Pervasip Corp. (OTCPK: PVSP) is spinning off its cannabis company Artizen after struggling to get the financing it needed. Pervasip acquired Artizen in September 2021 when its share prices were higher and the company secured a $3 million preferred equity financing on fixed price conversion terms. However, CEO German Burtscher said in a letter to shareholders that an equity infusion was still needed and hoped that by spinning Artizen out to the OTC Market Place, it could justify a valuation of $50 million.
The company said it would post audited financials post Artizen spin-out and begin the process of uplisting to OTCQB. Pervasip said Washington-based Artizen had sales of $15 million in 2022.
Pervasip said that during 2022, it managed to rationalize the business of Artizen by cutting costs, adding to its executive team, and expanding its premium brand collection. The company said it identified growth opportunities for licensed wholesale and retail operations in Washington and several other states to establish Artizen as a vertically integrated multi-state operator.
While Pervasip couldn’t get the financing it wanted, the company did say that it was able to complete $2 million in non-dilutive financing during 2022 and kept new common stock dilution to less than 10% of Pervasip’s outstanding common shares.
Artizen Spin-Out Details
The letter to shareholders stated, “Critically, and in contrast to Pervasip’s current capital structure, the structure of the spin-out transaction will not include convertible securities of any kind, and it will result in Artizen having 100,000,000 fully diluted issued and outstanding common shares upon completion. 15,000,000 of those shares will be distributed to Pervasip’s common shareholders of record on the record date of the spin-out transaction. The remaining 85,000,000 shares will be issued to Pervasip’s preferred shareholders of record as of the same date.”
It went on to say, “While Pervasip common shareholders of record at the spin-out closing date will collectively receive 15% of Artizen’s common shares in addition to keeping their existing Pervasip common shares, Pervasip’s Series K preferred stock will be restructured immediately after completing the Artizen spin-out to reduce the applicable conversion rights from 85% of Pervasip’s fully diluted issued and outstanding stock to 20%. Importantly, that 20% then will also absorb the full impact of all other Pervasip convertible equity and debt securities. As a result, in addition to receiving 15% of Artizen in the spin-out transaction, Pervasip’s common shareholders will collectively hold 80% of Pervasip’s fully diluted shares immediately after the spin-out transaction instead of the current 15%.”
Despite the lack of financing success at Artizen, Pervasip said it was continuing to look at other acquisitions.
The letter stated, “After months of careful research and analysis, we have determined that there are extraordinary highly profitable opportunities in water, including remarkable new technologies to improve pre-existing water production methods, and acquiring, rolling up, and upgrading existing cash flow producing water production assets. Further, while cannabis cultivation is certainly a target channel for commercialization of new water production technologies and methods, the market is far larger.”
Bertscher wrote, “Our focus at the new Pervasip after the Artizen spin-out will therefore be on (1) negotiating acquisitions for a select set of sufficiently commercial technologies and cash flow producing assets, (2) providing initial capital to build projects based on those technologies and assets, (3) acquiring the management, technical staff, and other personnel needed to operate and grow with those assets, and (4) yes, renaming the company to better reflect Pervasip’s new mission.”
Thus, we are extremely excited about the prospects of the Artizen spinout and Pervasip moving forward, both of which will be positioned to maximize shareholder value while eliminating all existing sources of dilution.
As mentioned before, Pervasip will also have and eventually to NASDAQ. This is an exciting time for all of us, and I urge you to be on the lookout for announcements over the coming weeks and months.