UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT
REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of
Report (Date of earliest event reported): January 28, 2015
CANNAVEST CORP.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation) |
333-173215
(Commission File Number) |
80-0944970
(I.R.S. Employer Identification No.) |
2688 South Rainbow Boulevard, Suite B
Las Vegas, Nevada 89146
(Address
of principal executive offices)
(866) 290-2157
(Registrant’s telephone number, including area code)
Check the appropriate box below if the
Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:
[_] Written communications pursuant to
Rule 425 under the Securities Act (17 CFR 230.425)
[_] Soliciting material pursuant to Rule
14a-12 under the Exchange Act (17 CFR 240.14a -12)
[_] Pre-commencement communications pursuant
to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d -2(b))
[_] Pre-commencement communications pursuant
to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e -4(c))
Item 2.02 Results of Operations
and Financial Condition
The information set forth
in Item 7.01 of this Current Report on Form 8-K (“Current Report”), including Exhibit 99.1 attached hereto, is incorporated
by reference into this Item 2.02.
Item 3.02 Unregistered Sales
of Equity Securities
On January
28, 2015, the Company commenced an offering whereby the Company intends to sell up to $24 million of its restricted common stock
in a private placement to accredited investors at a price per share of $2.00 (the “Offering”). On January 28, 2015,
the Company sold an aggregate of 125,000 shares of its restricted common stock pursuant to the Offering to two investors for an
aggregate purchase price of $250,000.
The issuance
of the shares in connection with the Offering was exempt from registration under the Securities Act of 1933, as amended (the “Act”),
in reliance on exemptions from the registration requirements of the Act in transactions not involved in a public offering pursuant
to Rule 506(b) of Regulation D, as promulgated by the Securities and Exchange Commission under the Act.
The information set forth in Item 7.01
below is incorporated by reference into this Item 3.02.
Item 7.01 Regulation FD Disclosure
In connection with the Offering, on
January 28, 2015, the Company disclosed certain information to prospective investors in an offering memorandum (the
“Offering Memorandum”) and during an investor presentation to prospective investors with whom the Company has a
substantive pre-existing relationship. Some of the information in the Offering Memorandum and disclosed in the investor
presentation has not previously been disclosed publicly and is furnished as Exhibit 99.1 in the general form presented in the
Offering Memorandum.
Exhibit 99.1 is incorporated herein solely
for purposes of this Item 7.01 disclosure.
Exhibit 99.1 contains forward-looking statements.
These forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions that
are difficult to predict. Forward-looking statements are based upon assumptions as to future events that may not prove to be accurate.
Actual outcomes and results may differ materially from what is expressed in these forward-looking statements.
The information in Item 7.01 of this Current
Report on Form 8-K ("Current Report"), including Exhibit 99.1 attached hereto, is being furnished and shall not be deemed
"filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act "),
or otherwise subject to the liabilities of such section. The information in Item 7.01 of this Current Report, including Exhibit
99.1, shall not be incorporated by reference into any filing under the Act or the Exchange Act, regardless of any incorporation
by reference language in any such filing. This Current Report will not be deemed an admission as to the materiality of any information
in this Current Report that is required to be disclosed solely by Regulation FD.
The information set forth in Item 3.02
above is incorporated by reference into this Item 7.01.
Item 9.01 Financial Statements and
Exhibits.
(d) Exhibits
| 99.1 | Excerpts from the Offering Memorandum. |
SIGNATURES
Pursuant to the requirements
of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
Date:
January 29, 2015
|
CANNAVEST CORP. |
|
|
|
By: |
/s/ Michael Mona, Jr. |
|
|
Michael Mona, Jr. President and Chief Executive Officer |
Exhibit 99.1
The following reprints in their entirety
certain sections of the confidential offering memorandum which contain previously undisclosed information.
Operating Summary
A five-year operating forecast is below.
