Valens GroWorks Corp. has entered into an amended manufacturing and sales licence agreement with SōRSE Technology Corporation that grants Valens an exclusive licence to use the proprietary SōRSE emulsion technology to produce, market, package, sell and distribute cannabis-infused products in Canada, Europe, Australia and Mexico.
The consideration at closing for the exclusivity in the expanded geography was US$10 million, comprised of US$6 million in cash and US$4 million to be issued in common shares of the company. The agreement carries an initial five-year exclusive term with a 2-year renewal of the exclusivity, subject to certain performance milestones related to operational and financial achievements.
As part of the agreement, Valens will transfer to SōRSE royalty payments calculated as a percentage of sales and subject to an annual minimum of $2 million over the five-year term. The Agreement also provides for a continuation of the agreement on a non-exclusive basis after the 2-year renewal, subject to annual minimum royalty payments.
"This agreement shows Valens' commitment to invest and broaden its IP portfolio and enable its customers to bring differentiated, next-generation products to market," said Jeff Fallows, president of Valens. "As we move into ‘Cannabis 2.0’ in Canada, we believe the products that offer consistent, high quality and predictable user experiences, like those we are able to create with SōRSE, will capture the lion's share of attention and be the hallmark for brand development in a strict regulatory environment.
“With this expanded agreement in place, we have extended this opportunity for our existing customers to key international markets and at the same time established a platform for international consumer brands to add high quality, cannabis infused products to their portfolios."
The SōRSE emulsion technology transforms cannabis oil into water-soluble forms for use in beverages, edibles, topicals and other consumer products without the cannabis taste, color or smell. The technology allows these cannabis-infused products to maintain potency when heated, chilled or frozen, and provides a number of other key advantages as well, including: a faster observed onset time; a significant reduction of offset time; an ability to use lower doses of cannabinoids due to the enhanced bioavailability; and increased consistency and stability with some product formulations achieving more than one-year shelf stability with no evidence of separation.
"We are proud to expand our partnership with Valens and leverage their near-term access to various global markets," says SōRSE CEO Howard Lee. "Over the last year, our team of more than 40-plus professionals has continued to actively focus on creating and developing innovative, desirable products and formats of consumption for cannabis consumers.
“As emulsion technology becomes more popular through new delivery methods such as ingestion, transdermal, topical and more, it is imperative that quality and safety in consumption leads all innovation in this sector. This is a shared value and mandate that our teams at SōRSE and Valens both prioritize. We look forward to continuing this working relationship with Valens and introducing our award-winning emulsion technology to global markets."
The agreement grants Valens an exclusive licence to use the technology in Canada, Europe, Australia and Mexico (except in respect of medical applications requiring clinical trials) during the initial five-year term, subject to certain performance milestones. This increases the addressable market from 37 million in the current Canada-only agreement to 700 million people in the new agreement, an increase of almost 20 times.
Furthermore, the agreement provides a framework for Valens to obtain rights to establish non-exclusive agreements to sell cannabis-infused products using the technology in the U.S. market and other markets, globally.
With the expanded exclusivity, Valens and its white label clients are positioned to not only succeed in the Canadian market, but also in the rapidly emerging legal cannabis and hemp-derived CBD markets in Europe, Australia, Mexico and beyond. The agreement adds to the company's leading white label product offerings across numerous "Cannabis 2.0" categories such as beverages, edibles, transdermal products and more, enabling Valens to better serve its current and future partners.
"We have seen incredible interest from our current and potential clients regarding the SōRSE emulsion technology and we are thrilled to finalize the expanded licence agreement with SōRSE," said Valens CEO Tyler Robson. "We expect the expanded exclusive territory will provide our clients with improved visibility and greater opportunity as they look to build global businesses around cannabis-infused products over the long term.”
The agreement furthers the existing relationship between Valens and SōRSE and enables Valens to produce and sell SōRSE's portfolio of branded products in Canada and the other exclusive markets at the option of the company. These branded products include Happy Apple, a cannabis-infused sparkling cider and Major, a cannabis-infused fruit drink, both recognized as top-selling cannabis beverages in the state of Washington. They also includes Pearl20, a cannabis-infused food and beverage mixer, and the Utopia line of cannabis-infused sparkling water, among others.