Delta Entertainment Group Inc. (OTC: DENG), a consumer products holding company, recently announced that it signed a letter of intent to acquire Grow Solutions Inc., a development-stage company that intends to lease equipment, distribute products, and provide management services for cannabis growers. While the agreement is signed, there’s no guarantee that it will be successful in closing.
Under the terms of the agreement, Delta Entertainment will become current in its SEC reporting through December 31, 2013, raise $1.25 million in capital, and issue an additional 700,293,957 shares of common stock. The company will also undertake the spin off of its currently operating subsidiaries, including its cosmetics and consumer products holdings in multiple different industries.
The U.S. cannabis industry grew 64% in 2013 and is expected to reach $2.34 billion in size by the end of 2014, according to ArcView Market Research. With additional states expected to legalize the drug over the next five years, the same group projects that the industry could balloon to $10.2 billion in size by 2018. Companies providing ancillary products, like Delta Entertainment, could benefit from these trends.
Recently, a number of different companies have entered the growing equipment space, including GrowLife Inc. (OTC: PHOT), GreenGro Technologies Inc. (OTC: GRNH), and Interactive Health Network Inc. (OTC: IGRW). Many of these companies are looking to build out brick-and-mortar retail locations as well as e-commerce stores to sell throughout the U.S. and around the world in markets where the drug is legal.
Shares of were trading even in early market hours after rising 150% so far this year.
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