CV Sciences Inc (CVSI)

[Det_Robert_Thorne]

No, I don't think they stole Phytosphere

IMO the deal was designed to do a few things that required a high initial sales price:

1) Let Medical Marijuana -- the seller -- use the $35M deal price to inflate its 2013 revenue for their 2013 guidance. Once it was noted that they couldn't account for it as revenue, but as extraordinary income, the loss of that $35M from the revenue line made the guidance look foolish.

2) Make CANV look like a player that could pay $35M

3) Allow Medical Marijuana to show the stock from the deal as a pretty hefty investment asset on the balance sheet

4) Float the Medical Marijuana share price high enough that CANV's CEO could sell his MedMar shares for much more than he paid for them, giving him the cash to form Roen Ventures, which then loaned the money to CANV in the form of a convertible loan, which will now make Roen the largest shareholder

5) Since CANV made part of the payment in cash, Med Mar gets a source of much needed cash without having to dilute its share count even further

Assuming that CANV pays Med Mar $3M in cash and $32M in shares, with the $4.50 - $6 "lock", Med Mar will end up with about 5.5M shares. If they sell those shares for $1 at the time of the offering, they'll see about $8.5M, which was probably a fair price for Phytosphere, because even though they valued the CBD inventory at $8.7M at the time of the deal, CANV valued it much, much lower ($525K) in their 1Q/13 10-Q, I think because Med Mar valued it at end-customer prices, while CANV valued it as unrefined CBD oil.

So no, I don't think that Phytosphere was stolen. In fact, I think that this was the plan all along.