U. S.

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934

For the fiscal year ended August 31, 2015

[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934

For the transition period from ___________ to _____________

Commission File Number: 000-55418

Logo
KUSH BOTTLES, INC.
(Name of small business issuer as specified in its charter)

Nevada
46-5268202
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)

1800 Newport Circle, Santa Ana, CA 92705

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code:

(714) 243-4311
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001par value
___________________

Indicate by check mark whether the registrant is a well-known seasoned issuer, as

defined in Rule 405 of the Securities Act. No [X]

Indicate by check mark whether the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. No [X]

Indicate by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes [X]

Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes [X]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of

Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K or
any amendment of this Form 10-K. [X]

Indicate by check mark whether the registrant is a large accelerated filer, an

accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule12b-2 of the Exchange Act.

Large accelerated filer [ ]

Accelerated filer [ ]
Non-accelerated filer [ ] (Do not check if smaller reporting company)
Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). No [X]

The aggregate market value of the voting and non-voting common equity held by non-
affiliates on February 28, 2015 is unknown because our common equity does not yet
trade in the public market.

As of November 30, 2015, there were 46,132,779 shares of our common stock were
issued and outstanding.

Page 1

FORM 10-K

KUSH BOTTLES, INC.

INDEX

Page
PART I

Item 1. Business
3

Item 1A. Risk Factors

5

Item 1B. Unresolved Staff Comments 5

Item 2. Property
7
 Item 3. Legal Proceedings
7

Item 4. Mine Safety Disclosures

7

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
8

Item 6. Selected Financial Data

9

Item 7. Management's Discussion and Analysis of Financial Condition and

Results of Operations
9

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

11

Item 8. Financial Statements and Supplementary Data

11

Item 9. Changes in and Disagreements with Accountants on Accounting and

Financial Disclosures
11

Item 9A(T). Controls and Procedures

11

Item 9B. Other Information

11

PART III

Item 10. Directors, Executive Officers and Corporate Governance

12

Item 11. Executive Compensation

14

Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
15

Item 13. Certain Relationships and Related Transactions, and Director

Independence
15

Item 14. Principal Accountant Fees and Services

16

Item 15. Exhibits Financial Statement Schedules

17
Signatures
18

Page 2

PART I

Item 1. Business

For purposes of this report, unless otherwise indicated or the context otherwise
requires, all references herein to “Kush”, “Kush Bottles”, “the Company” ,“we,”
“us,” and “our,” refer to Kush Bottles, Inc., a Nevada corporation.

CAUTIONARY STATEMENT

Except for historical matters, the matters discussed in this Form 10-K are forward-
looking statements that are subject to significant risks and uncertainties. These
statements are generally indicated by the use of forward-looking terminology such
as the words “estimate”, “could”, “should”, “would”, “likely”, “may”, “will”,
“plan”, “intend”, “believes”, “expects”, “anticipates”, “projected”, or other
similar words that express an indication of actions or results of actions that may
or are expected to occur in the future. These statements appear in a number of
places throughout this Form 10-K and include statements regarding our intentions,
beliefs or current expectations concerning, among other things, our results of
operations, financial condition, liquidity, prospects, growth, strategies and the
industries in which we operate.

By their nature, forward-looking statements involve risks and uncertainties because

they relate to events and depend on circumstances that may or may not occur in the
future. Forward-looking statements are not guarantees of future performance. Our
actual results of operations, financial condition and liquidity, and the
development of the industries in which we operate may differ materially from those
made in or suggested by the forward-looking statements contained in this Form 10.
Important factors that could cause those differences include, but are not limited
to:

•
competition from other companies and our ability to retain and increase our market
share;

•
our ability to generate growth or profitable growth;

•
our ability to hire and retain qualified personnel;

•
our ability to acquire required equipment and supplies to meet customer demand;

•
our ability to raise debt or equity financing as required to meet certain existing
obligations;
•
general local and global economic, regulatory and financial conditions.

Forward-looking statements include, but are not limited to, statements regarding
our strategy and future plans, future business condition and financial results, our
capital expenditure plans, future market demand, future regulatory or other
developments in our industry. All forward-looking statements in this Form 10 are
based on information currently available to us as of the date of this report. We
assume no obligation to update any forward-looking statements, except as required
by applicable law.

Emerging Growth Company

We are an “emerging growth company” under the federal securities laws (as that term
is used in the Jumpstart Our Business Startups Act of 2012) and will be subject to
certain reduced public company reporting requirements.

As a company with less than $1.0 billion in revenue during our most recently
completed fiscal year, we qualify as an "emerging growth company" as defined in
Section 2(a) of the Securities Act of 1933, as amended, which we refer to as the
Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, or
the JOBS Act. As an emerging growth company, we may take advantage of specified
reduced disclosure and other requirements that are otherwise applicable, in
general, to public companies that are not emerging growth companies. These
provisions include:

·
Reduced disclosure about our executive compensation arrangements;

·
No non-binding shareholder advisory votes on executive compensation or golden
parachute arrangements;

·
Exemption from the auditor attestation requirement in the assessment of our
internal control over financial reporting; and

·
Reduced disclosure of financial information in this prospectus, including two years
of audited financial information and two years of selected financial information.

We may take advantage of these exemptions for up to five years or such earlier time
that we are no longer an emerging growth company. We would cease to be an emerging
growth company if we have more than $1.0 billion in annual revenues as of the end
of a fiscal year, if we are deemed to be a large-accelerated filer under the rules
of the Securities and Exchange Commission, or if we issue more than $1.0 billion of
non-convertible debt over a three-year-period.

Page 3

Our Corporate History and Background

Kush Bottles, Inc. was incorporated in the state of Nevada on February 26, 2014.
The Company specializes in the wholesale distribution of packaging supplies for the
cannabis industry. The Company’s wholly owned subsidiary Kim International
Corporation (KIM), a California corporation, was originally incorporated as Hy Gro
Economics Corporation ("Hy Gro") on December 2, 2010. On October 30, 2012, Hy Gro
amended its articles of incorporation to reflect a name change to KIM International
Corporation (KIM).

On April 10, 2015, the Company entered into an equity purchase agreement to acquire
all of the issued and outstanding membership interests in Dank Bottles, LLC
("Dank"), a Colorado limited liability company. In exchange for the purchased
interests, the Company paid cash consideration of $373,725 and issued 3,500,000
shares of common stock to the sellers of Dank. Of the $373,725 of cash
consideration, $273,725 was paid on April 10, 2015 and the remaining $100,000 is to
be paid in 10 monthly installments beginning on July 31, 2015 and ending April 30,
2016. Effective April 10, 2015, Dank is now a wholly-owned subsidiary of Kush.

Recapitalization

On March 4, 2014, the stockholders of KIM exchanged all 10,000 of their common
shares of KIM for 32,400,000 common shares of Kush. The operations of KIM became
the operations of Kush after the share exchange and accordingly the transaction is
accounted for as a recapitalization of KIM whereby the historical financial
statements of KIM are presented as the historical financial statements of the
combined entity.

Subsequent to the share exchange, the members of KIM owned 32,400,000 of shares of
Company’s common stock, effectively obtaining operational and management control of
Kush. Kush had no operations prior to the share exchange. As a result of the
recapitalization, KIM was the acquiring entity in accordance with ASC 805, Business
Combinations. The accumulated losses of KIM were carried forward after the
completion of the share exchange. Operations prior to the share exchange were those
of KIM.

Recent Developments; Unregistered Sales of Equity Securities

From March 19, 2014 through the date of this filing, we entered into Purchase
Agreements with certain accredited investors pursuant to which we raised $957,000
in a private placement financing and issued 1,482,779 shares of common stock.

On April 6, 2015, the Company entered into a $240,000 revolving line of credit
facility with a financial institution. The minimum advance is $10,000. Interest
accrues at prime plus 2.75% and is payable monthly. The loan is secured by the
assets of the Company excluding patents. The loan matures on April 1, 2016.

On May 4, 2015, the Board appointed Greg Gamet as a director. The Company entered
into a Board of Directors Services Agreement with Mr. Gamet effective May 4, 2015.

Company and Product Overview

Kush Bottles, Inc. markets and sells packaging products and solutions to customers
operating in the regulated medical and recreational cannabis industries. As an
innovator in custom packaging design and implementation, we combine creativity with
compliance to provide the right solutions for our customers. The ability to source
almost anything a customer needs makes us a one-stop-shop packaging solutions
provider. We also provide custom branding on packaging products. This feature
allows our customers to turn their packaging into marketing or re-marketing
campaigns. Our core products are in accordance with Title 16 of the Code of Federal
Regulations Part 1700 of the Poison Prevention Packaging Act. The testing
standards for certification meet the stringent requirements as set by the Consumer
Product Safety Commission (“CPSC”) and ASTM International (“ASTM”). In addition,
the materials used for production are FDA-approved food grade and BPA-free. By
offering a product mix that is already tested compliant, we give peace of mind to
customers and reduce liability on their end. By working with a broad array of
manufacturers, we can offer quick solutions to our customers and ensure that their
products will be of superior grade and made with environmentally safe materials.

Our packaging business primarily consists of bottles, bags, tubes, and containers.
We maintain relationships with a broad range of manufacturers, which enables us to
source a plethora of packaging products in a cost effective manner and pass such
cost savings to our customers. In addition to a complete product line, we have
sophisticated labeling and customization capabilities, which allow us to add
significant value to our customers’ packaging design processes. Our products are
utilized by local urban farmers, green house growers, and medical and recreational
cannabis dispensaries.

Bottles. Our flagship product is the certified child-resistant Phillips RX pop-top

vial. Our pop top bottles meet all of the standards for both CPSC and ASTM. The
pop-top bottle is unique to the pharmaceutical packaging world because instead of a
traditional push and turn bottle, the pop-top requires a squeeze motion that
actually pops the attached top up and open. We carry the bottles in various sizes
and colors. We believe, based on management estimates, that we are a leading
packaging supplier in the cannabis market.

Bags. We provide an array of packaging solutions in the form of a bag. The

selection of bags we provide includes child resistant exit bags, traditional paper
exit bags, and a vast selection of food grade safe foil barrier bags. All bags are
available in stock designs and are fully customizable.

Tubes. We offer a complete line of tubes in two standard sizes, each available in a
wide variety of colors. We believe that we are one of the largest suppliers of
tubes to the cannabis industry in the United States. Our focus and investments are
made to ensure that we are able to meet the increasing trend towards impermeable
casing, substantially extending shelf life for pre-packaging. The tubes have a
positive seal for enhanced freshness and are odor tight for secure storage and
content privacy. All tubes are medical grade plastic, BPA-free, and molded of
natural gas based polypropylene in compliance with FDA regulation. We maintain
several unique designs in this market that combine tube and closure that we believe
are viewed as very innovative both in appearance and functionality. We believe that
our ability to provide creative package designs, combined with a complementary line
of closures, makes us a preferred supplier for many customers in our target market.

Containers. We provide a diverse selection of smaller sized containers composed of

either polystyrene, polypropylene or silicone. Our screw-top silicone containers
come in assorted customizable colors and are composed of non-stick material whereas
our BPA-free medical grade polypropylene hinged-top containers maintain an odorless
seal.

Page 4

Marketing and Sales

We sell into two distinct markets: our business-to-business market, which includes
legally operating medical and adult-use dispensaries, growers, and MIP producers
(Marijuana Infused Products) in states with marijuana programs; and our business-
to-consumer market, which sells products directly to the end-user. We reach our
large and diversified customer base through our direct sales force and the
strategic use of re-distributors. Our sales, fulfillment and support staff meet
with customers to understand their needs and improve our product offerings and
services. We are able to dedicate certain sales and marketing efforts to
particular products, customers or geographic regions, when applicable, which
enables us to develop expertise that we believe is valued by our customers. In
addition, inside sales representatives, marketing managers, and executives oversee
the marketing and sales efforts. Operational personnel work closely with sales
personnel and customer service representatives to satisfy customers’ needs through
the distribution of high-quality products, on-time deliveries, value-added
regulatory insight, and customized branding solutions.

Our marketing activities include brand and logo development, advertising, websites,
public relations, newsletters, catalogs and brochures, and all other points of
contact with customers and prospective customers. We have ongoing campaigns in each
of these areas, which are detailed below.

Branding. We believe that we have built one of the strongest and most recognizable
brands in the cannabis industry. We recognized early on the importance of creating
a strong, identifiable and lasting brand that would separate the Company from the
competition, and resonate with customers. Our logo, our name, the style of our ads,
and all collateral material reflect our “brand image.”

Advertising. As part of our branding and awareness campaigns, we have secured

premium placements (back cover) ads in several regional additions of one of the
most highly regarded industry publications. We believe our ads on this back cover
draw people into our brand and help solidify our position as a market leader. We
also run ads periodically in other trade publications and on specific websites that
reach our target audience.

Public Relations. We have an active public relations program, which has helped
build the Kush brand and position the Company not only as a leader in the industry,
but as the company with expertise in compliance issues and depth of understanding
into state and local regulations governing the cannabis industry. This expertise is
provided to our business-to-business customers, to help them stay compliant and
operate within all applicable rules. We believe that we have enjoyed great success
in our public relations campaigns, and have appeared in numerous newspaper articles
and television reports.

Email Marketing. We maintain a list of our customers and prospects, and we email to
them regularly. These campaigns may be seasonally based (i.e. Holiday Specials), or
may be “news” based to act as a vehicle to communicate important information.
Staying in touch with our customers and our prospects is another key component in
our marketing program.

Collateral. We have designed brochures, sales sheets, and catalogs that we use in
our sales and marketing programs. These professionally designed and quality-printed
pieces have been created using the Kush brand guidelines, and help promote the
Company while serving as useful sales tools.

Sales. We have a team of sales professionals that drive our revenues. These
dedicated individuals maintain contact with existing clients and secure on-going
orders, as well as have frequent communications with prospective customers. Our
sales team works both inside and outside the office, working the telephones and
meeting with clients and prospects as often as possible.

Competition. We believe that we have differentiated ourselves from competitors due

to several factors: We have built what we consider to be one of the strongest
brands in the industry. We have the highest quality and largest variety of products
that meet the certification standards for child-resistance. Additionally, we have a
knowledge base and expertise that is unmatched in our industry. As a result, we
have become more than just a supplier to our customers – we have become a trusted
partner, with insight and recommendations that help our customers’ businesses grow
and thrive.
Dependence on Major Customers

During our August 31, 2014 fiscal year, Dank represented 22% of our revenues. On
April 10, 2015, we acquired Dank. During our August 31, 2015 fiscal year, no
customer represented over 10% of revenues.

