CLS Holdings USA Inc (OTCMKTS:CLSH) Building Shareholder Value

On June 30, 2017, CLS Holdings USA Inc (OTCMKTS:CLSH) announced a non-binding Letter of Intent with privately owned Pure Harvest Cannabis Producers, Inc. of Las Vegas, Nevada. The market pushed up the share price on high volume. The move returned incredible returns to shareholders who correctly saw in previous months that the company was seeking transactions to provide value to them. The debt restructuring efforts announced three months ago and the conversion of debt to equity that insiders executed on June 7, 2017 were clear signs of the current strategy of CLSH. Working for shareholders seems to be the goal right now. Have a look at the market action.SourceCLS HoldingsCLSH was founded on March 31, 2011. The business entity has gone through mergers and acquisitions. If you don't know the current name of the company, you may remember the following ones: Adelt Design, Inc., CLS Labs, Inc., CLS Merger Inc.The company operates in the growing marijuana industry. More specifically, CLSH has a patent "pending proprietary method of extracting cannabinoids from cannabis plants and converting the resulting cannabinoid extracts into concentrates such as oils, waxes, edibles and shatter". What can be this patent useful for? The concentrates generated using this method can be ingested through "vaporization via electronic cigarettes (“e-cigarettes”), and used for a variety of pharmaceutical and other purposes".SourceThe company expects to generate revenues through licensing, fee-for-service, and joint venture arrangements. However, the company has not been able to generate revenues yet.The Letter of Intent - What happens next?The Letter of Intent was announced on June 30, 2017. According to the press release, Pure Harvest Cannabis Producers, Inc. is the company that may acquire CLSH. What do we know about this company? It seems to be a direct competitor of CLS Holdings. Like the company, it obtains revenues through licenses:

"Pure Harvest (www.PureHarvestCannabis.com) is a science-based medical cannabis company led by a team of respected veterans in business and in the cannabis industry. Pure Harvest plans to become a licensed vertically integrated cannabis business involved in all aspects of the cannabis cycle including plant science, cultivation, production, medical and recreational dispensaries, and delivery." Source

Is it the first time that Pure Harvest acquires other marijuana businesses? We don't think so. In the press release, it was stated that Pure Harvest has recently signed two non-binding Letters of Intent to acquire two high potential cannabis verticals that operate in Nevada. This company is becoming an M&A killer in the sector. The company could grow astonishingly in the following years if the strategy works out and it can integrate all the businesses acquired.Is the acquisition a sure thing? No, the Letter of Intent contains a number of conditions and contingencies, and due diligence conditions that both parties will need to fulfill. The companies may announce when new conditions are waived. The share price jumped when the letter was announced. Hence, it is expected that the share price will jump when these announcements are made. To be informed, we encourage market participants to subscribe to our newsletter.CLS Holdings is seeking valued-added transactionsJeffery Binder, the Chairman of CLSH, explained that the company has been looking for transactions.

"We have been seeking a value add transaction with a company involved in the production and/or distribution of cannabis and are pleased and excited about the potential the Pure Harvest transaction offers our shareholders. We believe that Pure Harvest has an experienced team with strong potential to emerge as one of the most dominant cannabis operators in the Western US." Source

In our opinion, the management did not like the share price of the company and has been trying to push it up. How? CLSH tried recently several transactions. On June 7, 2017, insiders converted $2.7 million of debt to equity. Chairman and CEO, Jeff Binder, said the following:

""Since inception, we have invested $4.5 million into the company and we remain committed to building something special for all our stakeholders. We continue to expand our search for partners and venues where we can exploit our proprietary extraction and conversion technology. Additionally, we are exploring acquisition opportunities with a number of exciting cannabis related companies." Source

We believe that the CEO tried to seduce market participants with these announcements. The fact that insiders preferred to hold equity instead of debt means that their interests are aligned with those of shareholders. In addition, on April 5, 2017, it was announced that the company had decided to restructure its debt. This is another transaction conceived to reduce the financial risk of CLSH. It adds value to shareholders.ConclusionCLS Holdings has been trying to find a powerful partner to work with for a long time. It seems that Pure Harvest is what the company was looking for. The deal is not finished yet however. The companies announced a Letter of Intent, thus the acquisition contract has not yet been signed. Both companies still need to negotiate a definitive agreement. For that reason, we believe that readers will do good by checking the company's news often. The announcement of the Letter of Intent made the share price jump, so a definitive agreement may make the share price increase even more. To sum up, be alert on this one.We will be updating our subscribers as soon as we know more. For the latest updates on CLSH, sign up below!Image courtesy of Steve Leverett via FlickrDisclosure: We have no position in CLSH and have not been compensated for this article.