TORONTO--(BUSINESS WIRE)--PRESS RELEASE--FSD Pharma Inc. and Solarvest BioEnergy Inc., a technology company which has developed an algal-based flexible production platform capable of producing health products, are pleased to announce that they have signed a non-binding letter of intent (LOI). The parties intend to enter into a definitive agreement, under which Solarvest would conduct research using its algal expression technology to develop pharma-grade cannabinoids, the parties would make mutual investments into one another, and Solarvest would grant FSD Pharma an exclusive license over a subset of the Project Cannabinoids and certain royalty rights over all of the other Project Cannabinoids.
The Collaborative Research Agreement
The parties intend to use commercially reasonably efforts to execute the definitive Collaborative Research Agreement within 30 days, provided that, subject to the receipt of any regulatory approvals including the TSX Venture Exchange, FSD Pharma may extend this by up to an additional 60 days.
CBD Research Project
Solarvest plans to develop and carry out a research project using its algal expression system for the purpose of developing a proof of concept that algae can express the Project Cannabinoids. The parties intend to develop a formal budget and timelines to carry out the CBD Research Project under the Collaborative Research Agreement, and will establish a joint scientific review committee, comprised of representatives from both Parties, to assess the progress of the CBD Research Project against these budgets and timelines.
License and Royalties
Once Solarvest successfully develops the Proof of Concept, the parties intend to enter into one or more license agreements, under which Solarvest will grant FSD Pharma an exclusive, worldwide license over any use of the Project Cannabinoids to produce prescription drugs that can treat diseases affecting the central nervous system. The Exclusive License will contain terms and conditions usually contained in agreements of a similar nature.
In addition to the licensing arrangement, Solarvest will pay a royalty fee to FSD Pharma on Solarvest’s sale or licensing of any of the Project Cannabinoids, other than the FSD Licensed Indications, equal to 5 percent of the net sales or net license fees, provided that once Solarvest has paid an aggregate of $3,000,000 in royalty fees, the royalty percentage will be reduced to 3 percent.
Mutual Investments
The parties intend, within three days following the receipt of all necessary approvals of the Collaborative Research Agreement, to make the following investments into one another:
a) FSD Pharma will issue 10,000,000 common shares in the capital of FSD to Solarvest at a deemed price of $0.30 per FSD Share;
b) Solarvest will issue 3,000,000 units of Solarvest to FSD Pharma at a deemed price of $0.20 per Solarvest Unit, each Solarvest Unit being comprised of one (1) common share in the capital of Solarvest and one (1) warrant, each Solarvest Warrant being exercisable into one additional Solarvest Share at an exercise price of $0.25 for a period of two (2) years following the issuance thereof; and
c) Solarvest will issue a convertible debenture to FSD Pharma in the principal amount of $2,400,000. The Solarvest Debenture will have a term of five (5) years, bear interest at a rate of 3 percent per annum, and be convertible into Solarvest Shares at a conversion price of $1.00 per Solarvest Share, provided that FSD Pharma will be required to convert the Solarvest Debenture should Solarvest Shares close at a price of at least $1.20 for a period of 20 consecutive trading days.
“If successful, this could dramatically disrupt current cannabis cultivation methods for medical purposes. It could reduce the majority of time, space and costs associated with cannabis cultivation for medical purposes specifically cannabis with GMP Certification. We are very pleased to collaborate with Solarvest on the development of promising alternative methods of cannabinoid production using algal technology,” said Zeeshan Saeed, president and founder of FSD Pharma. “We have been impressed by Solarvest’s management knowledge and operations and believe that future commercial production of cannabinoids using their algal-based production platform combined with our proposed investment in Solarvest have the potential to create significant value for our shareholders.”
“This is an exciting opportunity for FSD Pharma and is in line with our company’s strategic direction. We are continuing to focus our attention and efforts on advanced synthetic cannabinoid R&D and production for the purpose of finding better treatment outcomes for certain diseases of the central nervous system, sleep disorders, certain skin conditions and also looking into effective ways of combating the scourge opioid epidemic in North America. We look forward to working with Solarvest and anticipate positive results from their research study using algae technology to produce pharma-grade bio-synthetic cannabinoids,” added Dr. Raza Bokhari, executive co-chairman of the Board of Directors of FSD Pharma.