(in thousands) | |
| 2014 (est) | | |
| 2015 | | |
| 2016 | | |
| 2017 | | |
| 2018 | | |
| 2019 | |
Revenues: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Oil Sales | |
| 8,416 | | |
| 16,869 | | |
| 29,364 | | |
| 46,983 | | |
| 70,474 | | |
| 98,664 | |
Product Sales | |
| 1,815 | | |
| 4,986 | | |
| 12,875 | | |
| 20,601 | | |
| 30,901 | | |
| 43,261 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total Revenues | |
| 10,231 | | |
| 21,855 | | |
| 42,240 | | |
| 67,584 | | |
| 101,375 | | |
| 141,926 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
COGS | |
| 4,297 | | |
| 9,260 | | |
| 19,405 | | |
| 35,819 | | |
| 52,715 | | |
| 72,382 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Gross Margin | |
| 5,934 | | |
| 12,595 | | |
| 22,835 | | |
| 31,764 | | |
| 48,660 | | |
| 69,544 | |
| |
| 58.0 | % | |
| 57.6 | % | |
| 54.1 | % | |
| 53.0 | % | |
| 52.0 | % | |
| 51.0 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
SG&A | |
| 4,579 | | |
| 6,578 | | |
| 8,156 | | |
| 8,971 | | |
| 9,868 | | |
| 10,855 | |
R&D | |
| 781 | | |
| 976 | | |
| 1,059 | | |
| 1,165 | | |
| 1,281 | | |
| 1,409 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
EBITDA | |
| 574 | | |
| 5,040 | | |
| 13,621 | | |
| 21,628 | | |
| 37,511 | | |
| 57,279 | |
The worldwide CBD opportunity is included
in the cannabis market, which is estimated to have a $50 billion market potential in the United States alone over the next 5-10
years. The worldwide market opportunity is estimated at $200 billion over the same timeframe. The immediate addressable CBD market
is currently comprised of the following channels:
| · | Medical Marijuana Dispensaries (approximately
2,500 locations currently in U.S.) |
| · | Early adopters – e-commerce sites |
| · | Early adopters – retail brick &
mortar (Pharmaca) |
Within 1-2 years, we believe the CBD market
will expand significantly with the addition of the following channels:
Cash Flow Summary
A five-year cash flow including the financing
source and use of funds is below.
(in thousands) | |
| 2015 | | |
| 2016 | | |
| 2017 | | |
| 2018 | | |
| 2019 | |
Source of Funds | |
| | | |
| | | |
| | | |
| | | |
| | |
EBITDA | |
| 5,040 | | |
| 13,621 | | |
| 21,628 | | |
| 37,511 | | |
| 57,279 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Proceeds from Financing | |
| 24,000 | | |
| – | | |
| – | | |
| – | | |
| – | |
Total Source of Funds | |
| 29,040 | | |
| 13,621 | | |
| 21,628 | | |
| 37,511 | | |
| 57,279 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Use of Funds | |
| | | |
| | | |
| | | |
| | | |
| | |
Financing costs | |
| (1,500 | ) | |
| – | | |
| – | | |
| – | | |
| – | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Inventory purchases | |
| (17,000 | ) | |
| (6,000 | ) | |
| (6,000 | ) | |
| (6,000 | ) | |
| (6,000 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Working capital change | |
| (3,642 | ) | |
| (3,498 | ) | |
| (4,324 | ) | |
| (5,732 | ) | |
| (6,858 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
PP&E/Other | |
| (500 | ) | |
| (1,000 | ) | |
| (1,100 | ) | |
| (1,200 | ) | |
| (1,300 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Estimated Corp tax | |
| (1,616 | ) | |
| (5,048 | ) | |
| (8,251 | ) | |
| (14,604 | ) | |
| (22,512 | ) |
Total Use of Funds | |
| (24,259 | ) | |
| (15,546 | ) | |
| (19,675 | ) | |
| (27,536 | ) | |
| (36,670 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
BB - Cash | |
| 1,500 | | |
| 6,282 | | |
| 4,357 | | |
| 6,310 | | |
| 16,284 | |
EB - Cash | |
| 6,282 | | |
| 4,357 | | |
| 6,310 | | |
| 16,284 | | |
| 36,893 | |
The primary cash flow needs are to finance
inventory purchases and finance expansion of revenues through increased credit sales (working capital).
CannaVest Strategic Plan –
The next 5 years
1. Increase brand
awareness of Company’s proprietary consumer products and raw materials – “Mainstream CBD as a dietary and beauty
product ingredient.”
2. Expand the market
of innovators, formulators, product development and consumers of CBD products worldwide.
3. Invest in Company
infrastructure to produce, market and distribute CBD products worldwide.
4. Expand our internally
developed product offerings containing natural, hemp-based CBD.
5. Expand our worldwide
network of hemp farmers.
6. Establish the
infrastructure to grow hemp domestically.
7. Scale-up our
manufacturing process and QA/QC systems to ensure the safety, quality and supply of CBD for the expanding worldwide customer base.
8. Continue to monitor
the industry and evaluate strategic acquisitions that will provide additional capabilities to maintain our dominant position in
growing, harvesting, and processing hemp-derived products.
Financial Information
The Company is seeking to raise $24 million
to expand operations and finance working capital needs. The two most significant working capital areas include inventory purchases
($17M in 2015) and financing of working capital ($3.6M in 2015). Our ability to finance our working capital needs will allow the
Company to maintain its dominant supply chain position in the industry and to further expand the market by increasing credit sales.
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