Sources and Availability of Products

F&S Tool, Inc. is the principal supplier of our Phillips RX child-resistant pop-top
bottles. We purchase products and raw materials from different suppliers from time
to time on a non-exclusive basis. Except as described below in "Royalty
Agreements," we purchase all products and raw materials from suppliers by purchase
order. Our purchase orders are executed on a “spot” basis and contain market
pricing, shipment and delivery terms and conditions only. With the exception of
the royalty agreement described below, we do not have any agreement or arrangement
with any supplier other than purchase orders. For example, we have no agreements
or arrangements regarding supplier commitments to medium term or long term products
or raw materials supply, to provide products or raw materials in quantities
sufficient for our requirements or to maintain particular levels of supply
capacity. We believe that we have maintained strong relationships with our
suppliers. We expect that such relationships will continue into the foreseeable
future, but we can provide no assurances that these relationships will continue.
Based on our experience, we believe that adequate quantities of the raw materials
which are used to manufacture our products (i.e. plastic resins) will be available
at market prices, but we can provide no assurances as to such availability or the
prices thereof.

Research and Development Activities

Since inception of the business and through the date of this filing, we have
incurred $17,156 of expenses towards the research and development of a new child-
resistant tube. We have filed a patent on this product. The patent is pending
approval. Our costs to develop this product have been financed by internal cash
flows and not been borne directly by our customers.

Royalty Agreements

On September 11, 2014, the Company entered into a royalty agreement with KB Mold
Company ("KB Mold"), a related party. KB Mold owns the mold that produces the new
child-resistant tube that is the subject of the Company’s pending patent. Per the
terms of the agreement, the Company is obligated to pay KB Mold a royalty of $0.015
for every tube delivered to Kush from this mold. Kush is obligated to purchase
325,000 tubes every three months, beginning on April 29, 2015, the day the first
order was received, through December 31, 2019. After ordering and having paid
royalties to KB Mold on a minimum of 2,250,000 products, Kush will have the option
to purchase the mold from KB Mold for the amount of all direct costs invested by
Kush into the mold.

Page 5

Employees

As of the date of this filing, we have 29 full-time employees. Our employees work
at our three facilities located in Santa Ana, California, Denver, Colorado, and
Auburn, Washington. Our relations with employees remain satisfactory and there have
been no significant work stoppages or other labor disputes.

Environmental Matters and Government Regulation

The Food and Drug Administration (“FDA”) regulates the material content of direct-
contact food and drug packages, including certain packages we manufacture pursuant
to the Federal Food, Drug and Cosmetics Act. Certain of our products are also
regulated by the Consumer Product Safety Commission (“CPSC”) pursuant to various
federal laws, including the Consumer Product Safety Act and the Poison Prevention
Packaging Act. Both the FDA and the CPSC can require the manufacturer of defective
products to repurchase or recall such products and may also impose fines or
penalties on the manufacturer. Similar laws exist in some states, cities and other
countries in which we sell our products. We use FDA approved resins and pigments in
our products that directly contact food and drug products, and our products are in
material compliance with all applicable requirements.

The plastics industry, including us, is subject to existing and potential federal,
state, local and foreign legislation designed to reduce solid waste by requiring,
among other things, plastics to be degradable in landfills, minimum levels of
recycled content, various recycling requirements, disposal fees, and limits on the
use of plastic products. In particular, certain states have enacted legislation
requiring products packaged in plastic containers to comply with standards intended
to encourage recycling and increased use of recycled materials. In addition,
various consumer and special interest groups have lobbied from time to time for the
implementation of these and other similar measures. We believe that the legislation
promulgated to date and such initiatives to date have not had a material adverse
effect on us. There can be no assurance that any such future legislative or
regulatory efforts or future initiatives would not have a material adverse effect
on us.

Twenty states currently have some form of medical and recreational cannabis
legalization/decriminalization laws. We believe that another 8 states will have
some form of voting regarding legislation of cannabis
legalization/decriminalization laws in the next 24 months. We do not believe that
federal or any state laws prohibit us from selling our packaging products to
cannabis growers and dispensers.

Emerging Growth Company

We qualify as an “emerging growth company” as defined in the Jumpstart Our Business

Startups Act of 2012, or the JOBS Act. For as long as we continue to be an
emerging growth company, we may take advantage of exemptions from various reporting
requirements that are applicable to other public companies that are not emerging
growth companies, including not being required to comply with the auditor
attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced
disclosure obligations regarding executive compensation in our periodic reports and
proxy statements and exemptions from the requirements of holding a nonbinding
advisory vote on executive compensation and stockholder approval of any golden
parachute payments not previously approved.

Under the JOBS Act, emerging growth companies can also delay adopting new or
revised accounting standards until such time as those standards apply to private
companies. We have irrevocably elected not to avail ourselves of this exemption
from new or revised accounting standards. As a result we will be subject to the
same new or revised accounting standards as other public companies that are not
emerging growth companies.

Circumstances could cause us to lose emerging growth company status. We will

qualify as an emerging growth company until the earliest of:

-- The last day of our first fiscal year during which we have total annual gross
revenues of $1 billion or more;
-- The last day of our fiscal year following the fifth anniversary of the date of
our initial public offering;

-- The date on which we have issued more than $1 billion in non-convertible debt
during the prior three-year period; or

-- The date on which we qualify as a “large accelerated filer” under the Exchange
Act (qualifying as a large accelerated filer means, among other things, having a
public float in excess of $700 million).

How to Obtain our SEC Filings

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K, and any amendments to these reports, are available on our website at
www.kushbottles.com, as soon as reasonably practicable after we file these reports
electronically with, or furnish them to, the Securities and Exchange Commission
(“SEC”). Except as otherwise stated in these reports, the information contained on
our website or available by hyperlink from our website is not incorporated into
this Annual Report on Form 10-K or other documents we file with, or furnish to, the
SEC.

Page 6

Item 1A. Risk Factors

As a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act, we

are not required to provide the information called for by Item 304 of Regulation S-
K.

Item 1B. Unresolved Staff Comments.

None

Item 2. Properties

At present, we do not hold title to any real estate property. All of our properties
are leased. We do not have any mortgages, liens or encumbrances against any such
properties. Our corporate head-quarters and primary distribution center is located
in a leased facility at 1800 Newport Circle, Santa Ana, CA 92705, and consists of
approximately 10,000 square feet of administrative, sales and distribution offices.
The current lease runs until August 1, 2017. We lease a facility in Auburn,
Washington which is utilized as a fulfillment and distribution center for the
Pacific Northwest region. The lease runs until December 31, 2015.

Effective April 10, 2015 and following the acquisition of Dank, we also lease a
facility in Denver, Colorado, which is the headquarters of operations for our
wholly-owned subsidiary, Dank. The lease runs through March 31, 2020. We believe
that our property and equipment is well-maintained, in good operating condition and
adequate for our present needs.

Item 3. Legal Proceedings

We are not a party to any legal proceedings responsive to this Item number.

Item 4. Mining Safety Disclosures

Not applicable.
Page 7

PART II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters and
Issuer Purchases of Equity Securities.

There is no current market for our securities. We intend to have our common stock
quoted on OTCMarkets.com.

Holders

At of the date of this report, we have approximately 175 holders of record of our
common stock.

As of November 30, 2015, there are options exercisable for 1,000,000 shares of our
common stock granted to Ben Wu, Chief Operating Officer, which are outstanding and
fully exercisable.

As of November 30, 2015, there are 46,132,779 shares of the Company's common stock
issued and outstanding. Of this total, 34,402,500 shares of the Company's common
stock, representing 75% of our issued and outstanding shares, are held by
affiliates.

Dividends

We have not declared any cash dividends on any class of our securities and we do
not have any restrictions that currently limit, or are likely to limit, our ability
to pay dividends now or in the future.

Securities authorized for issuance under equity compensation plans

We currently have no Equity Compensation Plans and we do not have any securities
authorized for issuance under equity compensation plans.

The Securities Enforcement and Penny Stock Reform Act of 1990

The Securities and Exchange Commission has also adopted rules that regulate broker-
dealer practices in connection with transactions in penny stocks. Penny stocks are
generally equity securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on the Nasdaq system,
provided that current price and volume information with respect to transactions in
such securities is provided by the exchange or system).

A purchaser is purchasing penny stock which limits the ability to sell the stock.
The shares offered by this prospectus constitute penny stock under the Securities
and Exchange Act. The shares will remain penny stocks for the foreseeable future.
The classification of penny stock makes it more difficult for a broker-dealer to
sell the stock into a secondary market, which makes it more difficult for a
purchaser to liquidate his/her investment. Any broker-dealer engaged by the
purchaser for the purpose of selling his or her shares in us will be subject to
Rules 15g-1 through 15g-10 of the Securities and Exchange Act. Rather than creating
a need to comply with those rules, some broker-dealers will refuse to attempt to
sell penny stock.
The penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from those rules, to deliver a standardized risk
disclosure document prepared by the Commission, which:

●
contains a description of the nature and level of risk in the market for penny
stocks in both public offerings and secondary trading;

●
contains a description of the broker's or dealer's duties to the customer and of
the rights and remedies available to the customer with respect to a violation to
such duties or other requirements of the Securities Act of 1934, as amended;

●
contains a brief, clear, narrative description of a dealer market, including "bid"
and "ask" prices for penny stocks and the significance of the spread between the
bid and ask price;

●
contains a toll-free telephone number for inquiries on disciplinary actions;

●
defines significant terms in the disclosure document or in the conduct of trading
penny stocks; and

●
contains such other information and is in such form (including language, type, size
and format) as the Securities and Exchange Commission shall require by rule or
regulation;

The broker-dealer also must provide, prior to effecting any transaction in a penny
stock, to the customer:

●
the bid and offer quotations for the penny stock;

●
the compensation of the broker-dealer and its salesperson in the transaction;

●
the number of shares to which such bid and ask prices apply, or other comparable
information relating to the depth and liquidity of the market for such stock; and

●
monthly account statements showing the market value of each penny stock held in the
customer's account.
In addition, the penny stock rules require that prior to a transaction in a penny
stock not otherwise exempt from those rules; the broker-dealer must make a special
written determination that the penny stock is a suitable investment for the
purchaser and receive the purchaser's written acknowledgment of the receipt of a
risk disclosure statement, a written agreement to transactions involving penny
stocks, and a signed and dated copy of a written suitability statement. These
disclosure requirements will have the effect of reducing the trading activity in
the secondary market for our stock because it will be subject to these penny stock
rules. Therefore, stockholders may have difficulty selling their securities.

Psge 8

Item 6. Selected Financial Data.

As a smaller reporting company, we are not required to provide the information

required by this item.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of

Operations

Cautionary Statement Concerning Forward-Looking Statements

The following discussion and analysis should be read in conjunction with our
audited consolidated financial statements and related notes included in this
report. This report contains “forward-looking statements.” The statements
contained in this report that are not historic in nature, particularly those that
utilize terminology such as “may,” “will,” “should,” “expects,” “anticipates,”
“estimates,” “believes,” or “plans” or comparable terminology are forward-looking
statements based on current expectations and assumptions.

Various risks and uncertainties could cause actual results to differ materially
from those expressed in forward-looking statements. The forward-looking events
discussed in this report, the documents to which we refer you and other statements
made from time to time by us or our representatives, may not occur, and actual
events and results may differ materially and are subject to risks, uncertainties,
and assumptions about us. For these statements, we claim the protection of the
“bespeaks caution” doctrine. All forward-looking statements in this document are
based on information currently available to us as of the date of this report, and
we assume no obligation to update any forward-looking statements. Forward-looking
statements involve known and unknown risks, uncertainties, and other factors that
may cause the actual results to differ materially from any future results,
performance, or achievements expressed or implied by such forward-looking
statements.

Overview

Kush Bottles, Inc. ("Kush" or the "Company") provides customizable packaging

products, materials and supplies for the cannabis industry. Representative examples
of our products include pop-top bottles, exit/barrier bags, tubes, and other small-
sized containers. We sell our solutions predominantly to businesses operating in
jurisdictions that have some form of cannabis decriminalization. These businesses
include medical and recreational dispensaries, large and small scale processors,
and packaging re-distributors. We also sell direct to consumers primarily via our
online store.

We believe that we have created one of the largest product libraries in the
cannabis industry, allowing us to be a comprehensive solutions provider to our
customers. Our extensive knowledge of the regulatory environment applicable to the
cannabis industry allows us to quickly adapt to our customers' packaging
requirements. We maintain the flexibility to enter the markets of decriminalized
regions by establishing re-distributor partnerships or opening new facilities. We
also have the flexibility to introduce new products and services to our vast
customer network. We have no supplier purchase commitments and no take or pay
arrangements. In addition to these factors, we believe that we offer competitive
pricing, prompt deliveries, and excellent customer service. We expect continued
growth as we take measures to invest in our own molds and intellectual property.

On April 10, 2015, the Company paid cash consideration of $373,725 and issued
3,500,000 shares of common stock to the sellers of Dank Bottles, LLC ("Dank"), in
exchange for all of 100% of the membership interests in Dank. Kush is identified as
the acquiring company for US GAAP accounting purposes. Under the acquisition method
of accounting, as of the effective time of the business combination, the assets
acquired, including the identifiable intangible assets, and liabilities assumed
from Dank were recorded at their respective fair values. Any excess of the purchase
price for the business combination over the net fair value of Dank identified
assets and intangible assets acquired and liabilities assumed were recorded as
goodwill. The operational results discussed below include the activity for Dank
from April 10, 2015 to August 31, 2015.

