On December 3, LiveWell Canada issued a news release announcing a possible merger with Vitality CBD Health Products to create a world-class life sciences company specializing in CBD, one of the first fully integrated companies to address the growing demand for CBD products from hemp and cannabis.
Vitality is a hemp CBD growing and production company while LiveWell is a CBD research, development, marketing and distribution company. Together, they would combine their Canadian and US operations to meet the growing demand for CBD in North America and international markets.
Under the terms of the agreement, Vitality’s shareholders would own 85% of the new business while LiveWell’s shareholders would own 15% of the company. The distribution could be 90% / 10% if Vitality were able to produce 3000kg / day of CBD by 30 June 2019.
On April the 10th. Vitality’s shareholders voted in favor of the merger, while the following day, April 11, 2019, 97% of LiveWell’s shareholders accepted the merger between the two companies, creating the new EUREKA93 company, which will trade under the symbol ERKA. Eureka93 comes from the fact that the facility in Montana is in the city of Eureka, accessible by road 93. With a bit of imagination, the leaders say Eureka, what a good idea …
The final proportion of the agreement ultimately allows LiveWell’s shareholders to own 15% of the shares of the new company. The rest will be held by the shareholders of Vitality (83%) and those of Mercal (2%).
To date, the acquisition of Acenzia (research and development, Windsor) has been completed. Eureka93 is in the process of finalizing the sale of CBD isolate in Tilray (Nasdaq: TLRY) at a rate of 300kg / month starting in the summer of 2019. Other agreements are being negotiated. The adoption of the Farm Act Bill in the United States last December has allowed companies to grow hemp legally. This created a craze for this product and for CBD (non-psychotropic part of Cannabis). In addition, the fact that these products were banned for several years implies that there has been almost no research and development. Eureka93 has a competitive advantage due to its progress in these areas.
The company currently produces about 50Kg / day of CBD at its Montana plant. It is the largest producer in North America for the moment. According to the forecasts of the managers, this production should increase gradually to 100kg / day in Q3 2019 then to 200kg / day towards the end of the year. The Las Cruces plant (New Mexico) is under renovation and is expected to be in operation in Q3 2019 with a potential production of 1000kg / day. It is expected that in 2020, the plant could produce up to 4000kg / day at its maximum operating level.
Eureka93 already has four high-potential customers who are willing to buy a good part, if not all, of the company’s CBD production (CEO’s statement at the April 11 meeting). The price of a wholesale kilogram of CBD ranges from $ 6500 to $ 10,000 per kilogram. Eureka93 will also enter the retail sector with refined products and isolates, profitability being significantly increased
Managers have announced that a request has been made to integrate the NASDAQ. For this reason, the new firm has consolidated the shares of LiveWell Canada at a ratio of 15: 1. In doing so, the company assumes that the share price will remain above US $ 4, the minimum amount required to enter the NASDAQ. It is mentioned that the registration for this stock market exchange could be done in the summer of 2019. In the meantime, it was mentioned during the meeting that, following the results of the votes of the shareholders, the firm had about two weeks of paperwork to be done before submitting it to the Canadian Stock Exchange. In the wording issued by the firm, the latter expects the stock to be listed at the end of April.
Obviously, it is not possible to determine the price of the stock at its next exit, it would be only speculation. However, the company’s management mentions that it would be normal to have downward pressure at the time of opening (statement of the CEO at the meeting of April 11) given the time elapsed since stopping transactions. At the time of the trading stop, LiveWell’s stock traded at $ 0.74 per share. As a result of the consolidation, this equates to $ 11.10 for the new Eureka93 stock (15 times 0.74 = 11.10). There will be approximately 74 million shares outstanding.
Finally, I would like to point out that the AGROTECH bond, a product we currently distribute at Cape Cove Financial Management, has an exposure in Eureka93 (originally LiveWell stock) and is available for some time as a new portion is added to the available capital. This bond will give you a 10% distribution per year for 3 years followed by a profit sharing afterwards where the investor will take 75% of this profit.
I remain available for any questions you may have.