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RotoGro (ASX:RGI): Reinventing the wheel to feed the world
  • Roto-Gro International (RGI) has had to clarify the details of a C$1.9 million (around A$2.03 million) purchase order with Portuguese company, Canniberia
  • The announcement was initially made on Tuesday, but the company was forced into a trading halt pending an update on the deal's fine print
  • The deal hinges on Canniberia being granted a pre-licence for cannabis cultivation by the Portuguese regulator, Infarmed
  • While the process is viewed as a formality, it will take some time to process
  • It's expected the first half of the order will be completed by mid-November, with the second half to ship within nine months of the pre-licence grant
  • The deal will be settled via four staged payments each worth around $500,000, with two payments due per order
  • Roto-Gro International closed Friday's session 4.26 per cent higher at 4.9 cents after coming out of the trading halt

Roto-Gro International (RGI) has had to clarify the details of a C$1.9 million (around A$2.03 million) purchase order with Portuguese company, Canniberia.

The announcement was initially made on Tuesday but the company was forced into a trading halt pending an update on the deal's fine print.

What's the deal?

Roto-Gro had mentioned in its first release that Canniberia would require pre-licence approval from Infarmed — the Portuguese body regulating medicines and health products — before construction of its cannabis cultivation facility could go ahead.

While the grant of the pre-licence to Canniberia is regarded as a formality once the correct paperwork is submitted, there's a number of hoops to jump through before that can happen.

Canniberia will have to furnish Infarmed with a raft of paperwork, including facility design, cultivation capacity and techniques, product sourcing and offtake arrangements, as well as indicative timetables for construction and harvest.

Roto-Gro will be required to provide detailed information on its Model 420IT Rotational Garden Systems to be installed at the facility. This information will be supplied to Canniberia ahead of its final submission to Infarmed.

The pre-licence is expected within 30 days of the submission of the required documentation.

While all parties anticipate the pre-licence will be granted, there's a lot of work to be done before the sales agreement will be actioned.

Based on current projections, it's expected the pre-licence will be granted at the end of November.

And the money?

Roto-Gro will have to wait some time before it cashes out the deal.

The order will comprise two deliveries and four separate staged payments.

The first delivery of 72 Garden Systems and one Fertigation System will require an up-front payment of around $550,000 within five days of the order being made.

The A$2.03 million balance will be paid in three instalments.

The first instalment is due 30 days before the initial order is shipped.

The subsequent payments are due when the second order of a further 72 Garden Systems is ordered and shipped. Under the purchase agreement, the second order is due within nine months of the grant of the pre-licence.

Roto-Gro will also be required to train Canniberia staff to operate the systems.

The first order is expected within two weeks of the pre-licence's grant.

Roto-Gro International closed Friday's session 4.26 per cent higher at 4.9 cents after coming out of the trading halt.


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