Auxly, FSD Pharma end cannabis cultivation venture over contractual disputes

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Auxly Cannabis Group, a vertically integrated marijuana company in Vancouver, British Columbia, said Thursday it is ending a joint venture with cultivator FV Pharma, a wholly owned subsidiary of Cobourg, Ontario-based FSD Pharma.

The move, linked to contractual disagreements between the two companies and concerns over infrastructure, follows FSD’s claim a day earlier that it had terminated the agreement.

Under the original terms of the joint venture, Auxly was to receive 49.9% of all cannabis produced at FSD’s facility in Cobourg.

Included in the arrangement was the construction of a roughly 220,000-square-foot, self-contained cultivation facility. According to FSD, the Cobourg facility potentially could have a capacity of 3.8 million square feet.

When the companies terminated the agreement, Auxly had invested 7.5 million Canadian dollars ($5.6 million) in the development and construction of the facility.

The dispute centers on alleged contractual breaches relating to FSD’s management and staffing obligations at the Cobourg facility as well as what Auxly called “significant concerns” over certain aspects of the building’s infrastructure.

Auxly officials said they alerted FSD to the alleged breaches on Jan. 17 in hopes the issues could be resolved.

However, FSD responded Feb. 6 by saying it was terminating the relationship because Auxly failed to meet obligations stipulated in the agreement.

Also on Feb. 6, FSD appointed executive co-chair Raza Bokhari as interim CEO, replacing terminated Rupert Haynes.

Auxly trades on the TSX Venture Exchange under the ticker symbol XLY and on over-the-counter exchanges as CBWTF.

FSD trades on the Canadian Securities Exchange as HUGE and on OTC exchanges as FSDDF.