Kush Bottles Reports First Quarter Fiscal 2017 Results

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Jan 11, 2017, 07:30 ET

SANTA ANA, Calif., Jan. 11, 2017 /PRNewswire/ -- Kush Bottles, Inc. (OTCQB: KSHB), a provider of packaging, supplies, accessories and branding solutions for the regulated cannabis industry, reported financial results for its first fiscal quarter ended November 30, 2016.

First Quarter Fiscal 2017 Financial Highlights vs. First Quarter Fiscal 2016

Revenue up 44% to $2.47 million
Gross margin up 50 basis points to 33.8%
Net loss, including $0.12 million in non-cash stock compensation, $30,000 in depreciation and $24,000 for a non-recurring expense, was $(0.16) million compared to net income of $5,000
Record cash balance of $2.0 million compared to $0.30 million
Working capital up significantly to a record $3.38 million compared to $0.26 million

Executive Commentary
"Our first fiscal quarter began on a strong note, with record revenue and the strongest cash and working capital positions in our company's history," said Nick Kovacevich, co-founder and CEO of Kush Bottles. "This was driven by continued growth in California and Washington. More specifically, our customer base, average order size and number of orders continue to climb, and our e-commerce revenues also continue to increase. Our custom branded packaging revenues increased nearly three times from last year and our SKU count grew by 73%.

"During the quarter, we implemented a new cloud-based accounting, CRM and ERP system which we expect will improve our ability to scale. Our new larger facility in Washington has helped to accommodate continued growth, and we also expanded our sales force to penetrate the new states that legalized cannabis in the November 2016 election.

"As we look towards the remainder of 2017, we believe we are well-positioned to capitalize on the growth opportunities which exist in the developing, regulated cannabis industry. We have increased our customer base, which exceeds 3,000 producers, processers and retailers, and we've created one of the largest product libraries in the industry, with distribution spanning across 28 states and Canada. Also, we have doubled our revenue for two consecutive years, and we believe we remain in the early stages of our growth."

First Quarter Fiscal 2017 Financial Results
Total revenue in the first fiscal quarter of 2017 increased 44% to $2.47 million compared to $1.72 million in the first fiscal quarter of 2016. The increase was primarily attributed to growth in the number of customers, average order size and order volume in the Company's largest markets, as well as continued growth in other states with emerging legalized cannabis programs.

Gross margin in the first fiscal quarter of 2017 increased 50 basis points to 33.8% compared to 33.3% in the first fiscal quarter of 2016.

Operating expenses in the first fiscal quarter of 2017 increased to $0.97 million compared to $0.56 million in the first fiscal quarter of 2016. This was primarily due to a $0.12 million increase in non-cash stock compensation expense and a $0.15 million increase in payroll and related expenses due to an expansion of the Company's sales force and operational personnel.

Net loss in the first fiscal quarter of 2017 was $(0.16) million or $(0.00) per share, compared to net income of $5,000 or $0.00 per share in the first fiscal quarter of 2016. Net loss in the first fiscal quarter of 2017 included $0.12 million in non-cash stock compensation, $30,000 in depreciation and $24,000 for a non-recurring expense. Excluding these charges, net income would have been approximately $7,000 or $0.00 per share.

At November 30, 2016, cash increased significantly to $2.00 million compared to $0.30 million as of November 30, 2015. Total debt was reduced to $55,000 compared to $0.20 million in the first fiscal quarter of 2016.

Working capital was up significantly to $3.38 million as of November 30, 2016 compared to $0.26 million as of November 30, 2015, primarily driven by the increase in cash.

About Kush Bottles
Kush Bottles, Inc. (OTCQB: KSHB) provides packaging products and solutions to producers, processers and retailers operating in the regulated medical and recreational cannabis industry. Founded in 2010, Kush Bottles has sold more than 100 million bottles and regularly services more than 3,000 customers across the United States and Canada. The company primarily services the business-to-business market, which includes legally operated medical and adult-use dispensaries, growers and marijuana-infused product (MIP) manufacturers. Kush Bottles aims to be the gold standard for responsible branding and packaging in the cannabis industry.

Kush Bottles has no direct involvement with cannabis plants or extracts.

The company has been featured in media nationwide, including CNBC, Los Angeles Times, TheStreet.com, Entrepreneur, and Inc. Magazine. For more information, visit www.kushbottles.com or call (888)-920-5874.

Connect
Website: www.kushbottles.com
Instagram: instagram.com/kushbottles
Facebook: facebook.com/kushbottles
Twitter: twitter.com/kushbottles

Forward Looking Statement
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 our 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 our opinions only as of the date of this release. Please keep in mind that we are not obligating ourselves 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," "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 us herein are often discussed in filings we make with the United States Securities and Exchange Commission (SEC), available at: www.sec.gov, and on our website, at: www.kushbottles.com.

