Kushtown USA

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Overview

Kushtown USA LLC (CNSX:FIN) is a California based leading liquid edibles company that specializes in cannabis infused medicated water, sodas, hot sauces and barbecue sauces. Since 2000, Kushtown has been one of the leaders in marijuana beverages and edible products in California, with sales to over 200 medical marijuana dispensaries.

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Kushtown holds trademark rights to the Kushtown line of products, and management plans to leverage the established Kushtown brand name in California and aims to expand the Kushtown brand into the recreational cannabis market across North America, pending the November 8, 2016 vote in California and other States to legalize recreational marijuana.

Kushtown currently markets and distributes the following Cannabis infused products:

Kushtown Sodas – Kushtown offers 20 different varieties of medicated soda. Sodas/drinks come in varieties of carbonated and non-carbonated beverages. Flavors like Cherry Cola, lemonade, fruit punch, and lemon lime are infused with a THC tincture.

Kushtown Water – The Kush water product is a healthy choice for a liquid edible for those who can’t have sugary or carbonated drinks. Medicated water can be substituted for use of coffee, lemonade, tea, juice and soups.

Kushtown Hot Sauce – This sauce packs a punch with heat similar to a Franks wing sauce mixed with Tabasco and is marijuana infused. Packed with flavor and heat. Best with nachos, burritos, pizza, eggs, soups and hot wings.

Kushtown barbeque sauce –  A Smokey barbeque sauce with mild heat and infused marijuana. It works with almost anything barbeque sauces are made for. Best with burgers, ribs, chicken, steak, pizza and wings.

Kushtown holds trademark rights to the Kushtown line of products, and management plans to leverage the established Kushtown brand name in California and aims to expand the Kushtown brand into the recreational cannabis market across North America, pending the Nov. 8, 2016, vote in California and other states to legalize recreational marijuana.

California Proposition 64, the California marijuana legalization initiative, will be on the ballot on Nov. 8, 2016.

The accelerating pace of marijuana legalization in the United States has grabbed headlines around the world in the past few months.

In the United States, four states (and the District of Columbia) already allow the use of recreational marijuana. On Nov. 8, 2016, alongside the presidential election, five more will vote on similar legalization: California, Nevada, Maine, Massachusetts and Arizona.

Medical marijuana has been given the green light in half of all U.S. states. Legal cannabis sales in the United States jumped 17 per cent to $5.4-billion in 2015 and are expected to grow by 25 per cent this year to $6.7-billion, according to Arcview Market Research.

By 2020, legal cannabis sales in the United States are projected to hit $21.8-billion. California currently accounts for 49 per cent of all U.S. cannabis sales by state, and it is predicted that the legal cannabis market will see a whopping $21.8-billion in total annual sales by 2020. (By comparison, at that point, the legal marijuana market could be bigger than the National Football League, which saw roughly $12-billion of revenue last year but is aiming to reach $25-billion by 2027.)

Kushtown is well positioned to capitalize on the changing legislation in the marijuana industry in California, and the company plans to execute an aggressive marketing and distribution plan to expand the Kushtown brand of liquid edibles across North America. Management of Kushtown has built an excellent reputation, operating in California’s medical marijuana market, and is a leading liquid-edibles company in California. With California’s potential move toward legalization, Kushtown is planning an aggressive growth strategy and is currently in the process of acquiring a high-output automated bottling and packaging plant to be installed and operational in the coming weeks.

Letter agreement

Pursuant to the terms of the letter agreement, the company will, within 14 days of signing the letter agreement, pay the shareholders of Kushtown aggregate cash consideration of $50,000 (U.S.) and shall advance a loan to Kushtown of $50,000 (U.S.). The cash payment and the loan will be evidenced by a promissory note(s) and will be secured by a pledge over an aggregate 20 per cent of the issued and outstanding shares of Kushtown. In addition, upon closing of the transaction, the company will issue to Kushtown shareholders an aggregate of 8,440,845 common shares in the capital of the company at a deemed price of 15 cents per payment share for total share consideration of $1,266,126.75 (Canadian) ($950,000 (U.S.)). The payment shares will be subject to escrow conditions and/or resale restrictions as required by applicable securities laws and the policies of the Canadian Securities Exchange.

Pursuant to the terms of the assignment agreement, the company will, upon closing of the transaction, issue 2.5 million common shares to the assignor at a deemed price of 15 Canadian cents per share and shall grant the assignor a 2-per-cent net-profit-interest royalty on all Kushtown-branded products sold by the company.

The transaction remains subject to certain closing conditions, including completion of due diligence, the negotiation and signing of a definitive agreement and obtaining all necessary approvals, including approval of the respective boards, the approval of the Canadian Securities Exchange and, if applicable, shareholders of the company. There can be no guarantees that the transaction will be completed as proposed or at all.