CEO: Nicholas Kovacevich
WSA: Good day from Wall Street. This is Juan Costello, senior analyst with the Wall Street analyzer. Joining us today is Nicholas Kovacevich, the CEO for Kush Bottles Incorporated, the company trade is on the OTCQB, ticker symbol is KSHB. Thanks for joining us today, Nicholas.
Nicholas Kovacevich: Thank you Juan, good to be here.
WSA: Great, so starting off, please give us a history and overview of Kush Bottles, for some of our listeners new to your story?
Nicholas Kovacevich: Okay, sure, Kush Bottles was founded in 2010, with the idea of being a compliant packaging solution for the burgeoning niche market of medical and legal marijuana. The company began with a few products and eventually expanded into offering a complete line of packaging solutions and servicing all 23 states that have legal marijuana programs in place, which includes facilities in three of the major States being California, Denver, Colorado and outside of Seattle, Washington to effectively service and provide packaging and selling products for the thousand plus customers that Kush Bottles has in their profile today.
WSA: Great and what were some of the key highlights and drivers, behind the Q1 results, which saw a revenue increase of over 175%?
Nicholas Kovacevich: Well Q1 this year, really shows that we’re going into a whole other growth phase of the company. We’ve been growing pretty steadily. Now, we have multiple markets that have opened up, so you look at the highlights behind that and the driving force, really has to do with continued growth in all regions, but specifically the northwest region.
Oregon recently allowed for temporary recreational marijuana sales, under temporary rules. So, it commenced on October 1st, and those temporary rules will last until, likely October of this year, when they’re going to finalize the permanent rules. But we saw a lot of growth there, as people were rushing into the Oregon market, to either set up, you know, more dispensary retail access or whether it’s kind of tourism and guys come in and purchase these [locations] from the existing stores there in Oregon. So, that was a big lift for us in Q1.
We also saw a continued growth in our custom packaging side of things. We are one of the few companies that offer in-house custom design and branding solutions. So, we have been working with some customers that we’ve had for a long time that are also growing and developing their brand and we’ve been able to put together, get them off of generic standard packaging and put them into customized, highly branded, customer solutions that our in-house design team has created and our fulfillment team has procured.
So, we saw a lot of growth there, which is great because that means, not only our company is growing in what we’re doing, but our customers are continuing to thrive and grow, which is a good sign for our future outlook.
WSA: Right well talk about the market opportunity and how you’ve positioned the company to capitalize on some of the key market trends in this sector?
Nicholas Kovacevich: Well we are very fortunate to be in the fastest growing industry in the country and hope potentially worldwide and that being legalized marijuana, something that is taking The States by storm, and we look for continued expansion into new territories, into new States that are throwing out programs.
November is a new election year, and we expect a lot of States to have initiatives on the ballot, to either legalize marijuana in a medical fashion or in a recreational form, all of which is good for us. The more regulation that comes to this industry, the better for us, as we sell a regulatory product, the compliant packaging solution that fills requirement of any and every State that we operate in, as we continue a standout portfolio to match what the States have mandated as regulatory packaging.
So really for us, the outlook is bright in the terms of expansion, because we have new markets that open up and we get to keep our first move advantage, as we go into those new markets. Secondly, we have continued growth opportunity in our current customer base, because as I touched on we have a lot of customers that are growing and developing.
They’re expanding themselves, they’re moving to new markets. They’re building their brands now and with that they have other products and product needs that we can fulfill, and we try to keep our position as more of a, one stop shop. So, as we look to expand with our product mix, we just look to what our customers need, to build our product portfolio, to match that and then we get extra business and extra revenue, just from the fact that now we are providing more products to the same customer base.
So, on both sides we are looking very positive, outward growth through new customers and inward growth through expanding our product offering to our current customers.
WSA: And what are some of the key goals or milestones that you’re hoping to accomplish here with the course of the next six to twelve months?
Nicholas Kovacevich: This year 2016, fiscal 2016 is a big year for us to obviously show that the company has now moved into more of a national presence in getting more of these States serviced, and extending our footprint. So, one of our big goals is to make sure we have physical feet on the street, so to speak in every new market, and right now we’re attacking Oregon, like I said.
We’re also looking at Alaska, we’re also looking at Hawaii and some of these states that are getting their programs out, Nevada is another one. The East Coast is up and coming, so Massachusetts, Maryland, all have programs in place and they’re waiting to roll out, kind of a more mainstream operation that would allow us to then enter that market too.
So we look for this year to be a big goal-wise, make sure that we have our feet on the street, make sure we have boots on the ground in every major area, in regards with legal marijuana programs that are being rolled out. We’re also looking to capitalize on fund raising and one of the big things for us is, the growth is consistent and steady, but how can we accelerate it more, right?
We can get some capital inputs and we can do some things, and make some investments with that capital that can accelerate and catapult that growth even faster and further than our plan is currently projecting, so that’s very exciting. The first step in that would be to get the stock trading, which we did this year. The next step is now to go out and raise that capital and then put that capital to good use and build more value, for everyone involved in our company.
WSA: Well, sure and that leads into the next question. You’ve recently just gone public, and as you speak with investors and the financial community, what are some of the drivers that you wish perhaps investors better understood about Kush Bottles?
