Organto Agrees to Sell Colombian Cannabis Subsidiary

Published: June 28, 2019

Organto has entered into a Share Purchase Agreement to sell its shares of Medicannabis S.A.S., to Xebra Brands Ltd. for a combination of shares of Xebra, cash and forgiveness of debt. Prior to this Agreement, Organto owned 100% of the outstanding shares of Medicannabis, a privately held Colombian company focused on the development of medicinal cannabis. Xebra is an emerging, privately held Canadian cannabis company developing high-margin cannabis-based consumer products, with a major focus on cannabis infused beverages. Xebra intends to seek a public listing on the TSX Venture Exchange.

Under the terms of the Agreement, Organto and former shareholders and certain advisors of Medicannabis will receive a total of 10,000,000 common shares of Xebra, representing approximately 9.9% of the outstanding shares of Xebra, with Organto receiving 7,124,630 common shares and the former shareholders and advisors of Medicannabis receiving 2,875,370 common shares. As a result of the Xebra shares being issued directly by Xebra to the former shareholders and certain advisors of Medicannabis, 7,461,538 common shares of Organto previously issued as part of the acquisition of Medicannabis will be cancelled.

Organto will receive cash proceeds of CAD$500,000 with $290,000 paid on closing and $210,000 to be paid based upon certain financing objectives of Xebra, but in any event no later than September 30, 2019. Organto currently has outstanding payables of approximately CDN$150,000 related to Medicannabis that will be paid from the cash proceeds received, and as a result will ultimately realize net cash proceeds of $350,000 from this sale.

In addition to the cash proceeds, promissory notes of approximately $600,000 due by Organto to Xebra will be also be forgiven and Xebra will assume all outstanding debts and obligations of Medicannabis. As part of the agreement Organto has been granted a ROFR (right-of-first refusal) to distribute Xebra’s cannabis products throughout Europe. The transaction is subject to shareholder and TSX-V approval.

“We are very pleased to enter into this agreement to sell our medicinal cannabis assets to Xebra Brands Ltd. We believe the combination of our Colombian cannabis assets with the assets of Xebra, position the combined business for long-term success in the ever changing and rapidly growing global cannabis market,” said Steve Bromley, Chair and Interim Chief Executive Officer of Organto Foods Inc. “With this transaction we will continue to have an investment in this exciting and fast-growing sector while we focus operationally on our core organic fruit and vegetables platform. We believe the opportunity in organic fruits and vegetables is significant as global healthy eating and wellness trends continue to drive strong growth on a global basis, and with our recent repositioning and diverse customer base and supply chain capabilities, we are well-positioned to capture this market opportunity.”