Creso Pharma Ltd (ASX:CPH, OTCQB:COPHF) has made positive progress with due diligence activities for proposed acquisition target Health House International Ltd (HHI).
Among other investigations, work to date included an analysis of HHI’s revenue base, following HHI’s generation of A$15.2 million of cash receipts as well as opportunities to restructure and reduce costs.
Following the completion of preliminary due diligence, Creso has gained additional confidence in HHI and its operations.
To advance the potential transaction, Creso has executed a loan facility agreement with HHI, whereby Creso will provide up to A$700,000 to HHI for general corporate purposes and working capital.
“Pathway to profitability”
Creso CEO and managing director William Lay said: “Our initial diligence investigations into HHI have reaffirmed the view that we have the opportunity to purchase strategically aligned, significant revenue at an attractive multiple while being able to rein in costs with the aim being to accelerate a pathway to profitability.
“Subject to the completion of due diligence, we will now look to advance and execute definitive transaction agreements with HHI in the short term in order for the shareholders of both companies to benefits from the strategic opportunities of the proposed transaction.”
Loan facility agreement
In July, Creso signed a non-binding term sheet to acquire HHI and a loan facility agreement has been provided for up to A$700,000 to the company.
The repayment date of the loan is November 30, 2022, which may be accelerated in an event of default or change of control.
The facility has been secured via a general security deed, however, this security ranks second to the security held by Zelira Therapeutics Limited, a lender to HHI.
Upon Creso’s approval, HHI is required to carry out effectively and efficiently the work in accordance with the budget.
The loan facility agreement contains representations and warranties of HHI that are customary for an agreement of this nature.