KushCo Holdings, Inc. (OTCQX:KSHB) (”KushCo” or the ”Company”), a premier provider of ancillary products and services to the legal cannabis and CBD industries, has announced that a putative shareholder class action filed on April 30, 2019, in the United States District Court, Central District of California (“the Court”), Case No. 8:19-cv-00798-JLS-KES, against the Company and certain of its current and former officers, has been dismissed in its entirety with prejudice, bringing the case to an end.
On April 9, 2019, the Company publicly announced that it would be restating its consolidated financial statements for the fiscal years ending August 31, 2018 and 2017, and for the three months ended November 30, 2018 and 2017, due to inadvertent errors in the accounting for certain shared-settled contingent consideration related to Company’s acquisitions in fiscal years 2017 and 2018, which mistakenly categorized the acquisitions as “equity” instead of “liability.”
The class action plaintiffs had alleged that the Company knowingly committed these errors, intentionally misstated its financial statements, and had therefore violated federal securities laws. The Court disagreed that the plaintiffs’ complaint pled facts to support their allegations and held that the plaintiffs’ allegations instead “fail to allege a strong inference of scienter,” or knowledge of wrongdoing. The Court therefore dismissed the complaint with prejudice and entered judgment in favor of the Company. Although the plaintiffs had noticed an appeal to the Ninth Circuit Court of Appeals, on February 17, 2021, the plaintiffs agreed to dismiss their appeal with prejudice, effectively ending the case.
“We are pleased that the Court agreed so completely that this class action lawsuit was without merit, and granted our motion to dismiss,” said Nick Kovacevich, KushCo’s Co-founder, Chairman, and Chief Executive Officer. “We consistently and truthfully denied wrongdoing in this matter and, for our shareholders’ benefit, are glad to bring this litigation to an end without any payment by the Company. KushCo’s entire management team and Board of Directors take their disclosure obligations very seriously, and we continue to reaffirm our commitment to be as transparent as possible with the investor community.”