Discussion of Results of Operations for Fiscal 2015 Compared to Fiscal 2014

Total revenues increased from $1,710,286 in fiscal 2014 to $4,013,571 in fiscal

2015, an increase of $2,303,285 or 135%. This increase is primarily attributed to
the acquisition of Dank on April 10, 2015, which effectively enabled the Company to
capture a large portion of the market share in the state of Colorado. Dank revenues
for the period from April 10, 2015 to August 31, 2015 accounted for $1,196,862.
Sales to Dank prior to the acquisition for the period from September 1, 2014 to
April 9, 2015 accounted for $578,918. In addition, growth in volume of customer
orders throughout the fiscal year in the states of Oregon and Washington
contributed to the increase in revenues. Sales growth was not significantly
impacted by inflation or changes in pricing. Cost of goods sold increased from
$987,094 in fiscal 2014 to $2,585,397 in fiscal 2015, an increase of $1,598,303 or
162%. The two primary components of cost of goods sold include direct purchases and
freight. Gross profits in fiscal 2015 amounted to $1,428,174 for a 36% gross
margin. Gross profits in fiscal 2014 amounted to $723,192 for a 42% gross margin.
Gross Profits increased by $704,982 in fiscal 2015 or 97%. The driving factor
behind the increase in sales, cost of goods sold, and gross profits in fiscal 2015
is due to the acquisition of Dank and increased activity in the states of
Washington and Oregon.

Cost of goods sold fiscal 2015 was $2,585,397, which compares to cost of goods sold
of $987,094 for fiscal 2014. Our revenue increased during the fiscal year ended
August 31, 2015, and as our revenue increased, our cost of goods sold
correspondingly increased.

Operating expenses in fiscal 2015 amounted to $1,773,895 compared to $1,113,577 in

fiscal 2014, an increase of $660,318 or 59%. The increase stems from the additional
operating expenses assumed in the acquisition of Dank in addition to increases in
payroll, professional fees, insurance, and rent. Payroll and payroll related
expenses increased by $544,836 or 132% in fiscal 2015 due to the increase in head-
count, notably an increase of 15. Professional fees increased by $64,213 or 648%.
Rent expense increased $44,210 or 48% in fiscal 2015 due to increased rents and the
new facility in Colorado. Insurance increased by $32,002 or 644%.

The net result for the fiscal year ended August 31, 2015 was a loss of $339,303 or
$0.008 loss per share, compared to a loss of $395,517 or $0.010 loss per share for
the prior fiscal year.
Page 9

Liquidity and Capital Resources

At August 31, 2015, we had cash of $201,259 and a working capital surplus of
$207,481.

Cash Flows from Operating Activities

Net cash used in operating activities decreased from $228,664 in fiscal 2014 to
$202,228 in fiscal 2015. The change is primarily attributed to the decrease in the
Company's net loss ($395,517 in fiscal 2014 compared to $339,303 in fiscal 2015).
The other significant factors include changes in prepaids and inventory. The
Company prepaid for $125,000 of inventory which remained in process and in-transit
as of August 31, 2014. The Company focused heavily on expanding its inventory
levels in fiscal 2015.

Cash Flows from Investing Activities

Net cash used in investing activities increased from $14,281 in fiscal 2014 to
$410,945 in fiscal 2015. The significant increase is due to the $273,725 cash
outflow required to acquire Dank. The Company also invested in acquiring new
vehicles and machinery.

Cash Flows from Financing Activities

Net cash provided by financing activities increased from $242,285 in fiscal 2014 to
$791,428 in fiscal 2015. The change is primarily due to the sale of shares of the
Company’s common stock to accredited investors in a private placement offering.

Historically, the Company has had operating losses and negative cash flows from
operations. The Company has a net loss of $339,303 for the fiscal year ended August
31, 2015, and has an accumulated deficit of $748,447 as of August 31, 2015.
Whether, and when, the Company can attain profitability and positive cash flows
from operations is uncertain. These uncertainties cast significant doubt upon the
Company’s ability to continue as a going concern. The Company will need to raise
capital in order to fund its operations. This need may be adversely impacted by
uncertain market conditions and changes in the regulatory environment. To address
its financing requirements, the Company intends to seek financing through debt and
equity issuances and rights offerings to existing stockholders.

Specifically, management has identified that a minimum of $350,000 of capital is

needed over the next 12 months in order sustain operations. These capital needs
take into account, among other things, management's plans to alleviate cash
constraints over the next 12 months by increasing sales volume and gross margin
through focused sales and marketing efforts in developing states. Management
expects to utilize the $350,000 for working capital. Moreover, on April 6, 2015,
the Company entered into a $240,000 revolving line of credit facility with a
financial institution, which the Company can utilize to fund working capital
requirements. Furthermore, management has outlined a plan to raise $1,000,000 in
capital over the next 12 months through the issuance of shares of the Company's
common stock to accredited investors. Management believes that the capital raised
through these methods will be sufficient to sustain operations for the next 12
months. However, the outcome of these matters cannot be predicted with certainty
at this time.

Off-Balance Sheet Transactions

We have no off-balance sheet transactions.

Critical Accounting Policies and Estimates

We disclose those accounting policies that we consider to be significant in

determining the amounts to be utilized for communicating our consolidated financial
position, results of operations and cash flows in the first note to our
consolidated financial statements included elsewhere herein. Our discussion and
analysis of our financial condition and results of operations are based on our
consolidated financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States. The preparation of
financial statements in conformity with these principles requires management to
make estimates and assumptions that affect amounts reported in the financial
statements and accompanying notes. Actual results are likely to differ from these
estimates, but management does not believe such differences will materially affect
our financial position or results of operations. We believe that the following
accounting policies are the most critical because they have the greatest impact on
the presentation of our financial condition and results of operations.

Use of Estimates

The preparation of financial statements in conformity with accounting principles

generally accepted in the United States requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amount of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

Accounts Receivable and Allowance for Bad Debts

Trade accounts receivable are carried at their estimated collectible amounts.

Trade credit is generally extended on a short-term basis, thus trade receivables do
not bear interest. Trade accounts receivables are periodically evaluated for
collectability based on past credit history and their current financial condition.

Inventory

Inventories are stated at the lower of cost or net realizable value using the
first-in first out (FIFO) method.

Earnings (Loss) Per Share

The Company computes net loss per share under Accounting Standards Codification
subtopic 260-10, "Earnings per Share" (“ASC 260-10”). Basic net income (loss) per
common share is computed by dividing net loss by the weighted average number of
shares of common stock. Diluted net loss per share is computed using the weighted
average number of common and common stock equivalent shares outstanding during the
period.

Revenue Recognition

It is the Company’s policy that revenues from product sales is recognized in

accordance with ASC 605 "Revenue Recognition". Four basic criteria must be met
before revenue can be recognized; (1) persuasive evidence of an arrangement exists;
(2) delivery has occurred; (3) the selling price is fixed and determinable; and (4)
collectability is reasonably assured. Determination of criteria (3) and (4) are
based on management’s judgments regarding fixed nature in selling prices of the
products delivered and the collectability of those amounts. The Company has not
implemented any specific rebate programs. Provisions for discounts to customers,
estimated returns and allowances, and other adjustments are provided for in the
same period the related sales are recorded. The Company has not established a
formal customer incentive program, but considers and accomodates discounts to
certain customers on a case by case basis, including by way of example, for volume
shipping or for certain new customers with orders over a specific discretionary
dollar threshold. Consistent with ASC 605-15-25-1, the Company considers factors
such as historical return of products, estimated remaining shelf life, price
changes from competitors, and introductions of competing products in establishing a
refund allowance. The Company recognizes revenues as risk and title to products
transfers to the customer (which generally occurs at the time shipment is made),
the sales price is fixed or determinable, and collectability is reasonably assured.
The Company defers any revenue for which the product was not delivered or is
subject to refund until such time that the Company and the customer jointly
determine that the product has been delivered or no refund will be required.

Share-based Compensation

The Company account for its stock based award in accordance with Accounting
Standards Codification subtopic 718-10, "Compensation", which requires fair value
measurement and recognition of compensation expense for all share-based payment
awards made to employees and directors, including restricted stock awards. The
Company estimates the fair value of stock using the stock price on the date of the
approval of the award. The fair value is then expensed over the requisite service
periods of the awards, which is generally the performance period and the related
amount is recognized in the consolidated statements of operations.

Income Taxes

The Company accounts for income taxes in accordance with accounting guidance now
codified as FASB ASC 740, "Income Taxes," which requires that the Company recognize
deferred tax liabilities and assets based on the differences between the financial
statement carrying amounts and the tax bases of assets and liabilities, using
enacted tax rates in effect in the years the differences are expected to reverse.
Deferred income tax benefit (expense) results from the change in net deferred tax
assets or deferred tax liabilities. A valuation allowance is recorded when it is
more likely than not that some or all deferred tax assets will not be realized.

The Company applies the provisions of ASC 740, "Accounting for Uncertainty in
Income Taxes". The ASC clarifies the accounting for uncertainty in income taxes
recognized in an enterprise's financial statements. The ASC prescribes a
recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return. The ASC provides guidance on de-recognition, classification, interest
and penalties, accounting in interim periods, disclosure and transition. The
Company did not identify any material uncertain tax positions on returns that have
been filed or that will be filed.

Foreign Currency Transactions

None.

Page 10

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We currently do not utilize sensitive instruments subject to market risk in our

operations.
Item 8. Financial Statements and Supplementary Data.

Our financial statements and related explanatory notes can be found on the “F”
Pages at the end of this Report.

Item 9. Changes In and Disagreements With Accountants on Accounting and Financial

Disclosure.

None.

Item 9A. Controls and Procedures.

We conducted an evaluation, under the supervision and with the participation of

management, including our chief executive officer and chief financial officer, of
the effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended) as of the end of the period covered by this
annual report.

Based on this evaluation, our chief executive officer and chief financial officer
concluded that as of the evaluation date our disclosure controls and procedures
were not effective. Our procedures were designed to ensure that the information
relating to our company required to be disclosed in our SEC reports is recorded,
processed, summarized and reported within the time periods specified in SEC rules
and forms, and is accumulated and communicated to our management, including our
chief executive officer and chief financial officer, as appropriate to allow for
timely decisions regarding required disclosure. Management is currently evaluating
the current disclosure controls and procedures in place to see where improvements
can be made.

Management Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal

control over financial reporting. The Company's internal control over financial
reporting has been designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles
generally accepted in the United States of America. The Company's internal control
over financial reporting includes policies and procedures that pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect
transactions and dispositions of assets of the Company; provide reasonable
assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with accounting principles generally accepted in
the United States of America, and that receipts and expenditures are being made
only in accordance with authorization of management and directors of the Company;
and provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Company's assets that could
have a material effect on the Company's financial statements.

Because of its inherent limitations, internal control over financial reporting may
not prevent or detect misstatements. Therefore, even those systems determined to be
effective can provide only reasonable assurance with respect to financial statement
preparation and presentation. Projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

Management assessed the effectiveness of the Company's internal control over

financial reporting at August 31, 2015. In making this assessment, management used
the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission ("COSO") in Internal Control—2013 Integrated Framework. Based on that
assessment under those criteria, management has determined that, at August 31,
2015, the Company's internal control over financial reporting was effective.

This Annual Report on Form 10-K does not include an attestation report of the
Company's registered public accounting firm regarding internal control over
financial reporting. Management's report was not subject to attestation by the
Company's registered public accounting firm pursuant to temporary rules of the SEC
that permit the Company to provide only management's report in this annual report.

Inherent Limitations of Internal Controls

Our internal control over financial reporting is designed to provide reasonable

assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles. Our internal control over financial reporting includes those
policies and procedures that:

●
pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of our assets;
●
provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that our receipts and expenditures are being made only
in accordance with authorizations of our management and directors; and
●
provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of our assets that could have a
material effect on the financial statements.

Our management does not expect that our internal controls will prevent or detect
all errors and all fraud. A control system, no matter how well designed and
operated, can provide only reasonable, not absolute, assurance that the objectives
of the control system are met. Further, the design of a control system must reflect
the fact that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of internal controls can provide absolute assurance
that all control issues and instances of fraud, if any, have been detected. Also,
any evaluation of the effectiveness of controls in future periods are subject to
the risk that those internal controls may become inadequate because of changes in
business conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

Changes in Internal Controls over Financial Reporting

Management has not identified any change in our internal control over financial
reporting in connection with its evaluation of our most recent fiscal quarter that
has materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.

In April 2015, we acquired 100% of the membership interest of Dank Bottles, LLC
which added a location in Colorado. Management considers this transaction to be
material to the Company’s consolidated financial statements and believes that the
internal controls and procedures of Dank Bottles, LLC have been effectively
integrated and combined into the Company's existing internal control structure.
Item 9B. Other Information.

None

Page 11

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The following table sets forth, as of the date of this registration statement, the
name, age and positions of our officers and directors.

NAME
AGE
POSITION

Dallas Imbimbo
29
Chairman

Nicholas Kovacevich
29
Director, Chief Executive Officer and Secretary

Chris Martin
35
Chief Financial Officer

Ben Wu
37
Chief Operating Officer

Greg Gamet
43
Director

The background of our directors and executive officers is as follows:

Dallas Imbimbo - Chairman

Mr. Imbimbo has served as Chairman of the Company since its inception in December
2010. Mr. Imbimbo began his career in 2007 by founding PackMyDorm, a moving and
storage solutions company operating at UC Davis, UC Berkeley, UC Santa Cruz and
Stanford. In 2010, Dallas and his partners sold PackMyDorm and relocated to
Southern California to establish the Company. In addition to his role at Kush
Bottles, Mr. Imbimbo founded 3 Kings Ventures, LLC in 2011 and BigRentz Inc. in
2012. 3 Kings invests in and develops distressed residential real estate. BigRentz
is one of the nation’s largest online network of equipment rentals and under his
leadership as President and Chief Executive Officer, BigRentz has become one of the
fastest growing companies in Southern California. Mr. Imbimbo devotes approximately
1-2 hours per day to Kush and its business. Mr. Imbimbo's background in developing
small businesses combined with visionary outlook and managerial skills led to his
appointment as our Chairman.

