gases, solvents, accessories and branding solutions for the regulated cannabis industry, announced today it has completed its acquisition of Summit Innovations, LLC (“Summit Innovations”), a leading distributor of hydrocarbons to the legal cannabis industry based in Denver, Colorado. Summit Innovations was acquired in exchange for 1,280,000 shares of Kush Bottles common stock and approximately $3.2 million in cash subject to certain adjustments and holdbacks, as further described in the Company’s press release dated April 10, 2018.
Hydrocarbon gases are used to convert cannabis plants into oils, and this acquisition marks Kush Bottles’ entry into a new business vertical supplying gas to cannabis extractors. Summit Innovations operates seven distribution facilities located across the country. Its four core products are high purity butane, propane, iso-butane and blends. Summit Innovations works closely with legal cannabis manufacturers to ensure cleanliness, product quality, safety and compliance during the extraction process.
“We are pleased to close this acquisition and secure our entry into the hydrocarbon segment of the cannabis market,” commented, Nicholas Kovacevich, CEO and Chairman of Kush Bottles. “Gas is the lifeblood of the cannabis market and Summit Innovations offers a broad range of hydrocarbon gases that meet the complex needs of cannabis extractors across the country. By bringing Summit Innovations under the Kush Bottles umbrella, we expect to leverage synergies in our distribution channels to grow sales at both Summit and our existing business lines. This is a major step forward in our strategy to position Kush Bottles as a one-stop shop for any business looking to operate responsibly within the legal cannabis market.”
The Company continues to evaluate new technologies and developments within the industry as it builds out a diversified suite of products and services that are integral to the proper functioning of the cannabis supply chain.
Kush Bottles will issue up to an additional 1,280,000 shares of Kush Bottles common stock if the Summit Innovations business achieves certain earn-out milestones of up to $12.0 million in eligible revenues during the twelve-month period following closing.
To be added to the distribution list, please email ir@kushbottles.com with “Kush” in the subject line.
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About Kush Bottles
Kush Bottles, Inc. (OTCQB: KSHB) is a dynamic sales platform that provides unique products and services for both businesses and consumers in the cannabis industry. Founded in 2010 as a packaging and supplies company for dispensaries and growers, Kush Bottles has sold more than 1 billion units and now regularly services more than 5,000 legally operated medical and adult-use dispensaries, growers, and producers across North America, South America, and Europe. The Company has facilities in the three largest U.S. cannabis markets and a local sales presence in every major U.S. cannabis market.
Kush Bottles aims to be the gold standard for responsible and compliant products and services in the cannabis industry. Kush Bottles has no direct involvement with the cannabis plant or any products that contain THC.
The Company has been featured in media nationwide, including CNBC, Los Angeles Times, TheStreet.com, Entrepreneur, and business magazine Inc.
For more information, visit www.kushbottles.com or call (888)-920-5874.
Forward-Looking Statements
This press release may include predictions, estimates or other information that might be considered forward-looking within the meaning of applicable securities laws. While these forward-looking statements represent the Company’s current judgments, they are subject to risks and uncertainties that could cause actual results to differ materially. You are cautioned not to place undue reliance on these forward-looking statements, which reflect the opinions of the Company’s management only as of the date of this release. Please keep in mind that the Company is not obligating itself to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. When used herein, words such as: “potential,” “look forward,” “believe,” “expect,” “dedicated,” “building,” or variations of such words and similar expressions are intended to identify forward-looking statements. Factors that could cause actual results to differ materially from those contemplated in any forward-looking statements made by the Company herein are often discussed in filings the Company makes with the United States Securities and Exchange Commission (SEC), available at: www.sec.gov, and on the Company’s website, at: www.kushbottles.com.
Kush Bottles Contacts
Media Contact:
Anne Donohoe / Nick Opich
KCSA Strategic Communications
212-896-1265 / 212-896-1206
adonohoe@kcsa.com / nopich@kcsa.com
Investor Contact:
Phil Carlson / Elizabeth Barker
KCSA Strategic Communications
212-896-1233 / 212-896-1203
ir@kushbottles.com