International Cannabrands has signed a binding letter of intent ("LOI") with BioNeva Innovations of Carson City and other related asset holders, to acquire a fully-licensed cannabis cultivator and related assets located in Carson City, Nevada that includes an 8,250 sqft cannabis greenhouse.
Steve Gormley, CEO of the Company shared: "My team and I are extremely pleased to be acquiring BioNeva. The addition of cultivation to our existing capabilities should contribute significantly to our earnings and should provide better EBITDA margins for our current and future brands."
The LOI provides that the Company will purchase all issued and outstanding units of three entities, namely, BioNeva Innovations of Carson City, Sierra Superfoods and DB3 Management, in exchange for the issuance of 28,805,833 shares of the Company and a vendor take-back loan with a principal amount of USD$3.25 million (the "VTB Loan"). "The VTB Loan bears interest at the rate of 5% per annum and the principal amount is due and payable on 12/31/24," the team with the company explains. "The VTB Loan is interest-free for the first two years, after which point interest will be payable quarterly through the issuance of shares of the Company at an issue price equal to the volume-weighted average trading price of the ICI shares for the 20 trading days prior to each quarterly interest payment date."
"BioNeva is a cannabis cultivator located in Carson City, Nevada. BioNeva is fully operational and requires no additional capital for buildout. The facility is currently growing product and is expected to begin producing revenue towards the end of Q2 2020," they further explain. "The projected yield of the BioNeva facility is approximately 44kg (100 pounds) per month. BioNeva currently holds cultivation facility licenses for both medical and recreational marijuana issued by the State of Nevada. Its cultivation operations are conducted in an 8,250 ft2 cannabis greenhouse facility situated on 2.03 acres of leased land near Carson City, NV. The greenhouse flowering canopy is 4,000 ft2 and incorporates a highly efficient greenhouse roof glazing material, as well as auxiliary lighting systems that require minimal power consumption. The facility is currently managed by DB3. Sierra holds the hard assets and equipment associated with the BioNeva cultivation facility. DB3 currently manages the cultivation facility at Carson City as well as another unrelated cultivation facility under development in Washoe County, NV. DB3 derives revenue from its management of the Washoe facility of a minimum of USD$15,000 per month (with potential for 30% of net profits). The Washoe facility has been designed in a 20,000 ft2 greenhouse facility with the capacity for approximately 148kg (325 lbs) per month. The Washoe facility is still under construction but is expected to be operational in Q4 of 2020 and generating revenue by Q1 of 2021."
According to the company, the LOI also provides for the following conditions:
- a due diligence condition in favour of both the Company and the vendor parties;
- receipt of all necessary regulatory and third party approvals; and
the preparation and execution of definitive agreements.
- Closing of the acquisition is expected to occur on or before February 29, 2020.
While the acquisition does not constitute a related party transaction for the purposes of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions, Bob Yosaitis, a director of the Company holds a 25.3% interest in the units of BioNeva, a 25.3% interest in Sierra and a 40% interest in DB3. Mr. Yosaitis abstained from voting in connection with the approval of the transactions.
Bob Yosaitis, a director of the Company and a holder of BioNeva, Sierra and DB3, added: "My partner and I believe in the corporate strategy and growth of INCB and have offered favorable deal terms reflective of our confidence in INCB's near and long-term objectives."
Dan Larkin, a principal of BioNeva, Sierra and DB3 commented: "We have been impressed with the strategy and vision behind International Cannabrands. This partnership further allows us to leverage this turnkey facility and to expand the INCB brand and product offerings made available in Nevada."
Steve Gormley, concluded: "As we're seeing the effects of a seismic downturn in the cannabis sector, now is the time to pick up viable assets that still have significant enterprise value and can be bought at a massive discount. This acquisition falls squarely into the Company's corporate development strategy of acquiring select, highly-profitable value chain investments to facilitate brand growth, enhance margins and bolster cash flow."
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