eSense-Lab Limited (ASX:ESE) has entered a binding joint venture with a cosmeceutical manufacturer and wholesaler to formulate and manufacture a range of skincare, hair care and hand sanitisers containing its proprietary terpene mixes.
Under the agreement with ANC Enterprises Pty Ltd, eSense will provide specific terpenes uniquely developed for each product category.
ANC will then manufacture the products at its wholly-owned 600 square metre GMP-certified facility in Victoria, under a cost-plus arrangement.
eSense will hold a 95% stake in the JV company with an initial cash contribution of $95,000 while ANC will have the remaining 5% with a $5,000 cash contribution.
“Validates commercialisation model”
eSense CEO Itzik Mizrahi said: “The joint venture agreement validates eSense’s updated commercialisation model as well as the growing recognition of terpenes and their unique and varied qualities in more markets.
“This agreement will see eSense’s terpenes used in a premium Australian-made product to be delivered straight to consumers.”
eSense-Lab is a biotech company with a unique technology to analyse and reverse-engineer the terpene profiles of cannabis strains by using alternate plant sources.
Terpenes are naturally occurring compounds (classified as phytochemicals) which account for the flavour and fragrance of plants. Each plant has its own unique terpene profile.
Agreement terms
Under the deal, ANC will be given a 12-month option to increase its stake in the JV to 50% through additional capital contribution.
To achieve this ANC will have to pay $90,000 after one month and increase by $10,000 each calendar month thereafter.
It is anticipated that the JV company will pay $100,000 upfront for the terpenes and the remainder upon sales occurring.
The agreement is subject to certain conditions, including mutual due diligence, receipt of any regulatory and shareholder approvals, and executing certain definitive agreements.
The latter includes a shareholders’ agreement, supply agreements, manufacturing and distribution agreement.
eSense will make additional loan funds available to the JV for working capital purposes, if required.
Supply of terpenes
Terpenes will be supplied to the JV company for an initial 10-year term on a cost-plus arrangement.
In return, ANC will grant the JV a royalty-free, irrevocable, perpetual, licence for use throughout the world of any formulations, service marks, trademarks and trade names for the products produced for the JV, provided it pays ANC a formulation fee for any product it develops.
The formulation fee will be agreed between ANC and the JV company before the commissioning of any new products.
Under the deal, both companies have agreed to a minimum initial order of:
- 500,000 units of terpenes for hand sanitiser;
- 100,000 units of terpenes for skin care; and
- 100,000 units of terpenes for hair care.
These minimum orders are based on the anticipated initial production run.
ANC’s facility is capable of producing 16,000-20,000 bottles from two 8-hour shifts per day, or up to 5 million bottles annually.
Continued research
eSense’s laboratory continues researching and testing its gel-based, alcohol-free sanitiser with promising results of terpene’s anti-viral synergistic effects.
Discussions are ongoing with several Israeli universities, hospitals and virology labs to establish further testing and research into the exact nature of terpenes as an anti-viral.
Wastage minimised
ANC has more than 10 years of operating history with significant experience in manufacturing unique products for uses including skincare, sports and nutritional supplements, infant milk powders, bath salts, essential oils and pharmaceuticals.
It manufactures natural plant-focused products including New Age BotanicalsTM, a skincare brand which contains no artificial colours or ingredients.
ANC’s bottling processes generates only 1% of wastage, compared to the industry average of up to 10% waste.
The company has a team of six fulltime employees and between 10-20 casual employees at any time.