CULT Food Science Corp (CSE:CULT, OTCQB:CULTF) told investors it has signed a binding letter of intent (LOI) to acquire Because Animals Inc.'s consumer brand assets, related patents, non-scientific intellectual property, and product formulations.
Founded in 2016 and backed by prominent venture capital firms including Draper Associates and SOSV and Norwegian conglomerate Orkla, CULT noted that Because Animals is a sustainable pet food company known for its innovative use of ethical ingredients such as cultured meat. It was also awarded the Purina Pet Care Innovation Prize in 2020.
The company said it will combine Because Animals' formulations with its internally-developed pet food brands to form its new Pet Food Division, which aims to develop and commercialize cultivated pet food products in collaboration with its portfolio companies.
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"Pet foods have a complex relationship with agriculture and climate,” CULT CEO Lejjy Gafour said in a statement. “Common pet foods are often produced using animal meats that are deemed not suitable for human consumption. Or, are leveraging inputs that are going to become more scarce in the future due to climate change in the case of particular kinds of fish."
"At the same time, some of our pets can struggle to reach their nutritional needs if you seek to cut out every animal product out of their diets,” he added.
CULT noted that commercial pet food is estimated to drive as much as a quarter of the environmental impact of the factory farming industry. Conversion to cellular agriculture technologies continues to offer pets the same quality nutrition and taste as conventional production but significantly reduces their carbon pawprint by protecting global land and water resources, and biodiversity.
“Cultivated products using cellular agriculture and precision fermentation is one of the only solutions that can create a sustainable and nutritious future for our pets as well,” Gafour continued. “They are part of our everyday lives, and deserve sustainable and healthy options for food as much as we do."
The company said the launch of the Pet Foods Division into the multi-billion dollar pet food market to complement its product portfolio represents another step in its mission to bring cell-based innovation into everyday life.
"Eliminating factory-farmed meats in the foods we feed our companion animals will have wide-ranging effects on our society, with ripples through our food chain, economy and, of course, environment. We can reimagine our entire food system, starting with what we put under our dogs' and cats' noses every day," commented CULT vice president of product development Joshua Errett. "I am personally devoted to this cause, as today's announcement makes clear. I'm looking forward to continuing my important work on this amazing brand."
The company explained that Errett, one of Because Animals' co-founders, has left the startup and is continuing the development and commercialization of the Because Animals' consumer brand business under a different name within CULT Food Science. Because Animals Inc will continue to innovate in the pet food industry, not associated with CULT Food Science, it added.
Transaction terms
Under the terms and conditions of the LOI between Errett and CULT subsidiary, Further Foods Inc, Further will acquire the assets in exchange for a US$500,000 promissory note bearing interest at 4.35% and an initial 10% ownership stake in Further.
The promissory note will provide for a principal payment of US$50,000 within 30 days of closing and beginning six months after closing, monthly payments of US$7,500 plus accrued interest until the principal amount and accrued interest are paid in full. In addition, for every US$1,000,000 of gross revenue generated by the assets following the closing of the transaction, Further will issue the vendor - Errett - shares in the capital of Further equivalent to an additional 1% ownership stake in Further, up to a maximum additional 10% ownership stake in Further.
The company said the transaction is subject to receipt of all necessary regulatory approvals, completion of due diligence, and entering into a definitive agreement.
As the vendor is a vice president of CULT, the transaction is a ‘related party transaction’ as defined under Multilateral Instrument 61-101 (MI 61-101).
CULT Food Science is the first publicly-traded company of its kind in North America, pioneering the investment, development, and commercialization of cellular agriculture technologies and products. Through its global portfolio of affiliates, the company provides investors with unprecedented exposure to the most innovative start-up, private or early-stage cultivated meat, cell-based dairy, and other cultured food companies around the world.
CULT Foods, a division of CULT Food Science, creates breakthrough products that provide a sustainable, environmental, and ethical solution for the future of food, with the mission to make cell-based foods a part of everyday life.
Contact the author at stephen.gunnion@proactiveinvestors.com