The biotechnology company has agreed to sell certain non-core, non-pharmaceutical THC-related assets owned by its subsidiary Lexaria Canpharm ULC for C$3.85 million to Hill Street Beverage Company Inc (CVE:BEER), in which Lexaria owns a large position.
Hill Street will gain exclusive global rights to Lexaria’s DehydraTECH technology for use in non-pharmaceutical products that contain over 0.3% THC, while Lexaria will retain full ownership of DehydraTECH as well as the rights to use it with THC and other cannabinoids for pharmaceutical purposes.
Hill Street and Lexaria also agreed to replace previous agreements with a global non-exclusive license that gives Hill Street the right to produce non-pharmaceutical CBD products with less than 0.3% THC using the DehydraTECH technology for a period of ten years in exchange for a yet-to-be determined royalty to Lexaria.
As part of the agreement, CanPharm is receiving limited rights and contract manufacturing support from Hill Street to use DehydraTECH on a royalty-free basis to sell non-pharmaceutical, therapeutic and medicinal products that contain more than 0.3% THC in countries other than the US or Canada. Once Hill Street has paid the entire $3.85 million amount for the transaction, CanPharm will begin paying Hill Street a royalty for any products using the technology.
Under the terms of the deal, Hill Street will pay $350,000 in cash on closing, an additional $2 million payable over time in the form of a promissory note bearing 10% interest per year, and $1.5 million in shares of Hill Street, issuable in three equal tranches of $500,000 at closing; $500,000 eight months after closing; and $500,000 16 months after closing.
Hill Street plans to use DehydraTECH to develop Cannabis 2.0 products.
DehydraTECH has proven its effectiveness in a variety of segments including cannabis, hemp, and nicotine, Lexaria’s CEO Chris Bunka told shareholders.
“Hill Street's team is executing a new and aggressive strategy in the cannabis sector through extremely challenging times, designed for new realities and enhanced consumer expectations," Bunka said in a statement.
"Their team has already built some of the best-selling and most respected brands in the alcohol-free beverage sector. Lexaria will become a strategic shareholder of Hill Street as a result of this transaction and we look forward to working together in the future."
Following the sale, Lexaria plans to focus on regulated pharmaceutical and medical market segments such as business segments relating to heart disease, reduced-risk non-combusted nicotine, antiviral drugs, and hemp-based CBD business-to-business applications.
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