Item 1.01
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Entry into a Material Definitive Agreement.
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On June 7, 2018, Kush Bottles, Inc. (the
“Company”) entered into a securities purchase agreement (the “Purchase Agreement”) with certain accredited
investors identified on the signature pages thereto (the “Purchasers”) pursuant to which the Company agreed to issue
and sell an aggregate of 7,500,000 shares of its common stock, par value $0.001 per share (the “Common Stock”) and
warrants to purchase 3,750,000 shares of Common Stock (“Warrants”) (collectively, the “Securities”), in
a registered direct offering (the “Offering”). The Securities were offered by the Company pursuant to its shelf registration
statement on Form S-3 (File No. 333-221910) initially filed with the Securities and Exchange Commission (the “Commission”)
on December 5, 2017, as amended on January 25, 2018 and February 14, 2018, and declared effective on February 28, 2018 (the “Registration
Statement”). Subject to certain ownership limitations, the Warrants will be immediately exercisable at an exercise price
equal to $5.28 per share of Common Stock. The Warrants are exercisable for five years from the date of issuance.
The combined per share purchase price for
a share of Common Stock and half of a Warrant is $4.80. The closing of the Offering is expected to occur on June 12, 2018. The
Company expects the aggregate gross proceeds from the Offering to be approximately $36.0 million. The Company expects the aggregate
net proceeds from the Offering, after deducting the placement agent fees and other estimated offering expenses, to be approximately
$32.9 million. The Company intends to use the aggregate net proceeds for general corporate purposes, which may include, among other
things, working capital, product development, acquisitions, capital expenditures, and other business opportunities.
The Purchase Agreement contains customary
representations, warranties and agreements by the Company and customary conditions to closing. Under the Purchase Agreement, the
Company has agreed, subject to certain exceptions, not to enter into any agreement to issue or announce the issuance or proposed
issuance of any Common Stock or Common Stock equivalents for a period of 90 days following the closing of the Offering.
A.G.P./Alliance Global Partners (the “Placement
Agent”) acted as the placement agent for the Offering. The Company agreed to pay the Placement Agent an aggregate cash fee
equal to 7% of the aggregate gross proceeds raised in the Offering. The Company also agreed to reimburse the Placement Agent for
up to $120,000 of certain of its expenses with respect to the Offering and to pay the Placement Agent a non-accountable expense
allowance equal to 1% of the aggregate gross proceeds raised in the Offering. The Placement Agency Agreement is filed as Exhibit
10.2 hereto.
The foregoing summaries of the Warrants,
the Purchase Agreement and the Placement Agency Agreement (the “Transaction Documents”) do not purport to be complete
and are qualified in their entirety by reference to the full texts of the form of Warrant, the form of Purchase Agreement and the
Placement Agency Agreement that are filed herewith as Exhibits 4.1, 10.1 and 10.2, respectively. The representations, warranties
and covenants contained in Transaction Documents were made only for purposes of such agreements and as of specific dates, were
solely for the benefit of the parties to the Transaction Documents, and may be subject to limitations agreed upon by the contracting
parties. Accordingly, the Transaction Documents are incorporated herein by reference only to provide investors with information
regarding the terms of the Transaction Documents, and not to provide investors with any other factual information regarding the
Company or its business, and should be read in conjunction with the disclosures in the Company’s periodic reports and other
filings with the Commission.
This Current Report on Form 8-K does not
constitute an offer to sell, or the solicitation of an offer to buy, nor shall there be any sale of these Securities in any state
or jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the
securities laws of any such state or jurisdiction.