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New York, NY – June 12, 2019 – America’s cannabis market continues to expand, with 33 medical marijuana-legal states, 10 states with legalized adult consumption, and 4 states on the path to becoming the next to legalize recreational marijuana: Illinois, Ohio, New York, and New Jersey. In turn, cannabis companies are taking strategic steps to ensure their international expansion plans include making inroads into the world’s largest economy. Among the cannabis companies actively positioning themselves for U.S. market penetration are Chemistree Technology Inc. (CSE:CHM) (OTCQB:CHMJF), Aurora Cannabis Inc. (NYSE:ACB) (TSX:ACB), Tilray, Inc. (NASDAQ:TLRY), HEXO Corp (TSX:HEXO) (NYSE-A:HEXO), and CannTrust Holdings Inc. (TSX:TRST) (NYSE:CTST).
New Jersey, in particular, currently has Senate and Assembly support for 3 bills that would legalize adult-use marijuana, a move that would ultimately create the need for around 100 new cannabis cultivators to meet what’s expected to be an $850 million annual market by 2020. More immediately, New Jersey announced on June 3, 2019, that, starting July 1st, applications will be open for up to 108 new medical marijuana (MMJ) licenses.
In response, Chemistree Technology Inc. (CSE:CHM) (OTCQB:CHMJF) has already announced its strategic partner, Applied Cannabis Sciences of New Jersey (ACS), will be applying for all 3 permit types New Jersey is making available: cultivation endorsements, manufacturing endorsements, and dispensary endorsements. The plan is to create an on-the-ground vertically integrated model for ACS while giving Chemistree a valuable presence in the eastern U.S. cannabis market.
With other U.S. states moving toward their own forms of legalization, cannabis companies are finding various and creative ways to position themselves to score their share of the U.S. market as it emerges: Aurora Cannabis Inc. (NYSE:ACB) (TSX:ACB) formed a partnership with the mixed martial arts organization UFC® that will include athlete-targeted research in Nevada; Tilray, Inc. (NASDAQ:TLRY) acquired Manitoba Harvest in Q1 2019 along with its distribution to 16,000+ retail locations in the U.S. and Canada; HEXO Corp (TSX:HEXO) (NYSE:HEXO) formed HEXO USA Inc. and onboarded a U.S.-based CFO; and CannTrust Holdings Inc. (TSX:TRST) (NYSE:CTST) started trading on the New York Stock Exchange in late February.
At the same time that New Jersey announced an 800% increase in MMJ licenses, the state also announced an upcoming voter referendum on adult-use legislation in 2020. This has understandably caught the cannabis market’s attention; New Jersey needs to greatly increase the number of cannabis companies in the state to meet demand.
Meeting the New Jersey MMJ Opportunity
With the doors about to open much wider for New Jersey’s MMJ market, Chemistree Technology Inc. (CHM-CHMJF) took quick action in April 2019 by partnering with and acquiring 10% of Applied Cannabis Sciences (ACS), a medical retail dispensary comprised of a team of New Jersey-based industry professionals from both the MMJ and adult-use sectors. ACS is no lightweight by any standard, with a management team representing 50+ years of collective experience and 20+ cultivation, processing, and manufacturing licenses across 4 U.S. states.
Chemistree President Karl Kottmeier commented on the partnership saying, “The potential to expand Chemistree’s presence outside of California and Washington state and ultimately introduce our signature brand Sugarleaf to the large New Jersey consumer base by partnering with ACS is consistent with our growth strategy.”
To gain just some idea of the depth of the ACS team, counted among their founding members is Nicholas J. Zitelli, also known by his penname Nico Escondido, under which he has written hundreds of industry articles, most notably for High Times. Zitelli is the founder and CEO of the Amsterdam-based medicinal research and development Cannabis Genetics Institute (CGI), and has established industry expertise spanning everything from cultivation to genetics, garden technologies, lab testing, and regulatory and compliance measures. Chemistree wisely appointed Zitelli to its Board of Directors in April.
With New Jersey representing 9 million+ people, a mere 6 active cannabis operators, and up to 108 new licenses up for application, the partnership with ACS is only the latest example of how the Chemistree corporate strategy is playing out.
Keeping Pace with the Greater Cannabis Opportunity
With the cannabis industry emerging and expanding as fast as it is, Chemistree Technology Inc. (CHM-CHMJF) understands that time is of the essence. Unlike the typical and slower start-up approach of many other companies in the space, Chemistree uniquely positions itself as a U.S.-facing cannabis investment company. This approach has enabled Chemistree to accelerate its international presence and footprint by acquiring and developing cannabis assets that are vertically integrated across the cultivation, processing, distribution and retail sectors.
For example, their April 2019 acquisition of an ownership stake in Arizona-based The Physician’s Choice CBD came with a pre-existing suite of 9 proprietary full spectrum health-targeted CBD-from-hemp products and Q1 2019 booked sales of around $150,000.
An earlier strategic acquisition was Washington-based Sugarleaf, which came with turnkey facilities and the ability to market existing and popular brands, including 18 different strains of dried cannabis flower available in 50+ dispensaries throughout Washington. Other acquisitions include a 50% interest in Humbolt County-based C3 Molecular cannabis-processing company, 9.55 acres in Southern California’s “Cannabis Zone” in Desert Hot Springs, and Pasha Brands in the Canada-based cannabis sector.
The approach appears to be working, judging by the interest in Chemtree’s capital raise of over $10.8 million in March 2019 and the signing on of industry experts such as Nicholas J. Zitelli (Nico Escondido) and the partnership with ACS.
Other Market Expansion & Positioning Activities
Alberta-based Aurora Cannabis Inc. (NYSE:ACB) (TSX:ACB) announced Q3 fiscal 2019 revenue growth averaging 20% thanks to scaled up production and strong performance across their Canadian and international markets. With additional production facilities expected to receive European Union Good Manufacturing Practices (EU GMP) certification, Aurora expects its rate of supply to international markets will increase. Aurora began full spectrum cannabis extract exports in Germany in Q3, which are expected to contribute to the company’s growth thanks to the higher margins associated with extracts.
Tilray, Inc. (NASDAQ:TLRY) has been busy on multiple expansion fronts, including forming sales and distribution arrangements that would see medical cannabis being supplied through major pharmaceutical channels across Germany and elsewhere within the EU. In May 2019, Tilray announced its Biocant Park facility in Cantanhede, Portugal, had received a standard manufacturing license and Good Manufacturing Practices (GMP) certification in accordance with the European Medicines Agency’s (EMA) standards. Tilray has invested roughly €20 million in the ~250,000-square-foot manufacturing facility.
Big expansion news for HEXO Corp (TSX:HEXO) (NYSE-A:HEXO) was the April 2019 completion of its first harvest from the company’s 1-million-square-foot greenhouse expansion. The harvest represents an important milestone toward HEXO’s goal of annual production of 108,000 kg of dried flower per year. An idea of the scale of operations can be gained from the headcount involved: 600+ employees total, with another 500 hires expected in the near term.
Q1 2019 results for CannTrust Holdings Inc. (TSX:TRST) (NYSE:CTST) include multiple indicators of company expansion toward becoming a global provider of innovative cannabis products and brands. Harvested production exceeded 9,400 kg for a 96% increase in production over the prior quarter. CannTrust also acquired 81 acres of land in British Columbia, representing a potential outdoor yield of 75,000 kg of production. In Ontario, CannTrust began its Phase 3 expansion with an eye on adding another 50,000 kg to its annual capacity.
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