CFN Media Interviews Kush Bottles’ CEO Nick Kovacevich


Rachelle Gordon

October 26th, 2017

News, Top News


Kush Bottles (OTCMKTS: KSHB) offers a wide array of ancillary products for the emerging cannabis industry. From child-safe packaging to branding to vaporizer hardware, this publically traded company is already in several legal states and will soon be in more. Co-Founder and CEO of Kush Bottles Inc., Nick Kovacevich, sat down with CFN Media at the recent New West Summit to discuss the impressive growth of the company and how they are building their business the right way.

RG:  What is Kush Bottles and how does the company service the cannabis industry?

Nick Kovacevich:  We are a provider of products and services for the cannabis industry, mostly on the B2B side. We started as a packaging company focused on compliant packaging solutions for the industry. We’ve expanded into supplies and accessories – everything from lighters to grinders to pipes to rolling papers. We recently, by way of acquisition, expanded heavily into the vaporizer market, making us one of the leading distributors of hardware.

We offer cartridges, batteries, pen kits and more, for a lot of the large-scale processors. Our product mix continues to evolve with over 2,000 SKUs, all on the ancillary side. None of our products contain THC as none of our products touch the plant. The value is really in our distribution network and having facilities across multiple states. We are able to send products to our clients quickly and efficiently by having boots on the ground in all the major markets. We’re actually interfacing. We’re on the scene, we’re talking to our clients on a daily basis, understanding their needs, understanding the market dynamics. We work with regulators to help craft some of the regulations that are going to be impacting the industry – especially in terms of packaging.

RG:  When was Kush Bottles founded and how has the company grown since its inception?

NK:  Kush Bottles was founded in 2010 in California. We noticed an opportunity in the legal medical cannabis industry, where there was an emerging market being underserved by traditional businesses. As young entrepreneurs, we saw an opportunity and we took it. We knew if we could market to this industry, we could get some penetration and avoid large-scale competition because it was not a marketplace with much attention. In 2014, Kush Bottles started to evolve when Colorado legalized for adult-use and required child-resistant packaging. Some of the advice we’ve been preaching for years about being compliant and proactive (in terms of how you’re protecting kids from cannabis ingestion) came to light in early 2014.

We realized that our products had a lot more value in the regulated marketplace. Looking through our crystal ball, we thought, “Hey, if Colorado legalized and regulated, it’s not going to be long before other states follow, especially when you look at some of the data coming out of Colorado, especially the tax numbers.” We were right as Washington , Oregon, Alaska, and now Nevada soon followed. California, Massachusetts, Florida, New York and some other large markets on the medical side followed too. Again, our products have evolved to meet those regulations, which are different in every state. That’s how we’ve built out our packaging.

When we started the company in 2010, the market only really found cannabis flower that was being consumed by medical users. If you go to a dispensary today, a medical or adult-use, you’ll see a broad range of products. Obviously cannabis flower still, but a lot of concentrated products, including wax, shatter, hash, and other oil products. Those can be consumed in different ways through vaporizers and other formats. The products that we have offered have evolved to match the growing dynamic trends that are coming to the industry.

Regulation and trends have pushed our product expansion. In a new, emerging market, key, valuable service that we can offer to our customers is education around market dynamics and education around compliance. That is how we’ve evolved our services and becoming a value-add and a trusted partner, versus just a provider of goods.

RG:  When did you go public and how has it affected growth?

NK:  In April 2015, we officially registered with the SEC. We went through Form 10 registration, so we were fully transparent in our process. We had two years of audited financials and did not do shell or reverse merger. We were very clean during the process, but it was a little bit slower. We submitted our registration statement in April and were approved in June. After, we went through the 15c2-11 Process, but it took us a few months to get our market maker and our ticker symbol. Long story short, we began trading on the OTC in January 2016. We’ve been fully reporting ever since and have been experiencing unique opportunities, like actual credible Wall Street firms looking and analyzing our company.

I believe there’s more appetite from some of the major exchanges and we’re certainly positioned to be able to uplist. This will all depend if the climate stays moving in the right trend and demand for cannabis and cannabis-related businesses increases, especially those that are focused on operating legitimately. I think we’re in a unique position because of our timing, the method in our business approach, and our business model. We carry ourselves to focus on business first and promotion is not something that has been a big part of our public story.

I think the market has rewarded us for our approach. We’re feeling very good about our company’s direction. We love the direction that the country is going, in terms of public sentiment and appetite for risk amongst financial institutions is evolving in the right direction. We’re in a good place.

RG:  What should potential investors know about Kush Bottles?

NK:  We’ve demonstrated consistent year over year revenue growth – that’s key. We’re doing it the right way; Kush Bottles is not growing our revenue by losing millions of dollars every year. We’re executing our market share growth but doing it in a way that is economical, in terms of business financial sense. We have the right team that’s executed on that strategy. We have a huge M&A opportunity. Kush Bottles is a public company that has access to some capital. We have stock that trades decent volume and so we can use that as currency to structure M&A deals.

