Lobe Sciences Ltd. (OTCMKTS:GTSIF) has announced the receipt and signing of a non-binding letter of intent (LOI) with IONIC Brands Corp. The LOI dated November 30, 2020, is for the sale of certain Lobe assets associated with Cowlitz County Cannabis Cultivation Inc. to Ionic Brands.

Lobe selling certain Cowlitz Assets

It is important to note that Cowlitz is among the top licensed cannabis operators/processors in the state of Washington. The assets Lobe is selling to Ionic will include assigning all property leases associated with Cowlitz operations and assigning of Lobe’s option agreement for the acquisition of all outstanding Cowlitz shares. Equally, the agreement entails Lobe assigning all contracts and rights associated exclusively to Cowlitz to Ionic including equipment leases and service contracts.

This transaction is subject to certain customary closing conditions which include satisfactory due diligence from both companies and definitive agreement completion with binding terms for the transaction. The terms will include the finalization of certain assets that Lobe will retain and the Cowlitz assets sold. Also, the transaction has to receive approval from Lobe and Ionic directors and respective boards. There will be share consolidation by Ionic for one new Ionic common share for 4.5 shares of the old common shares. All ionic debentures have to convert into secured equity and the deal is also subject to completion of $2 million concurrent financings.

Ionic valued at C$47 million

The Assets will be sold at around C$23 million which shall be payable through issuance of Ionic post-consolidation common stock before factoring in the impact of Ionic Concurrent Financing. After closing the deal, Lobe is expected to own around 49% of Ionic’s common stock on pre-Ionic and Post-consolidation Concurrent Financing terms. The total capitalization of Ionic Pre-Ionic Concurrent Financing will be around C$47 million.

Lobe had previously announced that it was considering strategic options from Cowlitz to maximize the company’s Value. For the nine months ended September 30, 2020, Cowlitz generated gross sales revenue of around $14.6 million. Lobe is known to generate its revenue through leasing and licensing agreements currently in place with Cowlitz.

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