Grapefruit USA announced the execution of a binding letter of intent (“LOI”), entered into on June 30, 2022, by the Company and Diagnostic Lab Corporation of Englewood Cliffs, New Jersey, pursuant to which the Company and DLC will jointly recapitalize Grapefruit and raise $12.5 million of debt financing (including $5.5 million already committed from a qualified construction lender) to:
- Complete construction of the company’s “Mothership” cultivation, manufacturing, and distribution facility in the Coachillin’ Industrial Cultivation and Ancillary Canna-Business Park, located 14 miles north of downtown Palm Springs, California.
- Acquire all of DLC’s assets for a to-be-determined amount of cash and Grapefruit common shares.
- Fund the company’s application for an FDA 510K approval for its patented Hourglass time release Z-POD THC/CBD/cannabinoid infused delivery cream.
- Fund the company’s clinical study to measure the effects of the Hourglass delivery cream on the pain and other symptoms of patients who suffer from the debilitating effects of osteoarthritis.
DLC will additionally arrange Grapefruit’s acquisition of cash-flowing testing labs and provide sufficient working capital and interest payment reserves for Grapefruit to reach positive cash flow.
Implementation of the Transaction is subject to Grapefruit’s completion of due diligence with respect to the various components of the Transaction and drafting and execution of a definitive agreement between the Company and DLC.
The parties plan to retire the $12.5 million of new debt through a public equity capital raise and concurrent uplist to a U.S. or Canadian exchange, as applicable securities regulations permit.
Bradley J. Yourist, Grapefruit’s CEO and co-founder, commented, “Execution of this letter of intent between DLC and GPFT is the next step in Grapefruit’s evolution from a ‘me too’ cannabis company to a medical science-based, canna-focused biotech Company that will develop and obtain regulatory approval for an ever-expanding line of proprietary cannabis products based on the Company’s patented Hourglass technology. Construction of the Coachillin ‘Mothership’ facility at the Coachillin’ Park will secure our balance sheet and provide a reliable source of reasonably priced pharma-quality cannabis flowers for raw material for THC Hourglass products and for distribution in both the U.S. and Canada, as appropriate under any given market circumstances. The 510K approval for the Hourglass technology will facilitate its rapid market acceptance throughout the United States as an approved medical device. Finally, our lab acquisition program will provide rapid revenue growth and expand the Company’s cannabis industry footprint. The parties expect to finalize and execute the definitive agreement before the end of August 2022 and close the Transaction shortly thereafter
Alan Hirsch, Diagnostic Lab Corporation’s CEO and co-founder commented, “We look forward to the anticipated business combination, synergistic sector verticals, and working with the Grapefruit team to build a successful company.”
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