PALM BEACH, Florida, March 7, 2019 /PRNewswire/ -- In an article titled: "The Economics of Extraction" the Cannabis Business Times (CBT) predicted that consumers will demand more and more retail choices: "CBT reported that vape cartridge sales in California reached $100 million for the combined months of November and December 2017. The next bestselling concentrate product during that time was wax, with $7.4 million in sales. The stated total of all concentrate revenue in California for that same period was $140.9 million Based on those figures, it's clear that vape cartridges dominate sales. But why? The simple answer: user convenience." The article continued: "With this data, some companies will successfully focus strictly on cartridge sales, but the cartridge industry is destined to become competitive and saturated. Everyone has, or will soon have, their own branded cartridge without a strategic advantage like a rare cultivar, proprietary device, or efficient and/or superior extraction methodologies and practices. CBT believes many companies will produce a vape cartridge that is no better nor cheaper than the rest, and these companies will suffer due to little or no brand recognition and will struggle to compete with products that possess strategic advantages (such as the ones mentioned). Therefore, extract companies need to find means to efficiently produce a diversified range of concentrates—and not rely strictly on vape cartridge sales. Active Companies from around the market with current developments this week include: Chemesis International Inc. (CSE: CSI) (OTC: CADMF), Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON), HEXO Corp. (NYSE: HEXO) (TSX: HEXO), The Green Organic Dutchman Holdings Ltd. (OTC: TGODF) (TSX: TGOD), Tilray, Inc. (NASDAQ: TLRY).
Consumers will ultimately demand a wide range of products and offerings. Future consumers will be educated on cannabis's nuances and characteristics. In turn, many will prefer to purchase superior- tasting, connoisseur-quality products over artificial or formulated flavors or poor-quality concentrates. If the superior offerings are affordable, that is all the better for the consumer. Extractors need to be mindful not only of a product's strategic market advantages over another, but also the costs associated with extraction equipment as well as the cost of required basic materials (such as solvents) that can accumulate rapidly and increase production overhead.
Chemesis International Inc. (CSE: CSI) (OTCQB: CADMF) BREAKING NEWS: Chemesis International announces it has entered into binding agreements to acquire 100% of a fully-operational extraction and manufacturing facility in Cathedral City, California ("Facility"). Once completed, this transaction ("Acquisition") will expand the Company's processing ability to over 500,000 kg of cannabis annually. The new state-of-the-art facility is fully licensed, and the Acquisition is expected to double the Company's current capacity to process large amounts of cannabis to extract THC, CBD and other cannabinoid and terpene products.
The Facility is located within close proximity to the Company's existing licensed extraction facility, which commenced operations this quarter. Upon completion, the Acquisition will permit the Company to operate two fully licensed and commercialized facilities, which is expected to streamline resources for the Company's controlled expansion plan within the U.S.
The Acquisition will result in the Company acquiring control over the following licenses:
- Cannabis Business Local License, #MCL-17-007-M-18
- Cannabis Business Local License, #MCL-17-007-C-18
- Type 7 Manufacturing License – Adult & Medical Cannabis Products, #CDPH-T00000362
Furthermore, the Company is exploring the possibility of processing hemp at the Facility for full spectrum plant extracts rich in CBD and leveraging the hemp legalization provisions of the 2018 U.S. Farm Bill to capitalize on the expected increased demand for CBD. It has been estimated that the CBD market will have a value of over $2.1 billion by 2020. Legislation is currently pending in California that would accommodate incorporating hemp-derived cannabinoids and terpenes into the currently regulated cannabis supply chain (similar to neighboring legal cannabis states like Oregon), as well as non-THC-infused food, beverages and cosmetics.
"The Company will, upon completion of the Acquisition, significantly increase its production and manufacturing capabilities in the U.S.," said CEO of Chemesis, Edgar Montero. "The addition of this new facility will allow the Company to extract high-quality cannabinoids and terpenes for use in a wide variety of consumer products. Chemesis will then be able to leverage its existing expertise in extraction, distribution, and sales to continue growing revenues and build long-term value. I believe this expansion will open up considerable new revenue opportunities for the Company when we begin processing hemp," added Montero.
Under the terms of this acquisition, Chemesis will pay $1,000,000 USD 90 days from closing and issue 4,600,000 shares. The stock is subject to 36-month lock-up/leak-out guidelines. The Acquisition is expected to close on or about March 30, 2019. Read this and more news for Chemesis International at: https://www.financialnewsmedia.com/news-csi/
In the industry developments and happenings in the market this week include:
Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON.TO) this week confirmed that it had sold all of its common shares in the capital of Whistler Medical Marijuana Corporation ("Whistler"), representing approximately 19 percent of Whistler's issued and outstanding common shares, to Aurora Cannabis Inc. ("Aurora") for a total purchase price of approximately C$175 million, payable by the issuance of common shares in the capital of Aurora ("Aurora Common Shares"), and subject to certain working capital adjustments and holdbacks (the "Transaction").
"We'd like to thank and congratulate Whistler for their partnership over the past two years," said Mike Gorenstein, CEO of Cronos Group. "Whistler's commitment to creating high-quality products and establishing a premium brand has generated value for consumers and investors alike. We are proud to have been part of their growth and look forward to their progress through this venture."
HEXO Corp. (NYSE: HEXO) (TSX: HEXO.TO) recently announced that it has entered into a syndicated credit facility with Canadian Imperial Bank of Commerce ("CIBC"), as Sole Bookrunner, Co-Lead Arranger and Administrative Agent and Bank of Montreal as Co-Lead Arranger and Syndication Agent (together with CIBC, the "Lenders"). Under the terms of the credit facility, the Lenders will provide HEXO up to C$65 million of secured debt financing at a rate of interest that is expected to average in the mid-to-high 5% per annum range over its three-year term.
The credit facility consists of a C$50 million term loan and a C$15 million revolving loan, with an uncommitted option to increase the facility by up to C$135 million, subject to the satisfaction of certain customary legal and business conditions. Both loans mature in 2022. HEXO may, at its discretion, repay the balance of the loans without penalty, at any time.
The Green Organic Dutchman Holdings Ltd. (OTCQX: TGODF) (TSX: TGOD.TO) this week announced that it has received organic certification from Pro-cert Organic Systems Ltd. ("Pro-cert"). This is the second certification body to endorse TGOD's organic process at its Hamilton facility.
The Company is committed to the highest standards of organic cultivation of cannabis. TGOD cannabis is grown in soil, without synthetic fertilizers, herbicides or pesticides, and is never irradiated. Canadian consumers have stated that they prefer organic cannabis. In a recent study conducted by Hill & Knowlton, over 50% of recreational consumers stated it was important that their cannabis was organic. When the same question was posed of medical patients, that number increased to 63%.
"Certified-organic provides consumers with the best cannabis experience, and the entire TGOD organization is committed to that standard," said Brian Athaide, Director and CEO of TGOD.
Tilray, Inc. (NASDAQ: TLRY), a global leader in cannabis research, cultivation, production and distribution, this week announced that its wholly-owned subsidiary Tilray Portugal Unipessoal Lda. ("Tilray Portugal") has completed a successful harvest of medical cannabis at the Company's European Union (EU) Campus in Portugal.
Tilray's EU Campus in Portugal is a multi-faceted production facility that includes indoor, outdoor and greenhouse cultivation sites, as well as research labs, processing, packaging and distribution sites for medical cannabis and cannabinoid-derived medical products. To date, Tilray has invested approximately €20 million in the facility, which totals nearly 250,000 square-feet with additional room to expand.
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