More reverse merger news from the cannabis sector.
OTC DISCLOSURE & NEWS SERVICE
Imaging3 Update on Execution of Letter of Intent for Reverse Acquisition by Grapefruit Boulevard Investments, Inc.
Press Release | 03/18/2019
Burbank, CA, March 18, 2019 (GLOBE NEWSWIRE) -- Imaging3, Inc. (OTCQB:IGNG, “Imaging3” or the “Company”), a development stage company introducing disruptive technologies in the medical imaging industry, is updating and clarifying last week’s announcement that it has executed a non-binding letter of intent (“LOI”) to be acquired in a reverse acquisition (the “Acquisition”) by a privately held Los Angeles based cannabis company. The firm (identified as the Acquirer in the earlier announcement) is Grapefruit Boulevard Investments, Inc. (“GBI”) based in Westwood, Los Angeles, California. GBI holds California licenses to both manufacture and distribute cannabis products and is fully compliant with all applicable laws and regulations to operate such business. GBI has its extraction facility located in the Coachillin Industrial Cultivation and Ancillary Canna-Business Park in Desert Hot Springs, located on the extension of North Canyon Rd., approximately 10 miles north of the center of Palm Springs. GBI obtained its California licenses in January of 2018 and commenced distribution of cannabis products in June of 2018. GBI’s goal is to become a seed to sale vertically integrated fully compliant cannabis and CBD product Company. As previously announced, on Thursday, March 7, GBI obtained its final permit and clearance from the Desert Hot Springs fire department to commence operation of an ethanol-based extraction laboratory at its facilities. As an update to the previous announcement, GBI intends to commence extraction operations the week of March 25, 2019.
As previously announced, pursuant to the terms of the LOI, the Company and GBI have initiated negotiations intended to result in completion and execution of a definitive equity exchange agreement (the “Agreement”) defining all of the material terms of the Acquisition on or before March 31, 2019. Per the LOI, the Agreement shall provide that upon conclusion of the Acquisition, GBI’s designees shall own 80% of the then outstanding common shares of the Company and the Company’s current shareholders shall own 20% of such outstanding common shares. The Company will also be required to settle all currently outstanding obligations with certain creditors on terms acceptable to GBI, the Company and such creditors. Furthermore, GBI, under the terms of the LOI, was required to obtain a commitment for a bridge loan of not less than $1,250,000.00 to be funded at the closing of the Acquisition and an equity infusion of up to $10,000,000.00 subsequent to closing of the transaction, each from a qualified investor(s), both of which will be applied to the growth of GBI’s cannabis enterprises. During the week of March 11, 2016, the Company was able to obtain such commitments in the form of terms sheets for both a $1,250,000.00 convertible bridge loan with reasonable redemption provisions and a fixed conversion price and the $10,000,000 equity infusion in the form of an equity line of credit at a 15% discount to market price on terms fundamentally acceptable to the Company from investors know to be qualified by IGNG management and counsel. During the same week, the Company commenced settlement discussions with two of its three major creditors which are ongoing. The company intends to open negotiations with its third creditor the week of March 25, 2017.
As previously reported, concomitantly with the successful closing of the Acquisition, all rights to the Company’s intellectual property, assets and funding raised relating to its Dominion imaging technology will be assigned and transferred to a new, private closely-held company (“the Dominion Company”) to be owned by post-Acquisition IGNG, GBI’s designees, current IGNG management and board members, certain other persons currently associated with the Company and new investors in the Dominion Company, pursuant to terms finally negotiated by all of the parties to the Agreement. The Dominion Company will thereafter execute its business plan as previously articulated in IGNG’s periodic reports to the SEC separately from the cannabis operation. In response to a question commonly raised by certain current IGNG shareholders over the past ten days, the company will not be “spinning off” Dominion shares to the current IGNG shareholders due to the disproportionately complicated, expensive and time consuming costs and delays of such a spinoff, but such shareholders will continue to hold an interest in the new Dominion Company by virtue of their ownership of IGNG shares.
