Organto Foods (TSX-V: OGO) (OTC: OGOFF) has signed an agreement to sell its shares of Medicannabis S.A.S., a privately held Colombian company focused on the development of medicinal cannabis, to Xebra Brands Ltd.

The purchase price consists of shares of Xebra, cash and forgiveness of debt. Organto owns 100% of the shares of Medicannabis.

Xebra is a privately held Canadian cannabis company developing cannabis-based consumer products, with a major focus on cannabis-infused beverages, intends to seek a public listing on the TSX Venture Exchange.

Sale Agreement

Under the terms of the agreement, Organto and former shareholders and certain advisors of Medicannabis will receive a total of 10 million common shares of Xebra, representing approximately 9.9% of the outstanding shares of the company.

Organto will receive 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 canceled.

Organto will receive cash proceeds of C$500,000 with C$290,000 paid on closing and C$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 C$150,000 related to Medicannabis that will be paid from the cash proceeds received.

In addition to the cash proceeds, promissory notes of approximately C$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.

“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,” Steve Bromley, interim CEO of Organto Foods, said in a statement.

“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,” Bromley added.

The deal is subject to shareholder and TSX-V approval.