Debra BorchardtMarch 28, 2018
GB Sciences, Inc. (GBLX) has signed a letter of intent (LOI) to purchase NevadaPURE’s Las Vegas operation for $28 million in cash and the assumption of approximately $5 million of outstanding liabilities.
The purchase price is only two times sales when considering that NevadaPURE has an annualized sales run rate of over $16 million. This is based on the company’s sales since the state of Nevada began selling recreational marijuana. In a company statement, GB Sciences said, “This sales multiple compares with GB’s current price-to-annualized-sales multiple of 16, and a typical multiple of 60 or much more for publicly traded cannabis companies whose sales are similar to GB’s.”
The NevadaPURE acquisition will also provide GB Sciences with three additional licenses in the state, including a cultivation license, a production license, and a dispensary license. The company believes that margins will grow as the deal will effectively reduce the need for a middleman between the customer and the company.
In addition to the licenses, the acquisition will allow GB SCiences to take over the lease of a 72,000 sq. ft. building, which is currently producing 350 pounds of dried cannabis monthly, with a growing capacity that can be expanded to allow 12,000 pounds per year. The building also contains ample space to accommodate partnerships that will increase royalty revenues.
Management Comments
“We have taken a major step toward capturing a lead position in the Nevada market,” said Chief Operating Officer Kevin Kuethe. “With our expertise in the science of cultivation, we plan on significantly improving the quality of the NevadaPURE facility’s output, as well as dramatically increasing the sales revenue.”
Chief Executive Officer John Poss said, “We are really pleased and excited by this deal. Gaining 100% ownership of a dispensary, picking up $16 million in annual sales, providing additional capacity and space for new partnerships/brands – I can’t think of anything wrong with that!”
Stock Performance
GB Sciences was lately trading at 48 cents, down from its 52-week of $1.56.