Nicholas Kovacevich: Well yeah, one of the key things that we’d like everyone to understand is that you always hear the old adage ‘customer is king’ and really in a distribution company like we are, the customer relationship is king and we have those end relationships with the customer. It’s something we definitely value and it’s something that brings a ton of value to our business, because like I said this is a customer base, and now we can sell multiple different products, even products that we are currently not carrying into this customer base, because we own that relationship.
We have relationships with thousands of medical marijuana dispensaries, recreational marijuana stores or marijuana grower/producer processors and depending on where the state mandates the packaging be done, those relationships allow for consistent recurring sales. So, we’d like people to understand that the relationship there is what’s very important and it’s what we work every day to maintain and to grow, and then down the road, we become more than just a packaging, ancillary supply company, right?
We can sell anything into those channels that is federally legal. Currently, marijuana, and flowers and edibles, and concentrates are not federally legal, so we’re not going to touch those, but there will come a time down the road when eventually marijuana is federally legalized, and a company like us who has positioned a nationwide distribution operating plan, is going to be extremely valuable, because we can plug in all these things that people want to move, whether it’s you know, California-grown, humble flower that needs to get moved all the way to the East Coast.
Well, there’s going to be no infrastructure setup to do that outside of a company like us, who is currently operating within federal guidelines on the packaging side. We can easily flip that switch and become the nationwide distributor for all things marijuana, because we own those relationships and because we built that infrastructure.
WSA: Certainly, and perhaps you can walk us through your background experience Nicholas, and talk a little bit about the key management there?
Nicholas Kovacevich: Definitely, my background is as an entrepreneur, I’ve started several companies. Kush Bottles is the first company that I’ve really taken the helm as CEO and got the company to get into the public market, I mean and look at some serious fundraising. So I am very excited about that, but being an entrepreneur, former college athlete, I’ve always been very competitive and it excites me to be involved in a company that’s competing at such a high level in such a fast-growing industry that’s what gets me up and gets me motivated every day, and so with that I brought on a very experienced team that can really, run different facets of the business.
Number one would be our president and Chief Operating Officer, Ben Wu, who comes from private equity background. Very sound fundamentals from a business standpoint and he’s the guy that came in and really created change right from the get go. Changed the way that our operations ran, changed what really our culture was about and got us motivated about being a growth company. Put the right systems and processes in place to allow us to scale and contributed tremendously on the strategy side, and just developing what our company was going to be in the future. Implementing things like custom packaging, identifying different products and different expansion opportunities and so, Ben has done a great job and executed perfectly along the plan, and he’s really the driving force behind our company, in the president role.
Chris Martin is our CFO. We brought him on because he had nine plus years of public accounting experience and we, obviously just now getting into the public arena, a lot of the work he has been laying that down for the last year, so he has allowed us to do that seamlessly. So, Chris is the driving force in making sure that we’re current with our filings and that our company is doing everything and anything we can to stay above board at all costs. He’s also been very helpful in driving our company from a financial aspect right? Looking at these, analyzing our growth trajectories and building the operating plans, and so a lot of his experiences have paid off big for us. So yes, from a senior management level, we were very fond and happy with our team. We have built up some regional directors that are doing a great job of running their respective regions and then continuing to drive growth, and for the most part, our entire management within our company is all aligned, under our vision and our mission, which is to become the premier packaging solutions provider for this industry, and so far, we’re doing a great job at that.
WSA: Well great, and once again joining us today, is Nicholas Kovacevich, the CEO and cofounder for Kush Bottles Incorporated, which trade on the OTCQB, ticker symbol KSHB, currently trading at $2.42, share market cap is north of 110 million, and before we conclude here Nicholas, to recap some of your key points. Why do you believe investors should consider the company as a good investment opportunity today?
Nicholas Kovacevich: Yeah, I would tell anyone looking at investing in our company, number one, they should definitely do their research on the niche industry that we play in, which is the legal marijuana industry and realize the growth of the marijuana industry as seen over the last few years, and the fact that we’re just at the tip of the iceberg.
The momentum is going in the right direction, really both sides of the aisle are now in support of marijuana, whether it be from the social aspect or whether it be from the fiscal aspect, and just the amount of revenue that states are generating off of taxation and the amount of burden being taken off of our public officers for having to criminalize and regulate this thing from a criminal aspect. It just makes sense that we keep progressing in the way we’re going. So, if you’re betting on legal marijuana to continue, and one day be federally legal, then you want to take a company like ours, who owns the relationships with all of the big players within the marijuana states and is providing them with a multitude of products that they’re using on a daily basis. So, it’s a very reoccurring revenue model on something that we’ve built out consistently and steadily, and its only growing now exponentially and so, we have the momentum and the ability to continue to scale this thing as big as the marijuana industry can go.
We’re going to be riding the wave the whole way. We have a first move or advantage that we’ve capitalized on and we have a very innovative and experienced team that is executing to our plan, so that’s kind of from a higher level. If anyone is looking at this, as an investment opportunity, number one you’re betting on the legal marijuana industry, and number two, you’re betting on our ability to continue to execute our plan, because those are the only things that are going to continue to allow us to catapult this business the way it’s been.
WSA: Well, we certainly continue to look forward to continue to track the company’s growth and reporting your upcoming progress, and we’d like to thank you for taking the time to join us today Nicholas, and update our investor audience on Kush Bottles. It was great to have you on.
Nicholas Kovacevich: It was great to be on, I appreciate your time. Thanks for having me on today.