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RotoGro (ASX:RGI): Reinventing the wheel to feed the world
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  • RotoGro International (RGI) has signed long-term manufacturing and cultivation licence agreements with Verity Greens
  • The 20-year agreements give Verity an exclusive global licence to use RotoGro’s proprietary technology in the cultivation of perishable foods
  • Verity also has non-exclusive rights to use RGI's proprietary software, and to manufacture and use RotoGro's Rotational Garden Systems
  • To retain exclusivity of the cultivation licence beyond the end of 2021, Verity must purchase $10 million worth of RotoGro Model 710 Systems
  • RGI will also receive royalties from food production, system manufacture and software licence fees for the life of the contract
  • The deal allows RotoGro to move to a less capital-intensive business model and ensure ongoing revenues
  • RotoGro International is up 20.69 per cent to an even 7 cents

RotoGro International (RGI) has signed a long-term technology licence agreement with Verity Greens.

Big deal

The agreement runs for an initial term of 20 years, and gives Verity an exclusive global licence to use RotoGro’s proprietary technology in the cultivation of perishable foods.

Verity also has non-exclusive rights to use RGI's proprietary software, and to make and use RotoGro's Rotational Garden Systems, with rights to sub-license by continent or specific country.

To retain exclusivity cultivation licence exclusivity beyond the end of 2021, Verity must purchase $10 million worth of RotoGro Model 710 Systems, and select the city and country to host its first perishable foods cultivation facility.

Verity has already provided business plans for the first phase of its commercial-scale indoor vertical farm.

Those plans project $30 million in capital will be required to complete the vertical farm, including downstream processing, packaging, storage costs, and the $10 million in RotoGro systems.

Verity estimates the facility will yield around 850 tonnes of leafy greens each year, with plans to add to that figure in second and third phase expansions.

RotoGro will also receive royalties from any food grown and and garden systems manufactured under licence by other vendors.

RGI will pocket 2 per cent of Verity's net profits from food cultivation in the first year, rising incrementally to 5 per cent by the fourth year of the deal.

A C$2000 (around A$2150) manufacturing fee will also be paid for each garden system made under licence.

Outlook

The deal allows RotoGro to move to a less capital-intensive business model, and to ensure ongoing revenues.

While the anticipated recurring returns from manufacturing and software licence fees and food production are as yet speculative, the money essentially comes for "free" — which is a boon for RotoGro as it moves to capitalise on its patented tech.

RotoGro Non-Executive Chairman Michael Carli says the deal opens the door for the international sales of the company's innovative garden systems.

"Verity’s market expertise and experience will facilitate the global rollout of commercial scale indoor vertical farming facilities, each equipped with our patented and proprietary technology," Michael said.

"The sale of technology, annual software licensing fees, and a net profit interest arising from the agreement are expected to provide RotoGro with long-term, sustained trailing revenue," he added.

RotoGro International is up 20.69 per cent to an even 7 cents at 12:21 pm AEDT.

RGI by the numbers
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