Nicholas Kovacevich - Director, Chief Executive Officer and Secretary

Mr. Kovacevich has served as Director and Secretary of the Company since its
inception in December 2010. Mr. Kovacevich served as Chief Operating Officer from
December 2010 up until August 29, 2014, at which time he was appointed to Chief
Executive Officer. Mr. Kovacevich graduated Summa Cum Laude in 2009 from Southwest
Baptist University with a B.S. in Sports Management. From 2009 to 2010, Mr.
Kovacevich ran operations for a large-scale traveling basketball camp called
Basketball Jones in which he honed his entrepreneurial and leadership skills. In
addition to being a founder of Kush, Mr. Kovacevich partnered with Mr. Imbimbo and
established 3 Kings Ventures, LLC in 2011 and BigRentz Inc. in 2012. Mr. Kovacevich
devotes all of his time to Kush and its business, except for approximately 3 hours
per week that Mr. Kovacevich devotes to BigRentz and its business. Mr. Kovacevich
possesses excellent leadership and managerial skills and his background in
developing small businesses led to his appointment as Director, Chief Executive
Officer and Secretary of the Company.

Chris Martin - Chief Financial Officer

Mr. Martin has served as our Chief Financial Officer since July 29, 2014. Prior to
joining Kush, Mr. Martin served as the Director of Accounting for Burleigh Point
LTD (dba Billabong North America) from November 2013 to July 2014, overseeing all
financial reporting for the North America region. From July 2004 to November 2013,
Mr. Martin worked at Haskell and White LLP, a public accounting firm, where he
obtained his California state CPA license and specialized in assurance and business
advisory services for manufacturing and wholesale distribution clients. Mr. Martin
has a B.S. in Business Economics from the University of California, Los Angeles.
Mr. Martin's extensive technical and managerial experience led to his appointment
as Chief Financial Officer of the Company. Mr. Martin's term of employment
automatically extends for periods of one year on August 31 unless Mr. Martin or the
Company provides non-renewal notice.

Ben Wu - Chief Operating Officer

Ben Wu initially served as interim Chief Executive Officer from February 18, 2014
up until August 29, 2014, at which point he transitioned to Chief Operating
Officer. From April 2005 to December 2012, Mr. Wu worked for WedBush Capital
Partners, a private equity fund focused on acquiring, professionalizing, and
accelerating the growth of small entrepreneur owned companies. He was promoted Vice
President in 2009. In 2000, Mr. Wu began his career at Bear, Stearns & Co., where
he was an investment banking analyst. Mr. Wu's extensive experience in analyzing
and bolstering the growth of small companies led to his appointment as Chief
Operating Officer. Mr. Wu's term of employment automatically extends for periods of
one year on December 31 unless Mr. Wu or the Company provides non-renewal notice.

Greg Gamet - Director

On May 4, 2015, the Board appointed Mr. Gamet as a Director and the Company entered
into a Board of Director Services Agreement with Mr. Gamet. The term of the
agreement is for three years. Mr. Gamet has more than fifteen years of business
development, investor relations, and cannabis regulatory experience. From 2003 to
2013, Mr. Gamet owned and operated Vista Contractors, LLC, a Denver based landscape
and concrete installation business with over 100 employees. Since 2009, Mr. Gamet
has co-founded several companies, which include JGB Ventures, LLC (dba DANK) a
medical and recreational cannabis dispensary located in Colorado; Dank Bottles,
LLC, the Colorado market leader in child resistant packaging for the cannabis
industry, which the Company acquired on April 10, 2015 and now operates under the
business name Kush Bottles Colorado; Denver Consulting Group (DCG) a firm that
provides training and support documents to the national growing cannabis industry;
and most recently, CannaScore, a compliance audit application for licensed cannabis
businesses. Mr. Gamet devotes approximately 4 to 8 hours per day to Kush and its
business. Mr. Gamet's background as a businessman and an innovative leader in the
industry led to his appointment as our Director.

Page 12

Director Qualifications

We believe that our directors should have the highest professional and personal
ethics and values, consistent with our longstanding values and standards. They
should have broad experience at the policy-making level in business or banking.
They should be committed to enhancing stockholder value and should have sufficient
time to carry out their duties and to provide insight and practical wisdom based on
experience. Their service on other boards of public companies should be limited to
a number that permits them, given their individual circumstances, to perform
responsibly all director duties for us. Each director must represent the interests
of all stockholders. When considering potential director candidates, the Board also
considers the candidate’s character, judgment, diversity, and skills, including
financial literacy and experience in the context of our needs and the needs of the
Board.

Since our Board of Directors does not include a majority of independent directors,
the decisions of the Board regarding director nominees are made by persons who have
an interest in the outcome of the determination. The Board will consider candidates
for directors proposed by security holders, although no formal procedures for
submitting candidates have been adopted. The Board identifies director nominees
through a combination of referrals from different people, including management,
existing Board members and security holders. Once a candidate has been identified,
the Board reviews the individual’s experience and background and may discuss the
proposed nominee with the source of the recommendation. If the Board believes it to
be appropriate, Board members may meet with the proposed nominee before making a
final determination whether to include the proposed nominee as a member of the
slate of director nominees submitted to security holders for election to the Board.
The Board may request additional information from each candidate prior to reaching
a determination, and it is under no obligation to formally respond to all
recommendations.

Code of Ethics

We have not adopted a Code of Ethics, but we expect to adopt a Code of Ethics in
fiscal 2016. The Company did not adopt a Code of Ethics in fiscal 2015 due to a
lack of adequate time to review this process.

Involvement in Certain Legal Proceedings

To our knowledge, our directors and executive officers have not been involved in
any of the following events during the past ten years:

· Any bankruptcy petition filed by or against such person or any business of which
such person was a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that time;
· Any conviction in a criminal proceeding or being subject to a pending criminal
proceeding (excluding traffic violations and other minor offenses);
· Being subject to any order, judgment, or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently or
temporarily enjoining him from or otherwise limiting his involvement in any type of
business, securities or banking activities or to be associated with any person
practicing in banking or securities activities;
· Being found by a court of competent jurisdiction in a civil action, the SEC or
the Commodity Futures Trading Commission to have violated a Federal or state
securities or commodities law, and the judgment has not been reversed, suspended,
or vacated;
· Being subject of, or a party to, any Federal or state judicial or administrative
order, judgment decree, or finding, not subsequently reversed, suspended or
vacated, relating to an alleged violation of any Federal or state securities or
commodities law or regulation respecting financial institutions or insurance
companies, or any law or regulation prohibiting mail or wire fraud or fraud in
connection with any business entity; or
· Being subject of or party to any sanction or order, not subsequently reversed,
suspended, or vacated, of any self-regulatory organization, any registered entity
or any equivalent exchange, association, entity or organization that has
disciplinary authority over its members or persons associated with a member.

Information about our Board and its Committees.

We do not have an audit, compensation, advisory, or nominating committee comprised

of independent directors, and accordingly, the functions that would have been
performed by such committees are performed by our directors. Thus, there is a
potential conflict of interest in that our directors and officers have the
authority to determine issues concerning management compensation, nominations, and
audit issues that may affect management decisions.

Conflicts of Interest

One of our directors and one of our officers devote time to projects that do not
involve us. Mr. Imbimbo, our Chairman, devotes a portion of his working time to one
other private business activity, and Mr. Kovacevich, our CEO and Secretary, devotes
a portion of his working time to one other private business activity. This could
present a potential conflict of interest with respect to either, or both, of these
individuals. However, management believes this does not constitute a significant
risk to us to date, because the time allocated by these individuals to these other
activities does not significantly affect their performance of services on behalf
of, and for the benefit of, the Company.

SECTION 16(A) BENEFICIAL OWNER REPORTING COMPLIANCE.

Section 16(a) of the Securities and Exchange Act of 1934 requires that the
Company's directors, executive officers, and persons who own more than 10% of
registered class of the Company's equity securities, file with the SEC initial
reports of ownership and reports of changes in ownership of common stock and other
equity securities of the Company. Officers, directors, and greater than 10%
beneficial owners are required by SEC regulation to furnish the Company with copies
of all Section 16(a) reports they file.

Page 13

Item 11. Executive Compensation

Summary Compensation Table

As a smaller reporting company, we are required to disclose the executive

compensation of our "Named Executive Officers" which consist of the following
individuals: (i) any individual serving as our principal executive officer or
acting in a similar capacity (the "CEO"); (ii) the two other most highly
compensated executive officers of the Company serving as executive officers at the
most recently completed fiscal year; and (iii) any additional individuals for whom
disclosure would have been provided but for the fact that the individual was not
serving as an executive officer at the end of the most recently completed fiscal
year. The following table sets forth for fiscal 2014 and 2015, the compensation,
awarded to, paid to, or earned by our named executive officers.

Non-Equity
Nonqualified
All

Name and

Incentive
Deferred
Other

Principal

Stock
Option
Plan
Compensation
Compen

Position
Year
Salary
($)
Bonus
($)
Awards
($)(1)
Awards
($)(2)
Compensation
($)
Earnings
($)
-sation
($)
Total
($)

Nicholas Kovacevich
2015
68,000
0
0
0
0
0
0
68,000
Chief Executive Officer, Director and
Secretary
2014
60,000
0
0
0
0
0
0
60,000

Chris Martin
2015
84,000
0
0
0
0
0
0
84,000
Chief Financial Officer
2014
3,500
0
68,750
0
0
0
0
72,250

Ben Wu
2015
96,000
0
0
0
0
0
0
96,000
Chief Operating Officer
2014
96,000
0
23,148
9,548
0
0
0
128,696

(1) Amounts reflect the aggregate grant date fair value of restricted shares
granted in the year computed in accordance with FASB ASC Topic 718. These amounts
are not necessarily paid to or realized by the officer.

(2) Amounts reflect the aggregate grant date fair value of stock options granted in
the year computed in accordance with FASB ASC Topic 718. These amounts are not
necessarily paid to or realized by the officer. Assumptions used in the calculation
of these values are included in footnote 8 of the notes to the consolidated
financial statements.
Employment Agreements

On February 18, 2014, we entered into an employment agreement with Ben Wu to serve
as our Chief Executive Officer and President until December 31, 2014. Thereafter,
the agreement automatically renews for additional 12-month terms unless a notice of
non-renewal is provided by either party. On August 29, 2014, Ben Wu was appointed
by the Board to serve as Chief Operating Officer and Nicholas Kovacevich was
appointed to serve as Chief Executive Officer. Under Mr. Wu's employment agreement,
he is entitled to receive compensation of $96,000 per year as a base salary and a
discretionary annual cash bonus not to exceed his base salary, with the amount of
such bonus, if any, determined by the Board. Mr. Wu also received 1,000,000
restricted shares of Company common stock pursuant to the terms of his employment
agreement, which vested immediately upon execution of his agreement, as well as an
option to purchase 1,000,000 shares of Company common stock at an exercise price of
$0.05 per share. The fair value per share did not exceed the exercise price on the
date of grant. The exercise price of the option was not adjusted or amended during
fiscal 2014 and 2015. The option fully vested upon execution of Mr. Wu’s employment
agreement and is exercisable immediately.

On July 28, 2014, we entered into an employment agreement with Chris Martin to
serve as our Chief Financial Officer until August 31, 2015. Thereafter, the
agreement automatically renews for additional 12-month terms unless a notice of
non-renewal is provided by either party. Under his employment agreement, Mr. Martin
is entitled to receive compensation of $84,000 per year as a base salary and a
discretionary annual cash bonus not to exceed his base salary, with the amount of
such bonus, if any, determined by the Board. Mr. Martin also received 100,000
restricted shares of Company common stock pursuant to the terms of his employment
agreement, which vested immediately upon execution of his agreement.

All stock options and restricted stock awards were not modified during fiscal 2014
and 2015.

Outstanding Equity Awards

The following table provides information regarding outstanding stock options and
unvested stock awards held by each of our named executive officers.

Option Awards
Stock Awards
Name
Number of Securities Underlying Unexercised Options
(#)
Exercisable
Number of Securities Underlying Unexercised Options
(#)
Unexercisable
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned
Options
(#)
Option Exercise Price
($)
Option Expiration Date
Number of Shares or Units of Stock That Have Not Vested
(#)
Market Value of Shares or Units of Stock That Have Not Vested
($)
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That
Have Not Vested
(#)
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or
Other Rights That Have Not Vested
($)

Nicholas Kovacevich
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
Chris Martin
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
Ben Wu
1,000,000
--
-0-
$0.05
-0-
-0-
-0-
-0-
-0-

We currently do not have a stock option plan or equity compensation plan. All
individual grants of stock options and restricted stock awards were done pursuant
to the execution of the named officer employment agreements. We do not currently
have an incentive plan that provides compensation intending to serve as an
incentive for performance. Per the named officer employment agreements, the named
executive officers are eligible to receive a percentage of their base salary as
incentive compensation if certain individual and corporate performance goals and
targets established by the Board from time to time, in its sole discretion, are
met. The Board, in its sole discretion, can also elect to award the named executive
officers equity-based incentive compensation.

Page 14

Potential Payments upon Termination or Change in Control

The employment agreements entered into by the Company with Ben Wu, Chief Operating
Officer, and Chris Martin, Chief Financial Officer contain severance provisions. In
the event of any of the following conditions triggering severance payment is
effected as of or after six months of the employment commencement date, an amount
equal to three months of base salary ($24,000) for Mr. Wu and one month of base
salary ($7,000) for Mr. Martin:
Payments upon Termination. If (i) employment is terminated by the Company (A)
without Cause, (B) by delivery of a Non-Renewal Notice by the Company, (C) by
reason of death or disability, or (D) title or duties are materially modified, the
Company changes its primary place of business or the location at which officer is
expected to be by more than 50 miles, the Company materially breaches a material
provision of the employment agreement or the Company otherwise materially and
adversely changes the conditions of employment; or (ii) (A) a Change of Control is
consummated (“Change of Control” means any of the following: any consolidation,
merger, or recapitalization of the Company with, or any sale of Company equity to,
any other non-affiliated entity as a result of which, in any such case, the
beneficial holders of the issued and outstanding equity securities of the Company
immediately prior to such transaction possess less than 50% of the voting power of
the surviving entity immediately after such transaction; or any sale or transfer of
all or substantially all of the assets of the Company), (B) office is not offered
substantially equivalent employment with the surviving company (provided that any
failure to offer a position with the identical title shall not be considered for
purposes of determining such substantial equivalence) following the Change of
Control and (C) officer resigns or otherwise voluntarily fails to continue
employment with the Company or the surviving company following such Change of
Control, as officer's sole and exclusive right and remedy.

