FSD Pharma Signs LOI to Establish Joint Venture with World-Class Extractions to Deploy Full Extraction Processing Centre

Published: September 26, 2019

FSD Pharma Signs LOI to Establish Joint Venture with World-Class Extractions to Deploy Full Extraction Processing Centre

FSD Pharma Inc. announced the signing of a letter of intent (“LOI”) to establish a joint venture with the Company’s wholly-owned subsidiary, FV Pharma Inc., and World-Class Extractions Inc. to develop, manage and operate a cannabis extraction and processing facility in Cobourg, Ontario (the “Facility”) to extract various cannabidiol and other valuable elements from cannabis and hemp plants.

The “LOI” amends, supersedes and replaces, in its entirety, the Collaboration and License Agreement entered into as of November 23, 2018 by and between World-Class and FV Pharma.

Following execution of the LOI, FSD Pharma and World-Class will each hold a fifty (50%) interest in the Joint Venture. The Joint Venture is expected to enter into a 5-year lease agreement with an additional 5-year option (the “Lease Agreement”) with FV Pharma to install the Boss Extraction and Processing unit(s) designed by World-Class’ subsidiary Soma Labs Scientific, occupying up to 5,000 sq. ft. of licensed indoor space at the Facility. The lease will commence December 1, 2019 and contain provisions for the expansion of the Facility during the first six (6) months of operation. Under the terms of the LOI, FSD Pharma has agreed to allocate additional finished space as required to expand the extraction and processing Facility to accommodate the installation of World-Class’ Small Beast (a large capacity ethanol extraction system) along with all the required peripheral equipment for the processing of crude into refined products.

The patent-pending Boss Extraction system provides proprietary systems and methods for producing cannabis extracts. Its technology can perform sub-critical CO2 extraction; combining proprietary max flow technology with advanced thermodynamics, automated features, and an exclusive plug and play design. The Boss features a maximum processing capability of up to 200 lbs per day, scalability add-on features, and continuous flow to produce extracts that have substantially greater concentrations of target cannabinoids and possess minimal contaminants. The Boss Extraction system is intended to provide third-party Licensed Producers with access to the technology needed to extract oil for value-added product production.

Once established, both parties to the Joint Venture will contribute the following resources to develop, manage and operate the cannabis extraction and processing center at the Facility:

  • Extraction operations will commence with the installation by World-Class’ subsidiary Soma Labs Scientific of (3) Boss Extraction systems in an existing licensed area for extraction and processing at the Facility.
  • World-Class Extractions, through Soma Labs Scientific, will provide the Joint Venture with all of the extraction and processing equipment required, assuming all direct costs.
  • All expenses and costs incurred by the Joint Venture will be evenly split with 50% born by each party.
  • Once operational, the extraction machinery will be managed and operated by FSD Pharma.

Additional provisions under the Joint Venture once established:

  • World-Class is entitled to nominate 2 of the 5 directors of the Joint Venture.
  • FSD Pharma is entitled to nominate 2 of the 5 directors of the Joint Venture.
  • One independent director will be assigned to the Joint Venture.
  • FSD Pharma has agreed to allocate additional completed space for future expansion installation of a Small Beast Ethanol Hemp Extraction system.
  • Both parties will fund operating costs and expenditures associated with the Joint Venture.

The Joint Venture is expected to provide additional revenue and partnership opportunities for both parties as the processing center is capable of performing toll processing extraction for third-party Licensed Producers using FV Pharma’s processing license. The FV Pharma Facility, formerly Kraft Canada’s production facility, is located approximately one hour’s drive from Toronto and is equipped with numerous on-site resources, making it a favorable location for third-party toll processing contracts.

“This is an important development for FSD Pharma, allowing the Company and World-Class to establish a processing center for on-site extraction of oil-based products and extracts at our Facility in Cobourg in 2019,” said Raza Bokhari, MD, Executive Co-Chairman and CEO of FSD Pharma, “Using FV Pharma’s processing license, the Joint Venture can begin processing once the Boss Extraction Systems are installed and our agreement is finalized. This Joint Venture provides us with additional revenue opportunities as we process our pharmaceutical-grade cannabis flower into high-quality oil-based products to meet the increasing demand for such products in the medicinal space.”

“World-Class is thrilled to be the official extractor of FV Pharma, while opening up our processing operations to other Canadian producers,” said Rosy Mondin CEO of World-Class, “The toll processing model is economical as license holders can create valued added cannabis oil derivative products under their corporate brand(s) without major expenditures on in-house extraction machinery or requiring a processing license. This milestone is incredibly significant as World Class is now ready to accept new tolling contracts and officially begin to generate revenue in the near term.”

FSD Pharma is focused on the research and development of novel cannabinoid-based treatments for several central nervous system disorders including chronic pain, fibromyalgia and irritable bowel syndrome, and on the development of the highest quality indoor grown, pharmaceutical-grade cannabis. The Company is licensed to cultivate cannabis in approximately 25,000 square feet.