Cannabis Global, Inc. has acquired a stake in Natural Plant Extract of California, Inc. (NPE), which operates a licensed cannabis manufacturing and distribution business operation out of Lynwood, CA.
NPE owns a Type 7 California Manufacturing License as well as a California Distribution license. Under the terms of the agreement, which closed on Aug. 31, 2020, Cannabis Global is purchasing 18.8 percent of Natural Plant Extract's outstanding capital stock.
"This is a significant agreement for Cannabis Global, as it provides the company with further penetration into the important California market, which is valued at billions of dollars per year," said Cannabis Global CEO Arman Tabatabaei. "We believe we create significant added value for our shareholders and new synergies by combining our managerial talents and technologies with the licenses and marketplace opportunities of NPE. We have aspirations of becoming a major distributor and manufacture of our cannabis products in California. NPE is ahead of most of the competition in the state in terms of permitting, build-out and licensing."
Under the terms of the agreement, which will be further explained in an upcoming filing with the Securities & Exchange Commission, Cannabis Global will pay the seller 27 monthly payments of $20,000 and a long-term note for $1.5 million which can be converted to common shares in the company at a later date. The total purchase price is $2.04 million.
As a result of the acquisition, Cannabis Global expects to book over $2 million of net tangible assets as of the end of the Aug. 31, 2020 fiscal year, likely allowing the company to become "penny stock exempt" based on the OTC Markets guidelines and to be eligible for the up-listing of its common stock trading venue.
Cannabis Global says this investment will allow for faster expansion into important distribution channels for California and speed market penetration of several internally developed cannabis-related technologies, while meaningfully expanding the company’s asset base. NPE operates as a distributor and is completing the build-out of its manufacturing facility, which is expected to be completed and fully operational in the first quarter of 2021.
"We see many applications for our technologies within the regulated THC-oriented marketplace,” Tabatabaei said. “Without access to partners with the proper licenses, we have been limited only to the hemp and CBD marketplaces. We expect this new relationship and equity stake in NPE to significantly change this dynamic allowing us more freedom in introducing our cannabis technological innovations to the very active California marketplace."
Cannabis Global has a growing portfolio of intellectual property, having filed six patents in the areas of cannabinoid delivery systems and cannabinoid polymeric nanoparticles. The company markets its consumer products under the Hemp You Can Feel brand name. Cannabis Global launched its Project Varin early in 2020 to develop new delivery methods for rare cannabinoid tetrahydrocannabivarin (THV-C) and to develop products based on this cannabinoid.