FSD Pharma terminates pact with Auxly Cannabis Group to build Ontario grow facility

FSD Pharma Inc (CSE:HUGE) (OTCQB: FSDDF) (FRA:0K9) said Friday that it has terminated an agreement with project partner Auxly Cannabis Group (CVE:XLY).

The company said Auxly reneged on its obligations to meet construction deadlines on building the world’s largest hydroponic indoor cannabis production facility.

FSD Pharma is headquartered at the former Kraft plant in Cobourg, Ontario, about an hour’s drive from Toronto, in a mammoth facility that sits on 72 acres of land, with 40 primed for development. The company is capitalizing on the need for indoor-grown, pharmaceutical-grade cannabis.

READ: FSD Pharma aims to have the world’s largest hydroponic indoor cannabis production and processing facility

FSD Pharma said in a statement that Auxly reneged on “clear obligations” to develop all aspects of the company’s cannabis cultivation facility in “mutually agreed upon staged phases.”

“Auxly issued a press release on July 3, 2018 in which they anticipated that the first phase of construction would be completed and ready for Health Canada approval by the end of December 2018,” said FSD CEO Dr Raza Bokhari. “We simply couldn’t wait any longer for our vendor to perform its obligations and therefore we terminated the agreement.”

Under the terms and conditions of a streaming agreement, FSD said that both companies are subject “to a number of non-disclosure obligations that survive the termination.”

“FSD Pharma intends to continue to live up to its surviving obligations, we are hopeful that Auxly will do the same,” said Dr Bokhari.

FSD Pharma strongly denied that it caused “any breaches” of the streaming agreement related to its “management and staffing obligations.”

READ: FSD Pharma and Therapix Biosciences in $48M deal to form medical cannabis company

The company rejects the claim that there are material issues with the infrastructure of its cultivation facility in Cobourg, Ontario.

FSD Pharma, through its wholly-owned subsidiary FV Pharma Inc, holds an ACMPR license to cultivate cannabis under the Access to Cannabis for Medical Purposes Regulations (ACMPR).

It is transforming its large facility in Cobourg into the world’s largest hydroponic indoor cannabis production and processing facility, with multiple business units co-supporting each other, operating under a single roof to exploit economies of scale and operational efficiencies.

Auxly was tasked with financing and constructing the buildout of the facility with C$55 million approved in its Phase 1 development budget. 

Bokhari earlier told Proactive Investors that FV Pharma will operate the facility and recover all costs, plus 10% and receive 50.1% of all production. 

Contact Uttara Choudhury at [email protected]

Follow her on Twitter: @UttaraProactive 

Story by ProactiveInvestors