On this point, the Company’s Chairman of the Board, Jeffrey N. Peterson, restated his experience-based perspective: “The Company’s management and board have diligently prepared for completion of our planned financing of the Dominion enterprise, and the execution of our vision for an important new value proposition addressing many under-served markets for 3D X-ray imaging technology. However, the explosion of investor interest in the cannabis space has suddenly presented us with an unusual opportunity to leverage the asset of our fully-reporting, SEC current public company structure through the serendipitous confluence of these events which we believe strengthen our likelihood to achieve our vision for the Dominion technology, while at the same offering our current IGNG shareholders a valuable opportunity for rapid appreciation of their current IGNG investment in the form of the post-Acquisition cannabis-focused company, while, at the same time significantly reducing the risk of holding an investment in a behind schedule medical device company.”
On January 22, 2019, GBI announced that its major shareholders Bradley and Daniel J. Yourist had purchased a controlling interest in Lake Victoria Mining Company (OTCPINK:LVCA) with the intent of utilizing LVCA as the corporate vehicle through which to operate its California cannabis enterprise. As part of that announcement Bradley Yourist stated that, among other things, “We are currently in the process of evaluating potential investments by non-affiliate investors seeking exposure to the legally compliant cannabis industry”. Shortly after that release, as LVCA began to explore obtaining financing utilizing the LVCA entity, it became apparent to new LVCA management that the consultant who had advised GBI with respect to the purchase of the LVCA entity and the financing prospects of the combined GBI/LVCA venture had made certain material misrepresentations concerning the LVCA entity and its ability serve as a corporate vehicle through which GBI/LVCA could quickly and compliantly obtain requisite debt and/or equity financing. As a result, GBI management began to explore alternatives and were introduced to IGNG management, with whom the Acquisition was discussed and subsequently agreed upon. With respect to this rapid shift in strategy Bradley Yourist, speaking on behalf of himself and GBI officer, director and co-founder, Daniel Yourist, stated, “Once we obtained new information from third parties, after we had delved into an examination of LVCA, it became apparent to us that an unaudited, alternative reporting company corporate vehicle such as LVCA would be a millstone around GBI’s neck at a time when the Company most required the ability to be able to obtain and react quickly to market financing and acquisition opportunities. IGNG as an audited, SEC current reporting OTCQB company presented a much better fit for GBI’s immediate financing needs and its short and long term goals as time is of the essence in order for a company such as GBI to succeed in the competitive and rapidly evolving cannabis space, as evidenced by the fact that less than a full week after announcement of the LOI, the Company received a commitment for its $1,250,000.00 bridge loan and $10,000,000.00 equity infusion. It has also been of significant value to us have input from John Hollister, current IGNG CEO who has previously been CEO and a Director of Nemus Bioscience, Inc. (OTCQB: NMUS) a biopharmaceutical cannabis company. While CEO of NEMUS, he company obtained $7,000,000.00 of early stage equity financing. We are very pleased that this unexpected opportunity arose for us and are determined to take advantage of it, not only as the founders and management of GBI but for the existing IGNG shareholder base”.
John Hollister, IGNG’s current CEO, stated, “Both IGNG and GBI are working expeditiously to complete the due diligence. I have been particularly encouraged by the response of our IGNG shareholders who, in general, appear to be enthusiastic about the acquisition and who, together with their attorneys, will be affording particularly close attention to the behavior of Alpha Capital Anstalt and Brio Capital Master Fund, Ltd., as they very closely track our progress with all of our existing creditors. We are working actively with all the parties involved to draft and finalize agreements with the funds from whom we have received term sheets for both the $1,250,000 bridge loan and the $10,000,000 equity raise. With the assistance of the funds from whom we have received term sheets, we have identified and this week will commence interviewing law firms to file the S-1 registration statement necessary for the equity offering. In sum we are moving on all fronts to expeditiously draft and finalize the financing documents and the Agreement in order to close the Acquisition as soon as possible.”
Potential investors in IGNG’s common shares are cautioned that there can be no assurances that the Acquisition will ever be closed and that even if it is, there can be no assurance that the Company will be able to obtain the financing necessary to achieve its articulated goals and further that even if such financing is obtained that it will be sufficient for the Company to remain in business.
