CropLogic leveraging booming US hemp market
Everything appears to be coming together for award-winning global agronomy, farm management and agtech company, CropLogic Limited (ASX:CLI).
The company has planted 500 acres of CBD-producing hemp biomass at its trial hemp farm in central Oregon. It has also embarked on a joint venture program to grow an additional 16.6 acres of premium trimmed flower hemp.
This trial farm provides a platform to trial a variety of hemp genetics and growing environments and enables CropLogic to showcase its agronomy, farm management and agtech skill set including its leading product CropLogic realTime.
CropLogic realTime was developed with the expertise of leading agronomists, leveraging over 30 years of research. The hardware technology monitors and tracks key crop metrics, such as soil moisture and irrigation, and converts observations into data 24/7. This information is then collated and displayed in a user-friendly application called CropLogic GrowerView, which provides actionable insights for users to make cost-saving decisions.
As the Hemp Trial Farm project progresses, so does the interest in CropLogic in the form of sales enquiries from customers as well attention from investors.
Since March, the stock is up more than 600%, rising from 1.1 cent per share to 7.9 cents today.
Prior to entering the industrial hemp space, following the passing of the 2018 Farm Bill which removed hemp from the scheduled 1 controlled substances list, CropLogic was already an award-winning global agronomy, farm management and agricultural technology company.
It provided growers of a variety of irrigated crops with digital agricultural technology expertise based upon scientific research and delivered with cutting-edge technology – science, agronomy and technology interwoven into an expert system for decision support.
After launching its product into Washington State, USA in 2017, CropLogic is currently servicing a significant portion of horticultural growers in this region, with a market share as high as 30% in some crops.
Bridging loan secured
The company today announced that it has negotiated the terms for a pre-revenue bridging finance loan of US$2 million with its existing lender, Atlas Capital Markets.
The funds will provide pre-revenue bridging finance to cover costs of CLI’s Hemp Trial Farm through to the processing and sale of the product in November.
This loan is further to the convertible note agreement entered into with Atlas in May 2019 that included a provision for a second tranche of up to 2,000,000 convertible notes. The Bridging Finance Loan will be in place of this second tranche and will be available for draw down as soon as conditions are satisfied.
Upon draw down under the facility, CLI will issue 8,947,057 options to Atlas exercisable at A$0.12 with a three-year term. Atlas has elected to convert US$750,000 of the amount outstanding under the May Note for the issue of 18,502,067 shares at A$0.06 per share.
CropLogic CEO James Cooper-Jones explained that the market’s response to CropLogic’s Hemp Trial Farm has enabled it to negotiate the terms of this bridging finance
The share price is up more than 50% since entering into the May Note resulting in the conversion of part of the original note, saving the company some US$750,000 in cash repayment.
The loan conversion confirms the noteholder’s confidence and re-rating of CropLogic. The new bridging finance should de-risk the Hemp Trial Farm by providing contingency funding for the company through to compliance testing and harvest.
Supply agreement in place
The announcement today follows news on Tuesday that the company has secured a supply agreement with a new industrial hemp processing facility, Deschutes Labs, that’s located in Central Oregon, USA.
Under the supply agreement CropLogic’s wholly owned subsidiary, Logical Cropping LLC, will supply biomass in weekly allotments beginning 20 October 2019.
The total value of the supply agreement is US$10,500,000 (A$15.4M), provided that these deliveries are completed, with payment to be made after each delivery, in US dollars.
Keep in mind that even after the company significant share price run over the past five months the company still has a market capitalisation of just over A$30 million.
Deschutes Labs is a reputable CBD wholesaler offering quality, consistency, and accountability.
It is operated by the industry's best — boasting an extraction team with over a decade of professional experience, having worked in the CBD and extract industry and with a track record of success in the cosmetics industry, including the successful marketing of retail products.
Its new state of the art industrial hemp processing facility is due to commence operations next month, with a phase 1 processing capacity of over 10,000 lbs per day.
For CropLogic, the agreement establishes it as a viable producer and assists in developing credibility amongst other hemp farmers that it is pitching to.