The magnitude of those payments (“Property Interests”), due from these cannabis operations, is approximately $25,000,000 per year, collectively. Yet, the corresponding combined cost to construct these facilities is only $5,750,000. The rights to those payments (Property Interests), were assigned by the participating investors to the participating publicly traded companies, in exchange for stock, at a 12 ½% discount to the market, based on only one annual payment, and valued immediately prior to the respective assignments (since the California transaction was only recently closed, that assignment has not yet taken place, but will be accomplished at approximately the same pricing). The issuance of shares will take place over time, lessening the amount of stock placed into the general market place.
Pursuant to Section 3(a)(10) of the Securities Act of 1933, the Property Interests, were conveyed to the public companies in exchange for stock in such companies, approved by a court of law, following a hearing, in the context of some litigation against one of the publicly traded companies, which makes those shares freely tradable. This structure encourages investors to furnish the capital necessary to construct the cannabis cultivators and processors. Additionally, the investors are obligated, under court order, to contribute to an escrow account so that at least 90% of the stock sales proceeds must be contributed to the build-out of the cannabis operators, until the investors obligations are fulfilled and the farms are fully constructed, paid for and operational. In short, the public companies will receive $3,000,000 of annual income, in perpetuity, under this plan.
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