Ben Wu, our president, has a background in M&A. He was with a firm, called Wedbush Partners, for eight years, where he looked at 1,000 deals a year. He’s able to structure these deals, identify opportunities, and we’ve proven that we’ve made three acquisitions to date. All three acquisitions have been heavy on the stock for compensation with the acquisition. We’re able to structure deals that are creative, again, using our stock as currency. That’s a nice added bonus, in addition to organic growth, that we’ve consistently displayed.

Kush Bottles has an opportunity now to expand to a really exciting new market. Obviously California, the biggest market, is finally regulating packaging and licensing. But, the East Coast is a whole untapped market that we expect to open up soon. Our company as a public company, like I mentioned, has been consistent in our filings, operating legitimately, and financing. For financing, we’ve avoided a lot of toxic structures that can send some of these OTC companies into a death spiral. By avoiding that, we’ve kept our balance sheet very clean. I think we’re in a prime position that as the results come in and as the growth is there, we can recognize significant upside in the market.

That’s the last message I’d like to leave with the investment community, is that by looking at our balance sheet and financials, we operate as legitimate business. Our business model is easy to explain and people can understand how we can continue to drive value in this emerging marketplace.

RG:  What are the company’s projections for growth over the next 2-5 years?

NK:  We operate in this window where we have a barrier that’s insulating us against what we would consider real competition threat. The threat would be from billion-dollar balance sheets, large Fortune 500, Fortune 1,000 companies that we know are interested in this space. It’s not quite big enough yet for them to take the risk. They are certainly not going to take the risk while there’s this federal overhang of illegality. How much of a window this is right now, none of us really know. But we can project, potentially under the Trump administration, that we have roughly another four years where we would have this barrier that’s keeping away some of the competition.

Since we have this limited window, we operate with a real sense of urgency. We need to grow our company as fast as possible while we have this opportunity. At some point that barrier is going to diminish and we’re going to be facing real competition. If we’re a company that’s doing $10 million at that point in time, we’re somebody that these large companies would look at and believe that they could crush us. We don’t have a lot of value and meaning.

If we’re at $100 million, that’s a totally different story. We want to put ourselves in a position where we have options – that when the large competition comes in we can either compete with them, we become a prime acquisition target, or there’s a situation where there’s a merger (something that’s even more exciting), or joint venture that we can do.

We just want to have options. The way we acquire options is with market share growth, by focusing on growing the right way so it’s sustainable growth. If we have a clean structure with our legitimate business, we will have multiple options that make sense, not only for us, but other potential partners down the road.

RG:  What else should the cannabis industry know about Kush Bottles?

NK:   I cannot stress enough the fact this dynamic with focus on the cannabis industry is moving in different directions every single week. We have to continue to be nimble and be dynamic in our business model. We’re not going to be trapped into any one product or any one segment of the industry. We are going to stay away from touching the plant since the attraction of investing in our publicly traded company is much greater if we stay ancillary. But outside of that, our horizons are open to be diverse in our business model and expand into different categories.

I think that’s key from an investor perspective looking at our company. There’s a proxy for the industry, so as an investor you have to understand the industry. You want to make assumptions of where the industry’s going to go, assumptions such as, “Is the company going to be indoor cultivation that’s going to survive because it’s a boutique crop, or is it going to be massive outdoor greenhouse cultivation because you’re going to get pricedown?” Decisions such as, “Is the brick and mortar going to be a licensed retail?” In a new market, people like to come and see what they’re purchasing. Another investor decision example is, “is the retail delivery going to disrupt brick and mortar in cannabis just like it’s doing in virtually every other sector in the country?” These are tough things you have to assume or at least think about when you’re going to place dollars into a certain investment.

We look at our companies like a proxy because as an investor, you don’t have to guess right on if it’s going to be retail or delivery. You don’t have to guess right if it’s going to be indoor or outdoor cultivation. We service the entire marketplace with a broad range of products. As the saying goes, “When the tide rises all boats rise, as well.” That’s where we see our company as being somebody who’s going to benefit, regardless of the direction or who the real winners are in the industry. Obviously, we want all of our clients to be successful, but when we’re spread out across such a broad range, the likelihood of us finding the winners amongst that mix is very high.

As an investor, you can feel a little bit more secure that an investment in a company like ours is going to get you broad exposure to the industry. As long as you believe the industry is going to continue to move forward and progress, there’s a pretty high likelihood that our business model will continue to be successful in that environment with the data we have captured.

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This article was published by CFN Enterprises Inc. (OTCQB: CNFN), owner and operator of CFN Media, the industry’s leading agency and digital financial media network dedicated to the burgeoning CBD and legal cannabis industries. Call +1 (833) 420-CNFN for more information.

About Rachelle Gordon

Rachelle Gordon is a Minneapolis-based writer. Find her online at www.rachellegordon.net.


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