Sometimes you just need a little nudge.
Remember a few days back, when I wrote about bumping into the Liberty Leaf (LIB.C) crew, and that they looked pleased with themselves. I also wrote that they needed to get some definitive news out, lest they be left behind by the pack, and that even though they were a client of ours, we were getting a bit too much crap from folks for their lack of activity?
Yeah, well they heard.
“[Liberty Leaf] announced today that it has entered into a letter of intent (“LOI”) to purchase a 27.5% interest in GR8 Track, Inc., a private California corporation licensed to produce cannabis for medical use.”
Whaaat? Just who are these GR8 people?
Oh, they only generated $12 million in revenue in 2016.
They’re the same Cannabis Botanical Group (CBG) Liberty pointed its MOU powers at late last year, right about the time the naysayers piled on to claim the MOU was bullshit and the company didn’t exist, leading to a sell-off of the stock.
Well it exists. It just exists as part of GR8 Track.
“[This] furthers our November 2016 Memorandum of Understanding with CBG, a licensed cannabis cultivator that is part of the GR8 Track group,” said LIB boss Will Rascan in a news release Thursday.
On the grow side, there’s this:
GR8 Track’s permitted 22k sq. ft of blooming plant canopy enable production to meet all the needs of its dispensary partners. When all dispensary distribution has been fulfilled, GR8 has established additional connections with cannabis product creators and enhancers, who provide a wide variety of other medical cannabis choices to patients in the GR8 dispensary network. The current production facility is profitable.
Yeah it is. $12m in revs last year.
GR8 produces 32,000 cloned plants per month, with the sales generating approximately US $2.5 million in revenue annually. With current developments both within the company and the cannabis industry, GR8 anticipates to be able to produce and sell 200,000 or more clones a month (equal to approximately US $16.8 million in revenue annually) without impinging on supplies and sales strategies for dispensary patients.
No, YOU shut the f**k up.
Let’s get to the deal itself.
Under the LOI terms, Liberty Leaf can purchase such amount of shares representing a 27.5% interest in GR8 by issuing US $1,500,000 worth of Liberty Leaf common shares, with US $600,000 issuable upon the execution of a definitive agreement and US $900,000 issuable over a series of certain milestones achieved by GR8.
In addition, Liberty Leaf shall be required to loan GR8 an aggregate US $1,500,000, repayable within two years of Liberty Leaf completing the final milestone share issuance. This is to be used towards previously disclosed capital expenditures for the GR8 business, including without limitation, GR8 tenant improvements, equipment, licensing and engineering, or as otherwise directed by Liberty Leaf.
The definitive agreement is subject to a final 60 day due diligence period and Liberty Leaf completing a minimum financing of CDN $500,000 gross proceeds. All shares issued pursuant to the LOI shall have a 4 month and 1 day hold period.
So yeah – a $1.5m loan, and $1.5m in paper. That’s all, for a 27.5% stake of a company that is running 8-figure revs.
Now, this is still an LOI, which is better than an MOU, but not in any way definitive. Yet.
But when we poked LIB in the chest, LIB came back with documentation, brother. Respect.
— Chris Parry
FULL DISCLOSURE: Liberty Leaf is an Equity.Guru marketing client.