canl cannabis reverse merger cannlabs, inc

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CANLCannabis Reverse

Merger

Disclaimer

This is not legal or investment advice of any kind

Seek competent advice from qualified attorneys and investment bankers

Your situation may vary

The more you know about finance and business, the more you can profit

On Friday the 13th CannLabs, Inc.

announced its reverse merger with SpeedSport Branding

CannLabs trades on the Over The Counter Bulletin Board (OTCQB) under symbol SDSPD until July

10, 2014, when the symbol will be symbol CANL on the OTCQB

Carbon Bond Holdings, Inc., a leading cannabis testing lab,

became a wholly owned subsidiary of CannLabs

CannLabs sold 500,000 shares of Series A Convertible Preferred

Stock for $500,000 and issued five year warrants to purchase

20,000,000 shares of common stock at $0.15

The investor agreed to lend $750,000 in additional funding

in three tranches through November 15, 2014

CannLabs agreed to file an SEC registration statements covering the

resale of the common stock underlying the Series A

Convertible Preferred Stock and the warrants

CannLabs acquired Carbon Bond

for 59,295,000 shares

CannLabs also swapped out SpeedSport Branding

for 111,545,535 shares, leaving it with 65,520,000

shares outstanding

Of these, 87.8% are held by the new shareholders,

9.5% by the old pre-merger shareholders

Another 30,048,077 shares can be issued to the Series A Preferred

Stock on conversion at a conversion price of $0.01664,

and another 20,000,000 shares on exercise of the warrants at $0.15

This compares nicely with the closing price of $1.38. The

preferred stock and the warrants limit conversions to 4.99% of the outstanding stock, which can be

increased to 9.99%

Friday June 13, the stock traded closed at

$1.38, up 369%

110,585 shares were traded

OTCShortReport.com shows that 82,266 shares of this volume was

sold short, or 74.39 %

Presumably much of this short was from market makers forced

to meet the demand after the news

SpeedSport Branding was a development company, a

small motorsports organization participating in road racing

It showed almost $100,000 in shareholders equity,

and a small loss on $22,000 in revenue for the last quarter

It was split off in exchange for the cancellation of stock

Cannabis is a hot item in the OTC market,

so much so that the SEC found it necessary

to issue a warning in May

Despite this warning, adding the stock from the

warrants and the convertible preferred to the outstanding stock and valuing it at $1.38, gives a

market cap of $147 million

If the investor can convert the preferred into common

and sell at $1.38, it turns its $500,000into $41,446,346

Throw in a full conversion of the warrants at $1.38

and you get a $24,600,000 kicker for total proceeds of $66,066,346

on the $500,000 investment

The investor breaks even on its $500,000 investment

if it converts and sells at less than two cents per share

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