Item 1.01 Entry into a Material Definitive
Agreement
Effective July 25, 2017, we consummated
the acquisition of Denver Consulting Group LLC, a Colorado limited liability company (“DCG”). On July 21, 2017 we executed
the applicable Share Exchange Agreement and on July 25, 2017, we filed the Statement of Share Exchange with the Colorado Secretary
of State’s office, which was the final condition that was needed to be met to make the transaction effective. A copy of the
definitive Share Exchange Agreement is attached to this report as exhibit 10.7 and incorporated herein as if set forth.
Upon filing of Statement of Share Exchange
we issued an aggregate of 2,258,065 shares of our common stock to the DCG members in exchange for 100% of their issued and outstanding
member interests. As a result, DCG is now a wholly owned subsidiary of our Company. The transaction with DCG did not result in
a change in our current management.
Upon completion of this acquisition we
have assumed DCG’s assets, liabilities and plans of operation, described below.
Business of Denver Consulting Group
LLC
History
DCG was formed in August 2014 in Colorado,
established by a partnership group of experienced cannabis business professionals who recognized the need for quality compliance
and operational consulting to support the wave of marijuana legalization both nationally and globally. Since inception DCG has
provided both medical and retail marijuana organizations with proven methods to improve operations, increase compliance with all
state and local regulations, train staff, develop customized compliant packaging solutions, increase security, create employee
handbooks, build brands, create customer loyalty, and more. DCG offers its services to virtually every type of business in the
cannabis industry, including growers, manufacturers, processors, and retailers.
DCG’s primary founding members, Greg
Gamet, Justin Jones, and Bryan Sullivan co-founded JGB Ventures, LLC, dba DANK(“ DANK”) and opened DANK Medical Dispensary
in September 2009. Jay Griffin and Dan Glenn joined the DANK team in 2010 and 2013, respectively, as operational managers
responsible for full implementation of compliant standard operating procedures and the health and safety of the patients they served.
In January 2014, DANK was issued one of the first five recreational dispensary licenses in Colorado.
Being involved in the everyday operations
of two successful branches of DANK, the owners noticed a lack of American distribution companies providing quality child safe packaging
for the cannabis industry. In the same year (2014), Kush Bottles Colorado was founded to fill this void and quickly became
the industry leader in child safe packaging. The continual success of both DANK dispensaries, combined with Kush Bottles organically
created an extensive network of cannabis professionals whom continually turned to Greg, Justin, and the other owners as the leading
experts in running successful, compliant, holistic cannabis businesses. Recognizing yet another unmet need in the cannabis industry,
Frank Falconer joined the team and created the founding ownership group of Denver Consulting Group.
DCG’s founding vision was to work
with clients to develop custom business strategies based on industry best practices for the burgeoning cannabis industry. Their
expertise in cannabis regulations, dispensary compliance, overall business operations and marijuana cultivation have ensured the
successes of clients in the continually evolving cannabis industry. DCG has also provided general consultation to help new potential
cannabis business owners and investors start up successful ventures, streamline and improve current operations, and enhance revenues
at several other cannabis-related companies nationwide. Overall, consulting services have ranged from licensing and application
support, including all documentation surrounding cultivation, dispensary, and processing Standard Operating Procedures such as
employee handbooks, compliance logs, and training manuals, to new marijuana business plans including cultivation, security, operations,
staffing, sales tracking, accounting, site selection and community outreach, to Seed to Sale METRC Training, MED Compliance
Audits, Staffing, Operation & Security Plans for existing operations.
Operations
DCG has active clients in Colorado, Alaska,
Washington, Oregon, California, Michigan, Illinois, Arkansas, Rhode Island, Maryland, Pennsylvania, Massachusetts, New York, and
Florida as well as Puerto Rico and Australia. DCG has successfully support winning applications in Colorado, Alaska, Oregon, California,
Illinois, Maryland, and Puerto Rico. More recently, the company has added new offices in Oregon and intends to add a significant
presence in California in concert with us. DCG’s 1
st
quarter of FY 2017 produced just over $450,000 of income
and generated profitable operations.
While DCG services are somewhat similar
to those offered by us, it has tended to focus on work through application filing while we have offered support through deployment
and becoming operational. DCG was one of the first companies to offer classes to the public. The classes included: Labeling
and Packaging, METRC Training (beginning and advanced), Compliance Training (Store), Orientation Classes, Cultivation Compliance,
and other custom classes.
Like us, DCG’s marketing efforts
have been limited to trade show, web presence, referrals, and professional relationships via speaking and other such education
engagements at trade shows and other industry gatherings.
Below is a summary of the unaudited financial
information of DCG.
Statement of Operations:
|
|
Year Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
580,707
|
|
|
$
|
437,375
|
|
Cost of Goods Sold
|
|
$
|
272,878
|
|
|
$
|
201,796
|
|
Total Operating Expense
|
|
$
|
313,262
|
|
|
$
|
191,886
|
|
Taxes Paid
|
|
$
|
–
|
|
|
$
|
–
|
|
Net Income (Loss) from Operations
|
|
$
|
(5,433
|
)
|
|
$
|
43,693
|
|
Balance Sheet:
|
|
Year Ended
December 31, 2016
|
|
|
|
|
|
Cash
|
|
$
|
32,495
|
|
Current assets
|
|
$
|
78,059
|
|
Total assets
|
|
$
|
116,267
|
|
Current liabilities
|
|
$
|
116,305
|
|
Total liabilities
|
|
$
|
116,305
|
|
Total stockholders’ equity (deficit)
|
|
$
|
(38
|
)
|
Our Operations after the DCG Acquisition
Following the Transactions our current
business activities will remain but are expected to be significantly enhanced. Our directors and executive officers will remain
as they consist currently.
Employees
As a result of the acquisition of DCG we
anticipate that the aggregate number of employees will increase to sixteen (16) including four additional full time employees in
project management or technical writing operations. None of DCG’s employees is represented by a labor union or a collective
bargaining agreement. DCG considered its relations with its employees to be good.
Facilities
As a result of the acquisition of DCG we
have not assumed any additional locations or lease arrangements. We anticipate consolidating DCG’s current operations into
our current principal place of business.
Financial Statements of DCG
Pursuant to the terms of the DCG Agreement,
DCG is obligated to provide us with an independent audited financial statement for the prior two fiscal years and any interim periods,
which shall be filed as an amendment to this Form 8-K and which shall be filed with the US Securities and Exchange Commission within
75 days of the Effective Date.