International Goldfields' (ASX:IGS) acquisition of an 85% stake in WinterGarden Biosciences, a Uruguayan medical cannabis company, is on track after signing a definitive agreement with Jardin de Invierno SA.
IGS shares should gain a fillip on the news.
Consideration is the issuance of IGS shares worth $8 million or 51% of the issued capital of IGS at post-equity raising and post-consolidation valuation.
Options will also be issued to acquire 10% of IGS shares at the price for shares to be issued to the public.
IGS will seek to raise $2,000,000 with minimum net proceeds to the company of $1,000,000 at completion of the raising.
WinterGarden can appoint three nominees to the IGS board, and IGS will retain two board members on completion.
Additionally shareholder approvals will be required including any approvals required to re-comply with the admission and quotation requirements of the ASX.
The two companies are finalising strategic funding needs for WinterGarden and transaction completion.
These discussions are at an advanced stage and IGS expects to finalise them in the coming weeks.
Uruguay first mover advantage
Uruguay was the first nation in the world to federally legalise research and development, as well as cultivation, sale and consumption of non-synthetic cannabinoids.
Winter Garden possesses a plantation site, corporate headquarters and a laboratory in Uruguay and aiming to take advantage of these new laws and regulations to become one of the first companies in the world to legally develop cannabis products.
Of significance, Federal Uruguayan laws allow the legal use and research of cannabis, but also the use of cannabinoids containing a higher percentage of Tetrahydrocannabinol (NYSE:THC), which is the psychoactive substance found within cannabis.
The higher THC content will assist Winter Garden to develop products that will provide clinical relief for a variety of neurological ailments. The ailments which could be improved by medicinal cannabis products are wide-ranging, from depression and post-traumatic stress disorder to anti-inflammation and neuropathic pain.
It has all required licences and infrastructure in place to enable this objective to be met.
WinterGarden is seeking to grow, research and produce cannabis plants containing a THC content of about 1%.
Globally, growth and research on cannabis with high levels of THC content is difficult. This has altered every aspect of the plant to the point that it offers little useful research benefits.
As a result, only synthetic compounds from plants can be utilised for research and these are largely ineffective and
inadequate for both research as well as pharma-grade medical applications.
Significant advantages under Uruguayan law
WinterGarden has comparative advantages based under Federal Uruguayan law including:
- To conduct Research and Development on the natural levels of THC and Cannabinoids;
- Can undertake invivo, invitro, clinical and phase 3 clinical trials as well as patent the resulting products in a relatively faster time frame;
- Permitted to register and patent its entire product line (including plant varieties, extraction methods and delivery systems) to create a fully licensable and patent protected product lines,
- Patent Process at a cost significantly less than competitors,
- Scale-up production of its extract, derivative and delivery products in its private laboratory, greenhouse and farm, including its vacant seed process facility, within months.
- Import and export licences for cannabinoid products.
IGS Director, David Tasker, commented on the agreement reached: "We are pleased to have formally recognised this exciting transaction with WinterGarden and we now expect to build real momentum around the transaction as we rapidly move closer to completion.
"WinterGarden have operationally made significant strides forward in recent months, which we expect will gather further momentum with certainty surrounding the transaction and funding now occurring."
Proactive Investors is a global leader reporting financial news, media, research and hosts events for listed emerging growth companies and investors across four continents.