Creso Pharma has entered into an asset purchase agreement with Canadian life sciences company ImpACTIVE to acquire its assets via newly incorporated subsidiary Creso ImpACTIVE.
Founded in 2019, ImpACTIVE has developed a range of CBD-based products for athletes designed to reduce muscle and joint inflammation without the use of heavy narcotics or prescription pharmaceuticals.
The deal provides Creso with direct access to the sports and recreation CBD market, estimated to be worth US$22 billion by 2022 and C$220 million in Canada alone.
Creso will acquire the assets for C$200,000 (A$216,000), payable in Creso shares priced at A$0.11. The agreement also includes the issue of six million performance shares – three million of which will convert into Creso shares if Creso ImpACTIVE generates C$20 million in gross sales revenue within three years. The remaining three million will convert if sales top C$40 million within five years.
The agreement is subject to ImpACTIVE co-founders Brett Ayers and Kevin Tansey signing employment agreements with Creso ImpACTIVE. Creso plans to hold a general meeting in December 2021 to approve the issue of the performance shares.
It said the acquisition provides it with the opportunity to increase its North American footprint and leverage ImpACTIVE’s distribution and sales channels to drive growth across its Swiss operations.
Non-executive chairman Adam Blumenthal added: “We expect that ImpACTIVE’s range of innovative products and brand ambassadors which will provide Creso Pharma with direct access to an emerging subsection of the global CBD market.
“The group also has established relationships with major US retail groups, which is expected to provide leverage for Creso Pharma as it seeks to grow sales of its own hemp-based CBD products.
“Further, this agreement highlights the company’s ongoing commitment to entering the US market ahead of its proposed dual listing.”
In March, Creso signed a non-binding Letter of Intent with ImpACTIVE to distribute its range of hemp CBD-based human health products, Cannadol and Cannaqix, in Canada and the US.
Meanwhile, Creso has released a prospectus proposing a “bonus issue of one option for every three shares held by those eligible shareholders registered at the record date”.
The company said it was a way of rewarding shareholders for supporting the company, but The Motley Fool explains the options can also act as a potential source of funding, with Creso receiving 25 cents for each bonus option exercised.
While no funds will be raised directly, if all of the almost 642 million options on issue were exercised, the company would receive around A$100 million.
The strategy also removes any “trading restrictions attaching to shares issued on exercise of the bonus options issued” enabling option holders to trade the securities on any ASX market that allows it.