Corporate: Is it a contract? Is it an order? No, it’s an MoU that’ll still deliver $8m, says Food Revolution
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The Food Revolution Group (ASX:FOD) says it’s signed an $8m sales deal with a Chinese ecommerce platform — but not so fast, it’s still only an MoU.
Or is it?
The agreement, which Food Revolution called an MoU in a statement this morning, is with ICC Global and sets the two companies up to look at setting up long-term distribution.
Normally an MoU isn’t cause for excitement: sometimes they go somewhere, sometimes they don’t. They’re not binding nor are they (usually) financial commitments.
But Food Revolution has locked in $8m worth of sales on the back of theirs.
“It is a sales contract but without a purchase order,” CEO John Florey told Stockhead.
Basically, ICC has committed to buying $8m worth of products by December 2020, but because they don’t have any orders on the horizon they’ve chosen not to say it’s a binding deal.
Except, confusingly, they do have an order: ICC will buy 10,000 units of orange juice, the equivalent of a 4-foot shipping container, set to be shipped in June.
Florey said the sales were “pretty firm”.
If the arrangement comes off as Food Revolution hopes, they will see all of that cash in the 2020 fiscal year since the first sale starts in June and ICC has committed to a December 2020 deadline for the orders.
ICC brought 70 daigous (which means to buy on behalf of — people outside China who shop on behalf of a China resident) to Food Revolution’s factory on Friday last week who were very keen on the existing range.
Florey said it was like the paparazzi had appeared as eager daigous took snaps of juices and citrus oils.
ICC on the other hand is keen on new sachet and gel products containing marine proteins and collagen.
If the Chinese resellers were keen on the products, ASX investors were today keen on the stock itself pushing it up as high as 17 per cent to 11.3c.
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