Other than the employment agreements with Ben Wu and with Chris Martin described in
the preceding paragraphs, the Company is not a party to any contract, agreement,
plan, or arrangement, whether written or unwritten, that provides for a payment or
payments to a named executive officer at, following, or in connection with the
resignation, retirement, or other termination of employment of the named executive
officer, or a change in control of the Company, or a change in the officer’s
responsibilities following a change in control.

Compensation of Directors

On May 4, 2015, the Company entered into a Board of Director Services Agreement
with Greg Gamet. In exchange for three years of service as Director, Mr. Gamet will
receive an additional 200,000 shares of the Company's common stock, which vest over
the three year term as follows: (a) 100,000 shares shall vest on May 30, 2016; and
(b) from and after May 30, 2016, 100,000 shares shall vest ratably in 8 quarterly
installment over the next 24 months, with each quarterly installment vesting on the
last day of the fiscal quarter.

We do not compensate our other two directors for their services in their capacity
as directors. Directors are not paid for meetings attended. All travel and lodging
expenses associated with corporate matters are reimbursed by us, if and when
incurred.

Compensation Committee Interlocks and Insider Participation

We currently do not have a compensation committee although we intend to create one

as the need arises. Currently, our Board of Directors serves as our Compensation
Committee. Nicholas Kovacevich is a named executive officer who also serves on our
Board of Directors and therefore makes decisions regarding compensation. Nicholas
Kovacevich also serves as a director of BigRentz, Inc., and his responsibilities
include matters of compensation. Dallas Imbimbo, Chairman, serves as Chairman and
Chief Executive Officer of BigRentz, Inc.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

The following table sets forth certain information regarding our common stock
beneficially owned as of November 30, 2015:
 (i) each stockholder known by us to be the beneficial owner of five (5%)
percent or more of our outstanding common stock;
(ii) each of our directors; and
(iii) all executive officers and directors as a group.

This information as to beneficial ownership was furnished to the Company by or on

behalf of each person named. As of November 30, 2015, there were 46,132,779 shares
of our common stock issued and outstanding.

Title
Of Class

Name And Address

Of Beneficial Owner
Amount and
Nature
Of Beneficial
Ownership

Percentage
Of Class

Common Stock
Dallas Imbimbo(2)
12,000,000
26%

Common Stock
Nicholas Kovacevich(2)
12,000,000
26%

Common Stock
Chris Martin(2)
100,000
(1)

Common Stock
Ben Wu(2)
2,000,000(3)
4%

Common Stock
Greg Gamet(4)
1,312,500
3%

Common Stock
John Kovacevich(2)
3,700,000
8%

Common Stock
Jeffrey Meng(5)
4,290,000
9%

Common Stock
All Directors and Officers as a Group
27,412,500
59%

(1) Less than 1%.

(2) The address is 1800 Newport Circle, Santa Ana, CA 92705.

(3) Includes 1,000,000 options to purchase common stock. Information regarding

“Percentage of Class” in the table above is presented on a fully-diluted, as-if-
exercised basis.

(4) The address is 3539 Gaylord St., Denver, CO 80205.

(5) The address is 17595 Harvard Ave, Suite C552, Irvine, CA 92614.

Beneficial ownership is determined in accordance with the rules and regulations of

the SEC. The number of shares and the percentage beneficially owned by each
individual listed above include shares that are subject to options held by that
individual that are immediately exercisable or exercisable within 60 days from the
date of this registration statement and the number of shares and the percentage
beneficially owned by all officers and directors as a group includes shares subject
to options held by all officers and directors as a group that are immediately
exercisable or exercisable within 60 days from the date of this registration
statement.

Item 13. Certain Relationships and Related Transactions and Director Independence.

Relationships

Nicholas Kovacevich, our Chief Executive Officer, Director, and Secretary, is the
brother of John Kovacevich, our Product Manager and a greater than 5% stockholder.
George and Rita Kovacevich are a less than 1% stockholder, and are the parents of
John and Nicholas Kovacevich. There are no other family relationships between any
of our directors or executive officers.

Nicholas Kovacevich, our Chief Executive Officer, Director and Secretary, has
loaned the Company $40,000 since inception of the business in December 2010.
Jeffrey Meng, a greater than 5% stockholder loaned the Company $50,000 during
fiscal 2014. These loans are non-interest bearing, unsecured and due upon demand.
As of August 31, 2014 and 2015, $50,000 and $0 were outstanding, respectively. As a
result of the Dank acquisition on April 10, 2015, the Company owed $100,000 to the
sellers of Dank. As of August 31, 2015, the balance owed to the sellers is $75,000.

The Company sub-leases its corporate headquarters from 3 Kings Ventures, LLC, a
related party owned by Dallas Imbimbo, Chairman, Nicholas Kovacevich, Chief
Executive Officer, and Jeffrey Meng, a greater than 5% stockholder. During the
fiscal years ended August 31, 2015 and 2014, the Company made rent payments to 3
Kings Ventures, LLC of $95,000 and $73,500, respectively. The Company leases its
Colorado facility from Elm Properties LLC, a related party in which Greg Gamet,
Director, has majority ownership. From the period April 10, 2015 to August 31,
2015, the Company made rent payments to Elm Properties, LLC of $20,400.

During the fiscal year ended August 31, 2014, the Company purchased $131,302 of
inventory from The Greenlight Companies, LLC, a related party owned by Nicholas
Kovacevich, Chief Executive Officer, Dallas Imbimbo, Chairman, John Kovacevich, a
greater than 5% stockholder, and Jeffrey Meng, a greater than 5% stockholder. The
Company did not purchase any inventory from The Greenlight Companies, LLC during
fiscal 2015.

The Company entered into a royalty agreement on December 8, 2014 with KB Mold
Company, Inc., a related party owned by Ben Wu, Chief Operating Officer, Chris
Martin, Chief Financial Officer, and John Kovacevich, a greater than 5%
stockholder. Effective April 29, 2015 and through the date of this filing, the
Company has incurred $13,923 of royalty fees from KB Mold Company.

Page 15

Director Independence

Our Board is currently composed of three members who are not independent. Our
Common Stock is not currently listed for trading on a national securities exchange
and, as such, we are not subject to any director independence standards. We
evaluated independence in accordance with the rules of The New York Stock Exchange,
Inc., which generally provides that a director is not independent if: (i) the
director is, or in the past three years has been, an employee of ours; (ii) a
member of the director’s immediate family is, or in the past three years has been,
an executive officer of ours; (iii) the director or a member of the director’s
immediate family has received more than $120,000 per year in direct compensation
from us other than for service as a director (or for a family member, as a non-
executive employee); (iv) the director or a member of the director’s immediate
family is, or in the past three years has been, employed in a professional capacity
by our independent public accountants, or has worked for such firm in any capacity
on our audit; (v) the director or a member of the director’s immediate family is,
or in the past three years has been, employed as an executive officer of a company
where one of our executive officers serves on the compensation committee; or (vi)
the director or a member of the director’s immediate family is an executive officer
of a company that makes payments to, or receives payments from, us in an amount
which, in any twelve-month period during the past three years, exceeds the greater
of $1,000,000 or 2% of that other company’s consolidated gross revenues.

Use of Promoters

Our founders are Dallas Imbimbo, Nicholas Kovacevich, John Kovacevich and Jeffrey
Meng.

The following table lists the money, property, contracts, options or rights of any
kind received and to be received by each of our founders from us, and the nature
and amount of any assets, services or other consideration therefore received or to
be received by us from our founders:

Founder
Money, property, contracts,
options and rights received
or to be received by Founders
from the Company
Assets, services or other
consideration received
or to be received by the
Company from Founders

Dallas Imbimbo
12,000,000 shares of common stock
Capital of $19,505

Wages of $116,868

Nicholas Kovacevich
12,000,000 shares of common stock
Capital of $19,505

Wages of $197,314
Loans of $40,000

Jeffrey Meng
4,700,000 shares of common stock
Capital of $19,505

Wages of $40,000
Loans of $50,000

John Kovacevich
3,700,000 shares of common stock
Capital of $19,505

Wages of $119,795

Other than services provided by our founders described in the table above, we have
not utilized the services of a promoter at any point in time from inception of the
business in December 2010 to the current date of this filing.

Item 14. Principal Accounting Fees and Services.

Appointment of Auditors

Our Board of Directors selected RBSM LLP (“RBSM”) as our auditors for the years
ended August 31, 2015 and 2014.

Audit Fees

RBSM billed us $59,500 in audit fees during the year ended August 31, 2015.

RBSM billed us $17,500 in audit fees during the year ended August 31, 2014.

Audit-Related Fees

We did not pay any fees to RBSM for assurance and related services that
are not reported under Audit Fees above, during our fiscal years ending August 31,
2015 and 2014.

Tax and All Other Fees

We did not pay any fees to RBSM for tax advice, tax planning or other work during
our fiscal years ending August 31, 2015 and 2014.

Pre-Approval Policies and Procedures

We have implemented pre-approval policies and procedures related to the provision

of audit and non-audit services. Under these procedures, our board of directors
pre-approves all services to be provided by RBSM and the estimated fees related to
these services.

With respect to the audit of our financial statements as of August 31, 2015 and
August 31, 2014, and for the year then ended, none of the hours expended on RBSM’s
engagement to audit those financial statements were attributed to work by persons
other than RBSM full-time, permanent employees.

Page 16

Item 15. Exhibits, Financial Statement Schedules.

Financial Statement
Page #

(i) For the Fiscal Years Ended August 31, 2015 and 2014 of Kush Bottles, Inc.

Report of Independent Registered Public Accounting Firm

F-1
Consolidated Balance Sheets at August 31, 2015 and 2014
F-2
Consolidated Statement of Operations for the Years Ended August 31, 2015 and 2014
F-3
Consolidated Statement of Stockholders' Equity for the Years Ended August 31, 2015
and 2014
F-4
Consolidated Statement of Cash Flows for the Years Ended August 31, 2015 and 2014
F-5
Notes to Consolidated Financial Statements
F-6 to F-13

Exhibit
Form
Filing
Filed with
Exhibits
#
Type
Date
This Report

Certificate of Incorporation filed with the Secretary of State of Nevada on

February 26, 2014.
3.1
Form 10 (A/1)
5/29/2015

Certificate of Amendment filed with the Secretary of State of Nevada on March 7,

2014.
3.2
Form 10 (A/1)
5/29/2015
Bylaws of Kush Bottles, Inc.
3.3
Form 10 (A/1)
5/29/2015

Employment Agreement effective February 18, 2014, by and between KIM International
Corporation and Ben Wu.
10.1

Form 10 (A/1)
5/29/2015

Employment Agreement effective July 28, 2014, by and between Kush Bottles, Inc. and
Chris Martin.
10.2
Form 10 (A/1)
5/29/2015

Royalty Agreement effective September 11, 2014, by and between KB Mold Company and
KIM International Corporation
10.3
Form 10 (A/1)
5/29/2015

Sublease Agreement effective August 1, 2012

10.4
Form 10 (A/1)
5/29/2015

Lease Agreement effective December 31, 2014

10.5
Form 10 (A/1)
5/29/2015

Stock Purchase Agreement effective March 4, 2014

10.6
Form 10 (A/1)
5/29/2015

Promissory Note effective December 3, 2014 by and between Dank Bottles, LLC and KIM
International Corporation

10.7
Form 10 (A/1)
5/29/2015

Equity Purchase Agreement by and between Kush Bottles, Inc. and members of Dank
Bottles, LLC, dated April 10, 2015
10.8
Form 10 (A/1)
5/29/2015
Opus Bank Revolving Line of Credit Agreement, dated April 15, 2015
10.9
Form 10 (A/1)
5/29/2015

Board of Director Services Agreement, effective May 4, 2015, between the KUSH
Bottles, Inc. and Greg Gamet
10.10
Form 10 (A/1)
5/29/2015

List of Subsidiaries
23.1
Form 10 (A/1)
5/29/2015

Certification of Nicholas Kovacevich and Chris Martin pursuant to Rule 13a-14(a)

31.1

Certification of Nicholas Kovacevich and Chris Martin pursuant to 18 U.S.C Section

1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.1

XBRL Instance Document

101.INS

XBRL Taxonomy Extension Schema Document

101.SCH

XBRL Taxonomy Extension Calculation Linkbase Document

101.CAL

XBRL Taxonomy Extension Definition Linkbase Document

101.DEF

XBRL Taxonomy Extension Label Linkbase Document

101.LAB

XBRL Taxonomy Extension Presentation Linkbase Document

101.PRE
X

Page 17

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereto duly authorized.

KUSH BOTTLES, INC.

Date: November 30, 2015 By: /s/ Nicholas Kovacevich

Chief Executive Officer and Secretary

Date: November 30, 2015 By: /s/ Chris Martin

Chief Financial Officer

In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant on the capacities and on the dates
indicated.

Signatures
Title
Date

/s/ Dallas Imbimbo

Dallas Imbimbo
Chairman
November 30, 2015

/s/ Nicholas Kovacevich

Nicholas Kovacevich
Director
November 30, 2015

/s/ Greg Gamet

Greg Gamet
Director
November 30, 2015

Page 18

KUSH BOTTLES, INC.

Consolidated Financial Statements

August 31, 2015 and 2014

Page 19

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

F-1
Consolidated Balance Sheets at August 31, 2015 and 2014
F-2
Consolidated Statement of Operations for the Years Ended August 31, 2015 and 2014
F-3
Consolidated Statement of Stockholders' Equity for the Years Ended August 31, 2015
and 2014
F-4
Consolidated Statement of Cash Flows for the Years Ended August 31, 2015 and 2014
F-5
Notes to Consolidated Financial Statements
F-6 to F-13

Page 20

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Kush Bottles, Inc.

We have audited the accompanying consolidated balance sheets of Kush Bottles, Inc.
(the “Company”) as of August 31, 2015 and 2014, and the related consolidated
statements of operations, stockholders’ equity and cash flows for the years then
ended. These consolidated financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform an
audit of the Company’s internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the Company’s internal
control over financial reporting. Accordingly, we express no such opinion. An audit
also includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for
our opinion.

