Adastra Steps Into Magic Mushrooms! Gets Dealer's License For Psilocybin And Psilocin

Adastra Holdings Ltd. XTXXF XTRX D has received its Controlled Drug and Substances Dealer's License on August 24, 2022. This license allows Adastra to process psilocybin and psilocin, the active compounds derived from psychedelic mushrooms.

Under the dealer's license, Adastra can possess up to 1,000 grams of psilocybin and psilocin at any time and can transfer the extracted material to other companies who hold a valid dealer's license. Adastra intends to utilize its in-house analytical testing lab, Chemia Analytics, to validate and develop its extraction processes, to optimize and enhance efficiency ahead of any future potential regulatory modifications to the existing psychedelics framework.

As the market matures to include regulations for other compounds, such as MDMA, LSD, 5-MeO-DMT and Ketamine, Adastra plans to include these substances in future dealer's license amendments, positioning itself to leverage clinic and patient demand. When approved, the company will be permitted to process and formulate a variety of psychedelic compounds, increasingly used and sought-after by patients and healthcare practitioners to combat a variety of physical and mental ailments.

Legacy Supply Agreement

The company has entered into an agreement, with a third party, whereby Adastra has the right and option to terminate an exclusive amended license agreement dated December 4, 2020 between the third party and 1204581 B.C. Ltd. ("Phyto"), a wholly-owned subsidiary of Adastra which was acquired by Adastra on September 15, 2021.

The Phyto license agreement was a legacy contract of Phyto, whereby Phyto utilized the third party's licensing status with Health Canada to exclusively package and sell its popular "Phyto" branded cannabis consumer packaged products on its behalf in consideration for payment of royalties back to Phyto. Pursuant to the terms of the agreement, Adastra negotiated terms with the third party to terminate the Phyto license agreement, provided that Adastra satisfies the following three conditions on or before September 30, 2022:

• Firstly, Adastra must pay the third party 50% of the third party's historical fees and expenses charged by a data company under a cannabis data sales agreement. This amount is to be set-off against amounts owed by the third party to Adastra. Adastra will continue to be responsible for the payment of 50% of the ongoing fees and expenses owed by the third party to the data company under the cannabis data sales agreement until Adastra enters into a separate agreement with the data company for the provision of data relating services related to the sale of Adastra's cannabis products. Once Adastra and the data company execute such an agreement, Adastra will provide the third party with payment of a final amount of 50% of the fees and expenses owed by the third party to the data company, being fees and expenses incurred up to the date of the Adastra/data company agreement.

• Secondly, Adastra must complete delivery, on or before September 30, 2022, of 250,000 units of unfinished "Roilty" or "Phyto" branded cannabis products to the third party, with a discount for the benefit of the third party.

• Thirdly, Adastra must pay in cash an amount representing all functional outstanding unfinished Phyto branded product and all functional Phyto branded packaging material held by the third party as of September 30, 2022.

Under the agreement, Adastra may deliver a notice and certification to the third party certifying that the foregoing conditions have been met on or before September 30, 2022. The third party will have three business days to deliver a dispute notification, setting out in reasonable detail the reasons for disputing the certification. If no dispute notice is sent, the Phyto license agreement terminates ten days from the date of delivery of the certification.

Additionally, under the agreement, Phyto has agreed to reduce fees owed to Phyto under the Phyto license agreement to 0% of the gross profit on product sales by the third party from March 1, 2022, to November 30, 2022.

If Adastra opts-out or fails to meet the foregoing conditions by September 30, 2022, the Phyto license agreement will continue to October 31, 2023, except that fees due to Phyto for product sales will be increased from 0% to 50% of the gross profit of the third party from all sales of such product made by the third party on or after December 1, 2022 until October 31, 2023.

Photo: Benzinga; Sources: courtesy of jarmoluk and lindsayfox via Pixabay

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