On March 7, 2019 Chemesis International (CSI.C) announced that it has “entered into binding agreement to acquire 100% of a fully-operational extraction and manufacturing facility in Cathedral City, California.”
Chemesis has 4 main branches of operation:
- Cultivation: grow facility in Puerto Rico with 30,000+ lb overall grow capacity. Grow opportunities currently under review in California.
- Manufacturing: extractions, formulations & products, specializing in BHO, Alcohol & CO2 extraction with the current capacity of over 2000 lbs of raw material a day.
- Distribution: with new regulations impacting the California market, CSI aims to be a fully compliant distributor. In Puerto Rico market, CSI serves the entire island from seed to sale.
- Retail: Actively engaging retail storefronts in the California market while working to open branded shops in multiple marketplaces.
Unlike a “Letter of Intent (LOI)”, a “binding agreement” is a contract in which a court can impose penalties in the event one party attempts to negate on a promise in the signed document.
An LOI will typically contain an all-weather escape clause like: “The finalisation of a definitive agreement must be satisfactory to each party.”
Binding agreements eliminate these easy-out escape clauses. Typically, both parties are constrained by Non-Disclosure Agreements (NDAs).
Once completed, this acquisition will expand CSI’s processing ability to “over 500,000 kg of cannabis annually.”
The new fully licenced state-of-the-art facility is expected to double CSI’s current capacity to process large amounts of cannabis to extract THC, CBD and other cannabinoid and terpene products.
CBD – a non-psychoactive cannabis compound – is derived from both marijuana plants and hemp. It is gaining traction in the health and wellness sector for treating a dazzling array of ailments including inflammation, chronic pain and arthritis.
On February 7, 2019, CSI announced that it has the IP and equipment necessary to conduct low-temperature live resin extraction.
The 2016 Marijuana Business Factbook lists the profit margins of cannabis-infused products–an umbrella term which includes edibles, concentrates like live resin and more–at roughly 32%,” stated Equity Guru’s Ethan Reyes.
Cannabis infused products maintain an 11% lead over the second most profitable consumer good, pharmaceutical drugs.
CSI’s proprietary extraction method will increase yields and reduce operating costs.
Chemesis’ low-temperature extraction provides a third extraction method to “complement its current ethanol and butane hash oil (BHO) methods.”
Chemesis has been relocating extraction machinery from San Diego County, CA, to the extraction facility in Cathedral City (pop. 53,000) – located in Riverside County – between Palm Springs and Rancho Mirage.
The new facility is located close to the existing licensed extraction facility, which commenced operations this quarter.
When the deal is finalised, CSI can operate two fully licensed and commercialized facilities, creating operational synergies for Chemesis’ 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
According to the March 7, 2019 press release, CSI is also conducting a business analysis on a hemp processing facility for full spectrum plant extracts rich in CBD – leveraging the hemp legalization provisions of the 2018 U.S. Farm Bill to capitalize on the expected increased demand for CBD.
The CBD market is projected to have a value of over $2.1 billion by 2020.
Legislation is pending in California that would allow incorporation of hemp-derived cannabinoids and terpenes into the cannabis supply, as well as non-THC-infused food, beverages and cosmetics.
Binding agreement terms:
Chemesis will pay USD $1 million 90 days from closing
Chemesis will issue 4.6 million shares.
36-month stock lock-up/leak-out guidelines.
On January 14, 2019 CSI announced the launch of its cannabis beverage division in Puerto Rico through Natural Ventures – an 80% owned subsidiary.
“The initial launch of these all-natural ingredient products will include an energy shot, a sleep shot, and a calming shot,” stated CSI – underlining the freakish versatility of cannabis plant.
CSI is also collaborating with filmmaker Kevin Smith and “Silent Bob”.
Equity Gury’s Chris Parry considers Kevin Smith “One of the top three best endorsement targets (for a cannabis company) in the world today.”
“The addition of this new facility in Cathedral California will allow us to extract high-quality cannabinoids and terpenes for use in a wide variety of consumer products,” stated CEO of Chemesis, Edgar Montero. “Chemesis will then be able to leverage its existing expertise in extraction, distribution, and sales to continue growing revenues and build long-term value.”
The acquisition is expected to close on or about March 30, 2019.
Full Disclosure: Chemesis is an Equity Guru marketing client, and we own the stock.