In our opinion, the consolidated financial statements referred to above present

fairly, in all material respects, the financial position of Kush Bottles, Inc. at
August 31, 2015 and 2014, and the results of its operations and its cash flows for
the years then ended, in conformity with accounting principles generally accepted
in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has sustained recurring net losses,
negative cash flow from operations, and faces uncertainties surrounding the
Company's ability to raise additional funds. These conditions raise substantial
doubt about the Company’s ability to continue as a going concern. Management’s
plans in regards to these matters are also described in Note 2. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

/s/ RBSM LLP

November 30, 2015

New York, New York

F-1

KUSH BOTTLES, INC

Consolidated Balance Sheets
As of August 31, 2015 and 2014

August 31, August 31,

2015

2014
ASSETS

CURRENT ASSETS

Cash

$
201,259

$
23,004

Accounts receivable, net of allowance

146,392
 50,313

Prepaids

153,389

128,202

Inventory

662,368

153,040

Total Current Assets

1,163,408

354,559

Goodwill

2,376,589

Property and equipment, net

205,271

21,551

TOTAL ASSETS

$
3,745,268

$
376,110

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable

$
377,199

$
97,071

Accrued expenses and other current liabilties

 391,334

48,157

Line of credit

85,000

Notes payable - related parties

75,000

50,000

Notes payable - current portion

27,394

5,812

Total Current Liabilities

955,927

201,040

LONG-TERM DEBT

Notes payable

54,585

7,662

TOTAL LIABILITIES

1,010,512

208,702

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,

46,132,779 and 40,720,000 shares issued and outstanding, respectively

46,133 40,720

Common stock to be issued, 0 and 750,000 shares, respectively

- 750

Additional paid-in capital

3,437,070

535,082

Accumulated deficit

(748,447)

(409,144)

Total Stockholders' Equity

2,734,756

167,408

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$
3,745,268

$
376,110

See accompanying notes to the consolidated financial statements

F-2

For the Years Ended

August 31,

2015

2014
REVENUE
$
4,013,571

$
1,710,286
COST OF GOODS SOLD

2,585,397

987,094

GROSS MARGIN

1,428,174

723,192

OPERATING EXPENSES

Depreciation

30,267

6,147

Stock compensation expense

278,529

Selling, general and administrative

1,743,628

828,901

Total Operating Expenses

1,773,895

1,113,577

LOSS FROM OPERATIONS

(345,721)

(390,385)

OTHER INCOME (EXPENSES)

Other income

12,980

Interest expense

(6,562)

(5,132)

Total Other Income (Expenses)

6,418

(5,132)

LOSS BEFORE INCOME TAXES

(339,303)

(395,517)

PROVISION FOR INCOME TAXES

NET LOSS
$
(339,303)

$
(395,517)

BASIC AND DILUTED LOSS PER SHARE

$
(0.008)

$
(0.010)

WEIGHTED AVERAGE NUMBER OF

COMMON SHARES OUTSTANDING -

BASIC AND DILUTED

42,718,159

40,269,973
See accompanying notes to the consolidated financial statements

F-3

KUSH BOTTLES, INC

Consolidated Statements of Stockholders' Equity
For the Years Ended August 31, 2014 and 2015

Common Stock

Additional

Common Stock

to be Issued

Paid-in

Accumulated

Shares

Amount

Shares

Amount

Capital

Deficit

Total

Balance, August 31, 2013

32,400,000

$
32,400

$
-

$
 45,623

$
(13,627)

$
64,396

Stock issued for services

7,600,000

7,600

50,000

50

169,433

177,083

Stock sold to investors

220,000

220

100,000

100

219,680

220,000

Stock compensation
500,000

500

600,000

600

100,346

101,446
Net loss for the year ended

August 31, 2014

-

(395,517)

(395,517)

Balance, August 31, 2014

40,720,000

40,720

750,000

750

535,082

(409,144)

167,408

Stock issued for services

50,000

50

(50,000)

(50)

Stock sold to investors

1,262,779

1,263

(100,000)
 (100)

735,838

737,001

Stock compensation
600,000

600

(600,000)

(600)

Acquisition of Dank Bottles, LLC

3,500,000

3,500

2,166,150

2,169,650

Net loss for the year ended

August 31, 2015

-

(339,303)

(339,303)
Balance, August 31, 2015
46,132,779

$
46,133

$
-

$
3,437,070

$
(748,447)

$
2,734,756

See accompanying notes to the consolidated financial statements

F-4

KUSH BOTTLES, INC

Consolidated Statements of Cash Flows

For the Years Ended

August 31,

2015

2014

CASH FLOWS FROM OPERATING ACTIVITIES

Net loss

$
(339,303)

$
(395,517)

Adjustments to reconcile net loss to net

cash used in operating activities:

Stock compensation

278,529

Depreciation

30,267

6,147

Changes in operating assets and liabilities

Accounts receivable

(24,412)

(48,539)

Prepaids and note receivable

(15,340)

(128,202)

Inventory

(208,427)

7,174
Accounts payable

94,285

48,002

Accrued expenses and other current liabilties

260,702

3,742

Net cash used in operating activities

(202,228)

(228,664)

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of Dank Bottles, LLC

(273,725)

Purchase of property and equipment

(137,220)

(14,281)

Net cash used in investing activities

(410,945)

(14,281)

CASH FLOWS FROM FINANCING ACTIVITIES

Repayment of related party loan

(75,000)

(20,000)

Proceeds from related party loan

 -
50,000

Proceeds from notes payable

173,472

Repayment of notes payable

(44,045)

(7,715)

Proceeds from sale of stock

737,001

220,000

Net cash provided by financing activities

791,428

242,285

NET INCREASE IN CASH

178,255

(660)

CASH AT BEGINNING OF PERIOD

23,004

23,664

CASH AT END OF PERIOD

$
201,259

$
23,004

SUPPLEMENTAL DISCLOSURES OF

CASH FLOW INFORMATION:

CASH PAID FOR:

Interest
$
6,562

$
5,132

Income taxes

$
-

$
-

NON-CASH INVESTING AND FINANCING ACTIVITIES

$
-

$
-

See accompanying notes to the consolidated financial statements

F-5

KUSH BOTTLES, INC.

Notes to Consolidated Financial Statements
As of August 31, 2015 and 2014

NOTE 1 – NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Kush Bottles, Inc. (“the Company”) was incorporated in the state of Nevada on
February 26, 2014. The Company specializes in the wholesale distribution of
packaging supplies for the cannabis industry. The Company’s wholly owned subsidiary
Kim International Corporation (KIM) was originally incorporated as Hy Gro Economics
Corporation ("Hy Gro") on December 2, 2010. On October 30, 2012, Hy Gro amended its
articles of incorporation to reflect a name change to KIM International Corporation
(KIM).

Recapitalization

On March 4, 2014, the shareholders of KIM exchanged all 10,000 of their common
shares for 32,400,000 common shares of Kush Bottles, Inc. The operations of KIM
became the operations of Kush after the share exchange and accordingly the
transaction is accounted for as a recapitalization of KIM whereby the historical
financial statements of KIM are presented as the historical financial statements of
the combined entity.

Subsequent to the share exchange, the members of KIM owned 32,400,000 of shares of
Company’s common stock, effectively obtaining operational and management control of
Kush. Kush had no operations prior to the share exchange. As a result of the
recapitalization, KIM was the acquiring entity in accordance with ASC 805, Business
Combinations. The accumulated losses of KIM were carried forward after the
completion of the share exchange. Operations prior to the share exchange were those
of KIM.

All reference to common stock shares and per share amounts have been restated to
effect the recapitalization which occurred on March 4, 2014.

Acquisition of Dank Bottles, LLC

On April 10, 2015, the Company entered into an equity purchase agreement to acquire
all of the issued and outstanding membership interests in Dank Bottles, LLC
("Dank"), a Colorado limited liability company, effectively making Dank a wholly
owned subsidiary of the Company. In exchange for the purchased interests, the
Company paid cash consideration of $373,725 and issued 3,500,000 shares of common
stock to the sellers of Dank. Of the $373,725 of cash consideration, $273,725 was
paid on April 10, 2015 and the remaining $100,000 is to be paid in 10 monthly
installments beginning on July 31, 2015 and ending April 30, 2016. As of August 31,
2015, the balanced owed to these sellers is $75,000 and is included in current
liabilies on the consolidated balance sheet.

The following table summarizes the total consideration paid by each major class of
consideration, including non-cash consideration paid:

Consideration paid:

Cash
$
273,725
Note payable, short-term

100,000
3,500,000 Common shares of Kush Bottles, Inc.
2,169,650
Total consideration
$
2,543,375

There is no public market for the Company's common stock and, as such, we evaluate
the best evidence to estimate the common stock's fair value. The common stock was
valued using the market approach. The market approach bases the valuation
measurement on what other similar enterprises or comparable transactions indicate
the value to be. From the period of inception to April 10, 2015, the Company had
sold 1,471,112 shares of its common stock to accredited investors for cash of
$912,000, at a weighted average offering price of $0.6199 per share. Accordingly,
the Company has valued the price of the common stock issued in conjunction with
these transactions at $0.6199 per share. The Company considers these transactions
preceding the acquisition the best evidence of fair value for the common stock. In
the absence of an active market trading its securities, management will continue to
monitor transactions in the Company's common stock to ascertain its value under the
market approach.

The following table summarizes the preliminary and final purchase price
allocations, and the estimated fair values of the net assets acquired, liabilities
assumed, identifiable intangible assets, and goodwill that resulted from the
acquisition of Dank as of April 10, 2015:

Preliminary
Final
Cash and cash equivalents
$
73,505

$
73,505
Accounts receivable, net

71,667

71,667
Inventory

300,901

300,901
Prepaid expenses

9,848

9,848
Property and equipment, net

76,767

76,767

532,688

532,688

Accounts payable

230,600

230,600
Customer deposits

72,585

72,585
Payroll liabilities

9,889

9,889
Notes payable, short-term

52,828

52,828

365,902

365,902

Customer list
 1,184,825

-
Non-compete

829,377

2,014,202

Goodwill

362,387

2,376,589

Total consideration
$
2,543,375

$
2,543,375

F-6

The acquisition was accounted for using the purchase method of accounting in
accordance with ASC 805, Business Combinations. As of April 10, 2015, the assets
acquired, including the identifiable intangible assets, and liabilities assumed
from Dank were recorded at their respective fair values. Any excess of the purchase
price for the acquisition over the net fair value of Dank identified tangible and
intangible assets acquired and liabilities assumed were recorded as goodwill. The
fair value measurements utilize estimates based on key assumptions of the
Acquisition, and historical and current market data. As disclosed in the Company's
Form 10-Q for the 9 month period ended May 31, 2015, the Company originally
estimated the preliminary purchase price allocations based on historical inputs and
data as of April 10, 2015. The preliminary allocation of the purchase price was
based on the best information available

In accordance with ASC 805-10-25-14, during the measurement period, the Company
obtained additional information about the intangible assets acquired that existed
as of the acquisition date. In accordance with ASC 805-10-25-13, the Company
retrospectively adjusted the provisional amounts recognized as of the acquisition
date to reflect the new information. Revisions were made to assign fair values of
$0 to customer relationships, $0 to non-compete agreements and $2,376,589 to
goodwill.

Basis of Presentation

The accompanying consolidated financial statements and related notes include the
activity of the Company and its wholly owned subsidiaries, KIM and Dank, and have
been prepared in accordance with accounting principles generally accepted in the
United States of America (“U.S. GAAP”). Significant inter-company transactions and
balances have been eliminated in consolidation.
The consolidated financial statements were prepared on a going concern basis.
During the year ended August 31, 2015, the Company had a net loss of $339,303 and
negative cash flow from operations of $202,228. Historically, the Company has had
operating losses and negative cash flows from operations. Whether, and when, the
Company can attain profitability and positive cash flows from operations is
uncertain. These uncertainties cast significant doubt upon the Company’s ability to
continue as a going concern. The Company will need to raise capital in order to
fund its operations. This need may be adversely impacted by uncertain market
conditions and changes in the regulatory environment. To address its financing
requirements, the Company will seek financing through debt and equity issuances and
rights offerings to existing shareholders. The outcome of these matters cannot be
predicted at this time.

Use of Estimates

The preparation of financial statements in conformity with accounting principles

generally accepted in the United States requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amount of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers cash and cash equivalents to consist of cash on hand and
investments having an original maturity of 90 days or less that are readily
convertible into cash. As of August 31, 2015 and 2014, the Company had $201,259
and $23,004, respectively.

Accounts Receivable

Trade accounts receivable are carried at their estimated collectible amounts.

Trade credit is generally extended on a short-term basis, thus trade receivables do
not bear interest. Trade accounts receivables are periodically evaluated for
collectability based on past credit history and their current financial condition.
The Company’s allowance for doubtful accounts was $5,080 and $28,000 as of August
31, 2015 and 2014, respectively.

Inventory

Inventories are stated at the lower of cost or net realizable value using the
first-in first out (FIFO) method. The Company’s inventory consists of finished
goods of $662,368 and $153,040 as of August 31, 2015 and 2014, respectively.

Property and Equipment

Property and equipment is recorded at cost less accumulated depreciation.

Depreciation is calculated using the straight-line method over the estimated useful
lives of the assets, after the asset is placed in service. Asset lives range from 3
to 7 years. Gains and losses from the retirement or disposition of property and
equipment are included in operations in the period incurred. Maintenance and
repairs are expensed as incurred.

Fair Value of Financial Instruments

The fair value of certain of our financial instruments, including cash and cash
equivalents, receivables, other current assets, accounts payable, accrued
compensation and employee benefits, other accrued liabilities and notes payable,
approximate their carrying amounts because of the short-term maturity of these
instruments.

Concentration of Risk

Financial instruments that potentially expose us to concentrations of risk consist

primarily of cash and cash equivalents and accounts receivable, which are generally
not collateralized. Our policy is to place our cash and cash equivalents with high
quality financial institutions, in order to limit the amount of credit exposure.
The Company generally does not require collateral from its customers, but its
credit extension and collection policies include analyzing the financial condition
of potential customers, establishing credit limits, monitoring payments, and
aggressively pursuing delinquent accounts. The Company maintains allowances for
potential credit losses. A significant portion of the Company’s revenues are
derived from the sales of products to the purveyors of cannabis products and
services.

