Alta Vista Ventures (CSE:AVV) surged in morning trading after the Canadian exploration stage company said it intends to acquire RedeCan Pharma, one of Canada's 19 MMPR (marijuana for medical purposes regulations) cultivation and sales licences.
Shares gained 67.6% to US$0.142 at 11:58 a.m. in New York.
Alta Vista signed a letter of intent to purchase a 100% undivided interest in RedeCan for C$9.5mln in cash and shares, Vancouver, British Columbia-based Alta Vista said in a statement on Monday.
"The completion of this transaction puts Alta Vista in a select group of public companies," Ian Foreman, president of Alta Vista, said in the statement.
Hes aid there are only a handful of public companies with a licence to cultivate and sell medical cannabis in Canada under the MMPR system.
Redecan Pharm is located in the heart of the Niagara peninsula in Southern Ontario.
RedeCan currently utilizes 15,000 square feet of greenhouse space on 30 acres of land located in the tender fruit belt.
The size of the property allows for future expansion of the facility.
RedeCan Pharm received its cultivation licence in June of 2014 and was then issued its licence to sell dry cannabis to medical patients across the country in March of 2015.
RedeCan's ability to utilize its greenhouse facility along with its ability to keep operating expenses down have allowed it to be a profitable licensed producer.
Seven million dollars will be paid in cash and C$2.5-mln will be paid by the issuance of shares of Alta Vista at a deemed price of C$0.33 per share.
Upon signing the letter of intent Alta Vista has paid a non-refundable deposit of $100,000 and issued two million shares to RedeCan.
The remaining payments will be made in two stages as follows: Alta Vista will purchase a minority interest of 28.6% on, or before, February 15, 2016, by paying C$1.9-mln and issuing two million shares.
Alta Vista will purchase the remaining 71.4% (for a 100% interest) on, or before February 15, 2017, by paying C$5-mln and issuing an additional 3.6mln shares.
In addition to the purchase price Alta Vista will pay a 10% royalty of the gross revenues of RedeCan on a quarterly basis to be paid 50 per cent in cash and 50% in shares of Alta Vista.
The company has agreed to pay a 7% finder's fee to Shaxon Enterprises upon successful completion of this transaction and would like to thank Don Shaxon and Jason Springett for their considerable efforts.