Company Contact
Ryan Selewicz
Director of Marketing
714-243-4017
[email protected]

Investor Relations
Liolios
Cody Slach or Sean Mansouri
949-574-3860
[email protected]

KUSH BOTTLES, INC
Condensed Consolidated Balance Sheets
	(Unaudited)


			November 30,	August 31,
			2016	2016
ASSETS

CURRENT ASSETS

	Cash		$ 2,000,439	$ 1,027,003
	Accounts receivable, net of allowance		266,018	199,844
	Prepaid expenses and other current assets		882,227	596,456
	Inventory		1,236,720	1,142,458

		Total Current Assets	4,385,404	2,965,761

	Goodwill		2,376,589	2,376,589
	Deposits		12,220	12,220
	Property and equipment, net		593,234	273,597

		TOTAL ASSETS	$ 7,367,447	$ 5,628,167

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

	Accounts payable		$ 546,332	$ 369,636
	Accrued expenses and other current liabilties		437,750	549,101
	Notes payable - current portion		20,637	20,247

		Total Current Liabilities	1,004,719	938,984

LONG-TERM DEBT

	Notes payable		33,950	39,307

		TOTAL LIABILITIES	1,038,669	978,291

COMMITMENTS and CONTINGENCIES			-	-

STOCKHOLDERS' EQUITY

	Preferred stock, $0.001 par value, 10,000,000 shares
	authorized, no shares issued and outstanding		-	-
	Common stock, $0.001 par value, 265,000,000 shares authorized,
	49,391,896 and 48,300,162 shares issued and outstanding, respectively		49,390	48,300
	Additional paid-in capital		7,118,054	5,278,284
	Accumulated deficit		(838,666)	(676,708)

		Total Stockholders' Equity	6,328,778	4,649,876

		TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 7,367,447	$ 5,628,167

KUSH BOTTLES, INC
Condensed Consolidated Statements of Operations
(Unaudited)

			For the Three Months Ended
			November 30,
			2016	2015


REVENUE			$ 2,472,295	$ 1,720,581
COST OF GOODS SOLD			1,637,652	1,148,209

GROSS PROFIT			834,643	572,372

OPERATING EXPENSES

	Depreciation		9,304	5,890
	Stock compensation expense		115,244	-
	Selling, general and administrative		847,076	559,283

		Total Operating Expenses	971,624	565,173

INCOME (LOSS) FROM OPERATIONS			(136,981)	7,199

OTHER INCOME (EXPENSES)

	Other income (expense)		(23,944)	19
	Interest expense, net		(1,033)	(2,298)

		Total Other Income (Expenses)	(24,977)	(2,279)

INCOME (LOSS) BEFORE INCOME TAXES			(161,958)	4,920

PROVISION FOR INCOME TAXES			-	-

NET INCOME (LOSS)			$ (161,958)	$ 4,920

BASIC INCOME (LOSS) PER SHARE			$ 0.00	$ (0.00)

DILUTED INCOME (LOSS) PER SHARE			$ 0.00	$ (0.00)

WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING - BASIC			48,713,496	46,132,779

WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING - DILUTED			50,511,299	47,054,237

KUSH BOTTLES, INC
Condensed Consolidated Statements of Cash Flows
(Unaudited)

				For the Three Months Ended
				November 30,
				2016	2015

CASH FLOWS FROM OPERATING ACTIVITIES
	Net income (loss)			$ (161,958)	$ 4,920
	Adjustments to reconcile net income (loss) to net
	cash provided by (used in) operating activities:
		Depreciation		29,735	19,788
		Stock compensation expense		115,244	-

	Changes in operating assets and liabilities
		Accounts receivable		(66,174)	(12,100)
		Prepaids		(366,550)	8,320
		Inventory		(94,262)	(257,281)
		Accounts payable		176,696	328,410
		Accrued expenses and other current liabilities		(111,351)	26,736

			Net cash provided by (used in) operating activities	(478,620)	118,793

CASH FLOWS FROM INVESTING ACTIVITIES

	Purchase of property and equipment			(164,976)	(47,282)

			Net cash used in investing activities	(164,976)	(47,282)

CASH FLOWS FROM FINANCING ACTIVITIES

	Repayment of related party loan			-	(33,332)
	Repayment of notes payable			(4,967)	(12,442)
	Proceeds from sale of stock			1,621,999	71,000

			Net cash provided by financing activities	1,617,032	25,226

NET INCREASE IN CASH				973,436	96,737

CASH AT BEGINNING OF PERIOD				1,027,003	201,259

CASH AT END OF PERIOD				$ 2,000,439	$ 297,996

SUPPLEMENTAL DISCLOSURES OF
	CASH FLOW INFORMATION:

	CASH PAID FOR:
		Interest		$ 1,033	$ 2,298
		Income taxes		$ -	$ -

NON-CASH INVESTING AND FINANCING ACTIVITIES
		Prepaid services paid in stock		$ 103,617	$ -