CubicFarms' Special Committee and Board of Directors have approved the lease of FreshHub machinery and equipment to Langley Indoor Produce, of which CubicFarms will have the option to retain up to 97.6% of the equity interest of this entity at the point of closing.
As part of this transaction, CubicFarms will grant a license for the underlying FreshHub intellectual property to Langley Indoor Produce. The use of the license grant will be limited to the indoor, non-containerized implementation of the CubicFarms patented equipment. Ongoing funding of Langley Indoor Produce will come from third-party investors.
The Company's rationale for pursuing this transaction is to allow for the continuation of research and development on the indoor FreshHub system while retaining focus on the HydroGreen business without diverting cash for research and development activities.
Daniel Burns, Chair of the Board of Directors and Special Committee, stated, "The Special Committee is continuing its work to determine the highest value strategic and tactical opportunities for the Company. We believe this transaction will allow CubicFarms to prioritize and maximize the value of the HydroGreen business, protect shareholder interests, and ensure the FreshHub prototype project is able to deliver on its potential for at-scale success using third-party capital."
John de Jonge, Interim Chief Executive Officer of CubicFarms, added, "With our recent HydroGreen machine sales, and our robust HydroGreen sales pipeline, it is important for our management team to stay focused on HydroGreen to leverage this momentum and rapidly achieve positive operating cashflow on the HydroGreen business. This transaction will make this possible while retaining the upside of ongoing FreshHub development."
Following the FreshHub Transaction, Langley Indoor Produce will initially raise up to $1,000,000 through an ongoing private placement of convertible preferred shares. Proceeds from the Private Placement will be used to fund the completion of the FreshHub Validation Project, cover other operating costs of Langley Indoor Produce, and construct FreshHub units, either at separate or existing FreshHub facilities. To the extent Langley Indoor Produce raises the full $1,000,000 financing, CubicFarms will have the option to retain approximately 85% of the equity interest of Langley Indoor Produce.