Goodwill and Other Long-Lived Assets

Goodwill represents the excess of cost over the fair value of identifiable assets
acquired and liabilities assumed in business combinations. The Company’s management
assess goodwill for impairment on an annual basis during the fourth quarter using a
August 1 measurement date unless circumstances require a more frequent measurement.
When evaluating goodwill for impairment, the Company may first perform an
assessment qualitatively whether it is more likely than not that a reporting unit's
carrying amount exceeds its fair value, referred to as a "step zero" approach. If,
based on the review of the qualitative factors, the Company determines it is not
more likely than not that the fair value of goodwill is less than its carrying
value, it would bypass the two-step impairment test. Events and circumstances the
Company considers in performing the "step zero" qualitative assessment include
macro-economic conditions, market and industry conditions, internal cost factors,
share price fluctuations, and the operational stability and the overall financial
performance of the reporting units. If the Company concludes that it is more likely
than not that a reporting unit's fair value is less than its carrying amount, it
would perform the first step (“step one”) of the two-step impairment test and
calculate the estimated fair value of the goodwill by using discounted cash flow
valuation model. These methods require estimates of future revenues, profits,
capital expenditures, working capital, and other relevant factors. The Company
estimates these amounts by evaluating historical trends, current budgets, operating
plans, industry data, and other relevant factors.

For fiscal 2015, the Company began its assessment with the step zero qualitative
analysis because the fair value substantially exceeded the carrying value goodwill.
After evaluating and weighing all relevant events and circumstances, the Company
concluded that it is not more likely than not that the fair value of goodwill was
less its carrying amounts. Consequently, the Company did not perform a step one
quantitative analysis in fiscal 2015.

F-7

Earnings (Loss) Per Share

The Company computes net loss per share under Accounting Standards Codification
subtopic 260-10, "Earnings Per Share" (“ASC 260-10”). Basic net income (loss) per
common share is computed by dividing net loss by the weighted average number of
shares of common stock. Diluted net loss per share is computed using the weighted
average number of common and common stock equivalent shares outstanding during the
period.
Comprehensive Income (loss)

Comprehensive income (loss) is the change in the Company’s equity (net assets)
during each period from transactions and other events and circumstances from non-
owner sources. During the years ended August 31, 2015 and 2014, the Company had no
elements of comprehensive income or loss.

Revenue Recognition

It is the Company’s policy that revenues from product sales is recognized in

accordance with ASC 605 "Revenue Recognition". Four basic criteria must be met
before revenue can be recognized; (1) persuasive evidence of an arrangement exists;
(2) delivery has occurred; (3) the selling price is fixed and determinable; and (4)
collectability is reasonably assured. Determination of criteria (3) and (4) are
based on management’s judgments regarding fixed nature in selling prices of the
products delivered and the collectability of those amounts. The Company has not
implemented any specific rebate programs. Provisions for discounts to customers,
estimated returns and allowances, and other adjustments are provided for in the
same period the related sales are recorded. As of August 31, 2015 and 2014, we had
provisions for sales discounts of $21,183 and $2,648, respectively. The Company has
not established a formal customer incentive program, but considers and accomodates
discounts to certain customers on a case by case basis, including by way of
example, for volume shipping or for certain new customers with orders over a
specific discretionary dollar threshold.

During the year ended August 31, 2015 and 2014, the Company had a refund allowance
of $0. Consistent with ASC 605-15-25-1, the Company considers factors such as
historical return of products, estimated remaining shelf life, price changes from
competitors, and introductions of competing products in establishing a refund
allowance.The Company recognizes revenues as risk and title to products transfers
to the customer (which generally occurs at the time shipment is made), the sales
price is fixed or determinable, and collectability is reasonably assured. The
Company defers any revenue for which the product was not delivered or is subject to
refund until such time that the Company and the customer jointly determine that the
product has been delivered or no refund will be required.

Warranty Costs

The Company has not had any historical warranty related expenditures from the sales
of its products, which if incurred would result in the return of any defective
products by customers.

Business Combinations

Accounting for our acquisitions requires the Company to recognize, separately from
goodwill, the assets acquired and the liabilities assumed at their acquisition-date
fair values. Goodwill as of the acquisition date is measured as the excess of
consideration transferred and the net of the acquisition-date fair values of the
assets acquired and the liabilities assumed. While the Company uses its best
estimates and assumptions to accurately value assets acquired and liabilities
assumed at the acquisition date, its estimates are inherently uncertain and subject
to refinement. As a result, during the measurement period, which may be up to one
year from the acquisition date, the Company records adjustments to the assets
acquired and liabilities assumed with the corresponding offset to goodwill. Upon
the conclusion of the measurement period or final determination of the values of
assets acquired or liabilities assumed, whichever comes first, any subsequent
adjustments are recorded to the consolidated statements of operations and
comprehensive income (loss).
Accounting for business combinations requires the Company’s management to make
significant estimates and assumptions, especially at the acquisition date including
its estimates for intangible assets, contractual obligations assumed, pre-
acquisition contingencies and contingent consideration, where applicable. If
management cannot reasonably determine the fair value of a pre-acquisition
contingency (non-income tax related) by the end of the measurement period, the
Company will recognize an asset or a liability for such pre-acquisition contingency
if: (i) it is probable that an asset existed or a liability had been incurred at
the acquisition date and (ii) the amount of the asset or liability can be
reasonably estimated. Although the Company believes the assumptions and estimates
it has made in the past have been reasonable and appropriate, they are based in
part on historical experience and information obtained from the management of the
acquired companies and are inherently uncertain. Subsequent to the measurement
period, changes in the estimates of such contingencies will affect earnings and
could have a material effect on the Company’s results of operations and financial
position.

Examples of critical estimates in valuing certain of the intangible assets we have

acquired include but are not limited to: (i) future expected cash flows from
product sales; (ii) the acquired company’s brand and competitive position, as well
as assumptions about the period of time the acquired brand will continue to be used
in the combined company’s product portfolio. Unanticipated events and circumstances
may occur that may affect the accuracy or validity of such assumptions, estimates
or actual results.

In addition, any uncertain tax positions and tax related valuation allowances
assumed in connection with a business combination are initially estimated as of the
acquisition date. If applicable, the Company would reevaluate these items quarterly
based upon facts and circumstances that existed as of the acquisition date with any
adjustments to its preliminary estimates being recorded to goodwill provided that
we are within the measurement period. Subsequent to the measurement period or the
final determination of the tax allowance’s or contingency’s estimated value,
whichever comes first, changes to these uncertain tax positions and tax related
valuation allowances will affect the Company’s provision for income taxes in our
consolidated statements of income and comprehensive income and could have a
material impact on our results of operations and financial position.

F-8

Share-based Compensation

The Company accounts for its stock based awards in accordance with Accounting
Standards Codification subtopic 718-10, "Compensation", which requires fair value
measurement and recognition of compensation expense for all share-based payment
awards made to employees and directors, including restricted stock awards. The
Company estimates the fair value of stock using the stock price on the grant date
of the the award. The fair value is then expensed over the requisite service
periods of the awards, which is generally the performance period and the related
amount is recognized in the consolidated statements of operations.

Advertising

The Company conducts advertising for the promotion of its services. In accordance
with ASC Topic 720-35-25, advertising costs are charged to operations when
incurred.

Income Taxes
The Company accounts for income taxes in accordance with accounting guidance now
codified as FASB ASC 740, "Income Taxes," which requires that the Company recognize
deferred tax liabilities and assets based on the differences between the financial
statement carrying amounts and the tax bases of assets and liabilities, using
enacted tax rates in effect in the years the differences are expected to reverse.
Deferred income tax benefit (expense) results from the change in net deferred tax
assets or deferred tax liabilities. A valuation allowance is recorded when it is
more likely than not that some or all deferred tax assets will not be realized.

The Company applies the provisions of ASC 740, "Accounting for Uncertainty in
Income Taxes". The ASC clarifies the accounting for uncertainty in income taxes
recognized in an enterprise's financial statements. The ASC prescribes a
recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return. The ASC provides guidance on de-recognition, classification, interest
and penalties, accounting in interim periods, disclosure and transition. The
Company did not identify any material uncertain tax positions on returns that have
been filed or that will be filed. The Company did not recognize any interest or
penalties for unrecognized tax benefits during the years ended August 31, 2015 and
2014, nor were any interest or penalties accrued as of August 31, 2015 and 2014.

Fair Value of Financial Instruments

The Company adopted ASC 820 which defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date (an exit price). The standard
outlines a valuation framework and creates a fair value hierarchy in order to
increase the consistency and comparability of fair value measurements and the
related disclosures. Under this standard certain assets and liabilities must be
measured at fair value, and disclosures are required for items measured at fair
value.

The Company currently does not have non-financial assets or non-financial

liabilities that are required to be measured at fair value on a recurring basis.
The Company’s financial assets and liabilities are measured using inputs from the
three levels of the fair value hierarchy. The three levels are as follows:

Level 1 - Inputs are unadjusted quoted prices in active markets for identical
assets or liabilities that the Company has the ability to access at the measurement
date. The fair value of the Company’s cash is based on quoted prices and therefore
classified as Level 1.

Level 2 - Inputs include quoted prices for similar assets and liabilities in active
markets, quoted prices for identical or similar assets or liabilities in markets
that are not active, inputs other than quoted prices that are observable for the
asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are
derived principally from or corroborated by observable market data by correlation
or other means (market corroborated inputs).

Level 3 - Unobservable inputs that reflect management’s assumptions about the

assumptions that market participants would use in pricing the asset or liability.

F-9

Application of Valuation Hierarchy

A financial instrument’s categorization within the valuation hierarchy is based
upon the lowest level of input that is significant to the fair value measurement.
The following is a description of the valuation methodology used to measure fair
value, as well as the general classification of such instruments pursuant to the
valuation hierarchy.

Advances from Related Party. The Company assessed that the fair value of this
liability approximates its carrying value due to its short-term nature.

Note Payable – Vehicle Loan. The Company assesses the fair value of this liability
to approximate its carrying value based on the effective yields of similar
obligations.

Line-of-Credit Payable. The Company assessed that the fair value of this liability
approximates its carrying value due to its short-term nature.

The Company had no financial assets or liabilities that are measured at fair value
on a recurring basis as of August 31, 2015 and 2014.

Segment Information

The Company is organized as a single operating segment, whereby its chief operating
decision maker assesses the performance of and allocates resources to the business
as a whole.

Reclassification

Certain reclassifications have been made to conform the prior period data to the
current presentation. These reclassifications had no effect on reported net loss.

Recently Issued Accounting Pronouncements

In September 2015, the FASB issued ASU 2015-16, Business Combinations (Topic 805),
"Simplifying the Accounting for Measurement Period Adjustments" (ASU 2015-16). This
ASU requires that an acquirer recognize adjustments to provisional amounts that are
identified during the measurement period in the reporting period in which the
adjustment amounts are determined. The amendments in this update require that the
acquirer record, in the same period’s financial statements, the effect on earnings
of charges in depreciation, amortization, or other income effects, if any, as a
result of the change to the provisional amounts, calculated as if the accounting
had been completed at the acquisition date. The amendments in this update require
an entity to present separately on the face of the income statement or disclose in
the notes the portion of the amount recorded in current-period earnings by line
item that would have been recorded in previous reporting periods if the adjustment
to the provisional amounts had been recognized as of the acquisition date. The
Company believes based on recent acquisitions that the impact that the adoption of
ASU 2015-16 is likely immaterial. ASU 2015-16 will be effective for the Company in
fiscal 2017.

In August 2015, the FASB issued ASU No. 2015-15, "Interest—Imputation of Interest
(Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs
Associated with Line-of-Credit Arrangements—Amendments to SEC Paragraphs Pursuant
to Staff Announcement at June 18, 2015 EITF Meeting" (ASU 2015-15). Specifically,
the ASU states that the SEC staff would not object to an entity deferring and
presenting debt issuance costs as an asset and subsequently amortizing deferred
debt issuance costs ratably over the term of the underlying line of credit (LOC)
arrangement, regardless of whether there are outstanding borrowings under that LOC
arrangement. . Presentation of fees under LOC arrangements had not been specified
in earlier guidance issued by the FASB in April, 2015, ASU 2015-03, "Interest—
Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt
Issuance Costs" (ASU 2015-03), which changed the presentation of debt issuance
costs in financial statements. Under the guidance in ASU 2015-03, debt issuance
costs (other than those in LOC arrangements) are presented in the balance sheet as
a direct deduction from the related debt liability rather than as an asset.
Amortization of the costs is reported as interest expense. ASU 2015-15 is effective
upon adoption of ASU 2015-03. Early adoption of ASU 2015-03 is allowed for
financial statements that have not previously been issued. The guidance is to be
applied retrospectively to all prior periods. ASUs 2015-03 and 2015-15 will be
effective for the Company beginning in fiscal 2017. The Company is currently
evaluating the impact that the combined adoption of ASUs 2015-03 and 2015-15 may
have on the Company’s Consolidated Financial Statements.

In August 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-15,
Presentation of Financial Statements —Going Concern (Subtopic 205-40). The new
guidance addresses management’s responsibility to evaluate whether there is
substantial doubt about an entity’s ability to continue as a going concern and to
provide related footnote disclosures. Management’s evaluation should be based on
relevant conditions and events that are known and reasonably knowable at the date
that the financial statements are issued. The standard will be effective for the
first interim period within annual reporting periods beginning after December 15,
2016. Early adoption is permitted. The Company is evaluating the effect that this
guidance will have on its financial statements and footnote disclosures.

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-
09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). ASU 2014-
09 requires an entity to recognize the amount of revenue to which it expects to be
entitled for the transfer of promised goods or services to customers. ASU 2014-09
will replace most existing revenue recognition guidance in U.S. Generally Accepted
Accounting Principles when it becomes effective and permits the use of either the
retrospective or cumulative effect transition method. The guidance also requires
additional disclosure about the nature, amount, timing and uncertainty of revenue
and cash flows arising from customer contracts. In July 2015, the FASB issued
guidance to defer the effective date for one year. For public entities, the
standard will be effective for annual reporting periods beginning after December
15, 2017 (including interim reporting periods within those periods), which means it
will be effective for our fiscal year beginning October 1, 2018. Early adoption is
permitted to the original effective date of December 15, 2016 (including interim
reporting periods within those periods). We have not yet selected a transition
method and we are currently evaluating the impact that the updated standard will
have on our consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, “Simplifying the Presentation of
Debt Issuance” (“ASU 2015-03”), which changes the presentation of debt issuance
costs in financial statements. Under ASU 2015-03, an entity presents such costs in
the balance sheet as a direct deduction from the related debt liability rather than
as an asset. Amortization of the costs is reported as interest expense. ASU 2015-03
is effective for fiscal years and interim periods within those fiscal years,
beginning after December 15, 2015, which means it will be effective for our fiscal
year beginning October 1, 2016. Early adoption is permitted. We do not believe that
adoption of ASU 2015-03 will have a significant impact on our consolidated
financial statements.

Other Accounting standards that have been issued or proposed by FASB that do not
require adoption until a future date are not expected to have a material impact on
the consolidated financial statements upon adoption. The Company does not discuss
recent pronouncements that are not anticipated to have an impact on or are
unrelated to its financial condition, results of operations, cash flows or
disclosures.

F-10
NOTE 2 – GOING CONCERN

The Company’s consolidated financial statements are prepared using accounting

principles generally accepted in the United States of America applicable to a going
concern, which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. The Company has a net loss of
$339,303 for the year ended August 31, 2015, and has an accumulated deficit of
$748,447 as of August 31, 2015. The ability of the Company to continue as a going
concern is dependent on the Company obtaining adequate working capital to fund
operations until it becomes profitable. The Company will need to raise additional
funds in the future, however there can be no assurance that such efforts will be
successful or that, in the event that they are successful, the terms and conditions
of such financing will be favorable. If the Company is unable to obtain adequate
capital, it could be forced to cease development of operations.

In order to continue as a going concern achieve a profitable level of operations

the Company will need, among other things, additional capital resources or the
planned expenditures may need to be reduced in order to extend the time period over
which the then-available resources would be able to fund the operations.
Management’s plans to continue as a going concern include raising additional
capital through increased sales of product and by sale of common shares. However,
management cannot provide any assurances that the Company will be successful in
accomplishing any of its plans. The ability of the Company to continue as a going
concern is dependent upon its ability to successfully accomplish its plans and
eventually secure other sources of financing and attain profitable operations. The
accompanying consolidated financial statements do not include any adjustments that
might be necessary if the Company is unable to continue as a going concern.

NOTE 3 – CONCENTRATIONS OF RISK

Supplier Concentrations

The Company purchases inventory from various suppliers and manufacturers. For the
fiscal year ended August 31, 2015 and 2014, one vendor accounted for approximately
34% of total inventory purchases. For the fiscal year ended August 31, 2014, three
vendors represented 80% of total inventory purchases.

Customer Concentrations

For the period from September 1, 2014 to April 9, 2015, Dank represented 33% of the
Company's revenues. On April 10, 2015, the Company acquired Dank. During the fiscal
year ended August 31, 2014, Dank represented 22% of the Company's revenues.

NOTE 4 – RELATED-PARTY TRANSACTIONS

As a result of the Dank acquisition on April 10, 2015, the Company owed $100,000 to
the sellers of Dank. The balance on this loan was $75,000 as of August 31, 2015.
Shareholders have made loans to the Company. Shareholder loans are non-interest
bearing, unsecured and due upon demand. The Company owes $0 and $50,000 for such
loans as of August 31, 2015 and August 31, 2014, respectively.

The Company leases its California and Colorado facilities from related parties.
During the fiscal years ended August 31, 2015 and 2014, the Company made rent
payments of $115,400 and $73,500, respectively, to these related parties.

F-11
NOTE 5 – PROPERTY AND EQUIPMENT

The major classes of fixed assets consist of the following as of August 31:

August 31,

August 31,

2015

2014
Office Equipment
$
28,955
$
7,260
Machinery and equipment

68,173

7,020
Leasehold improvements

32,780

-
Vehicles

140,609

30,615

270,517

44,895
Accumulated Depreciation

(65,246)

(23,344)

$
205,271
$
21,551

Depreciation expense was $30,267 and $6,147 for the years ended August 31, 2015 and
2014, respectively.

NOTE 6 - GOODWILL

The following table summarizes the changes in the carrying amount of goodwill for
the fiscal years ended August 31, 2015 and 2014:

Total
Goodwill, gross
 -
Accumulated impairment losses

$
-
Balance as of August 31, 2014

$
-

Additions

2,376,589
Deductions

-
Impairment loss

Goodwill, gross

2,376,589
Accumulated impairment losses

$
-
Balance as of August 31, 2015

$
2,376,589

The fiscal 2015 additions to goodwill are due to the Dank acquisition described in
Note 1. The Company had no impairment to the carrying value of goodwill as of
August 31, 2015.

F-12

NOTE 7 – LONG TERM DEBT

Automobile Contracts Payable

The Company has entered into purchase contracts for its vehicles. The loans are
secured by the vehicles and bear interest at an average interest rate of
approximately 12% per annum. The composition of these automobile contracts payable
is summarized in the table below:

Principal

Due
2016
$
27,394
2017
 21,557
2018

21,813
2019

5,893
2020

5,322

$
81,979

NOTE 8 – CURRENT LIABILITIES

Line of Credit

On April 6, 2015, the Company entered into a $240,000 revolving line of credit
facility. The loan matures on April 1, 2016 and bears interest at prime plus 2.75%.
As of August 31, 2015, the balance on this loan is $85,000.

Accrued Expenses

Accrued expenses and other current liabilities consist of the following as of

August 31:

August 31,

August 31,

2015

2014
Customer deposits
$
177,493
$
-
Accrued compensation

144,428

22,861
Credit card liabilities

56,748

25,296
Sales tax payable

12,665

$
391,334
$
48,157

F-13

NOTE 9 – STOCKHOLDERS' EQUITY

Preferred Stock

The authorized preferred stock is 10,000,000 shares with a par value of $0.001. As
of August 31, 2015 and 2014, the Company has no shares of preferred stock issued or
outstanding.

Common Stock

The authorized common stock is 265,000,000 shares with a par value of $0.001. As of
August 31, 2015 and 2014, 46,132,779 and 40,720,000 shares were issued and
outstanding, respectively.

During the year ended August 31, 2015, the Company sold 1,162,779 shares of its
common stock to investors in exchange for cash of $737,001.

On April 10, 2015, the Company entered into an equity purchase agreement to acquire
all of the issued and outstanding membership interests in Dank. As a result of the
acquisition, the Company issued 3,500,000 shares of common stock to the sellers of
Dank at a fair value of $2,169,650.

Share-based Compensation

The Company recorded compensation expense of $0 and $278,529 for the years ended
August 31, 2015 and 2014, respectively, in connection with the issuance of shares
of common stock and options to purchase common stock.

In conjunction with issuance of the 32,400,000 common shares to the shareholders of

KIM on March 4, 2014, Kush granted 7,650,000 shares for services rendered. The
shares were valued at $0.02 per share for a total of $177,083.

On July 28, 2014, the Company has authorized the issuance of 100,000 shares of
common stock to an officer of the Company. The shares vested immediately and
accordingly, the Company has reconized $68,750 of compensation expense.

On February 14, 2014, the Company granted 1,000,000 shares of common stock to an
officer of the Company upon execution of the officer's employment agreement. The
shares were valued at $0.02 per share and $23,148 was recognized as stock
compensation expense.

F-14

Stock Options

Per the employment agreement dated February 14, 2014, the Company also awarded the
officer the right to purchase 1,000,000 shares of common stock at a fixed price of
$0.05. The option fully vested upon execution of the officer's employment agreement
and is exercisable immediately. Using the Black-Scholes option pricing model,
management estimated the fair value of the option to be $9,548. Accordingly, $9,548
was recognized as stock compensation expense.
The Company estimates the fair value of share-based compensation utilizing the
Black-Scholes option pricing model, which is dependent upon several variables such
as the expected option term, expected volatility of our stock price over the
expected option term, expected risk-free interest rate over the expected option
term, expected dividend yield rate over the expected option term, and an estimate
of expected forfeiture rates. The Company believes this valuation methodology is
appropriate for estimating the fair value of stock options granted to employees and
directors which are subject to ASC Topic 718 requirements. These amounts are
estimates and thus may not be reflective of actual future results, nor amounts
ultimately realized by recipients of these grants. The Company recognizes
compensation on a straight-line basis over the requisite service period for each
award. The following table summarizes the assumptions the Company utilized to
record compensation expense for stock options granted during the years ended August
31, 2015 and 2014:

August 31,
August 31,

2015
2014
Expected term (years)

N/A

5.0
Expected volatility

N/A

70%
Weighted-average volatility

N/A

70%
Risk-free interest rate

N/A

1.53%
Dividend yield

N/A

0%
Expected forfeiture rate

N/A

0%

The expected life is computed using the simplified method, which is the average of
the vesting term and the contractual term. The expected volatility is based on
management's analysis of historical volatility for comparable companies. The risk-
free interest rate is based on the U.S. Treasury yields with terms equivalent to
the expected term of the related option at the time of the grant. While the Company
believes these estimates are reasonable, the compensation expense recorded would
increase if the expected life was increased, a higher expected volatility was used,
or if the expected dividend yield increased.

A summary of the Company’s stock option activity during the year ended August 31,
2015 and 2014 is presented below:

Weighted

Weighted

Average

Average

Remaining

Aggregate

No. of

Exercise

Contractual

Intrinsic

Options

Price

Term

Value
Balance Outstanding, August 31, 2014

1,000,000
$
0.05

4.46 years
$
637,500
Granted

-
Exercised

-
 -

-
Balance Outstanding, August 31, 2015

1,000,000
$
0.05

3.46 years
$
595,000
Exercisable, August 31, 2015

1,000,000
$
0.05

3.46 years
$
595,000

NOTE 10 – INCOME TAXES

For the fiscal years ended August 31, 2015 and 2014, the Company incurred a net
loss of $339,303 and $395,917, respectively. The net deferred tax asset generated
by the loss carry-forward has been fully reserved. The cumulative net operating
loss carry-forward is $734,830 at August 31, 2015 and will expire beginning in the
year 2033. Due to a change in control, IRC section 382 limits the amount of net
operating losses that can be utilized on an annual basis for the fiscal year ended
August 31, 2013.

The provision for income tax consists of the following:

August 31,

August 31,

2015

2014
Federal income (tax) benefit attributable to:

Current operations
$
135,159
$
157,552
Stock compensation

37,921

110,950
Depreciation
 10,065

2,378
Less: valuation allowance

(183,145)

(270,880)
Net provision for Federal income taxes
$
-
$
-

The cumulative tax effect at the expected rate of 43% of significant items
comprising our net deferred tax amount is as follows:

August 31,

August 31,

2015

2014
Deferred tax asset attributable to:

Net operating loss carryover

$
148,412
$
52,250
Stock compensation

148,872

110,950
Depreciation

12,443

2,378
Valuation allowance

(309,727)

(165,578)
Net deferred tax asset
$
-
$
-

Due to the change in ownership provisions of the Tax Reform Act of 1986, net
operating loss carry forwards of approximately $372,574 for Federal income tax
reporting purposes are subject to annual limitations, which expire starting 2033.
Should a change in ownership occur, net operating loss carry forwards may be
limited as to use in future years. The Company did not have any tax positions for
which it is reasonably possible that the total amount of unrecognized tax benefits
will significantly increase or decrease within the next 12 months. The Company
includes interest and penalties arising from the underpayment of income taxes in
the statements of operations in the provision for income taxes. As of August 31,
2015 and 2014, the Company had no accrued interest or penalties related to
uncertain tax positions. The tax years that remain subject to examination by major
taxing jurisdictions are for the years ended August 31, 2015, 2014 and 2013.

F-15

NOTE 11 – LOSS PER SHARE

We calculate basic loss per share by dividing net loss by the weighted average
number of common shares outstanding during the reporting period. Diluted loss per
share reflect the effects of potentially diluted securities. Because we incurred
net losses for the fiscal year ended August 31, 2015 and 2014, common stock
equivalents are anti-dilutive accordingly basic and diluted loss per share were the
same. The summary of the basic and diluted earnings per share computations is as
follows:

August 31,

August 31,

2015

2014
Net loss

Basic net loss per share:

$
(339,303)
$
(395,517)
Weighted-average shares outstanding - basic and diluted
42,718,159

40,269,973
Basic net loss per share
$
(0.008)
$
(0.010)
Diluted net loss per share:

Weighted-average shares outstanding - basic

42,718,159

40,269,973
Weighted-average shares outstanding - diluted

42,718,159

40,269,973
Diluted net loss per share:
$
(0.008)
$
(0.010)

NOTE 12 – COMMITMENTS AND CONTINGENCIES

Lease

The Company’s corporate head-quarters and primary distribution center is located in

Santa Ana, California. The Company also has a facility located in Auburn,
Washington. Each facility is leased. The California facility lease expires on
August 1, 2017 and requires monthly payments of $9,000 in fiscal 16 and $10,000 in
fiscal 17 for a total of $228,000 in lease commitments through the end of term. The
Washington facility lease has a term of 6 months and provides for monthly payments
of $1,739, and expires on December 31, 2015. The total future commitments for these
Washington facility leases total $6,956. Effective April 10, 2015 and following the
acquisition of Dank, we also lease a facility in Denver, Colorado, which is the
headquarters of operations for our wholly-owned subsidiary, Dank. The lease runs
through March 31, 2020 and requires escalating monthly payments, ranging between
$4,800 and $5,800, for a total of $304,500 in future lease commitments through the
end of the term. During fiscal years ended August 31, 2015 and 2014, the Company
recognized $136,110 and $91,900 respectively, of rental expense, related to its
office, retail and warehouse space.

Minimum future commitments under non-cancelable operating leases and other

obligations were as follows at August 31, 2015:

2016
$
177,656
2017

184,800
2018

66,800
2019

69,600
2020

40,600

$
539,456

Other Commitments

In the ordinary course of business, the Company may enter into contractual purchase
obligations and other agreements that are legally binding and specify certain
minimum payment terms. The Company had no such agreements as of August 31, 2015.

Litigation

The Company may be subject to legal proceedings and claims which arise in the
ordinary course of its business. Although occasional adverse decisions or
settlements may occur, the Company believes that the final disposition of such
matters should not have a material adverse effect on its financial position,
results of operations or liquidity. The Company had no pending legal proceedings or
claims as of August 31, 2015 and 2014.

NOTE 13 – SUBSEQUENT EVENTS

Management has evaluated subsequent events through the date of the filing of this
annual report and noted no significant events for disclosure.

F-16