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In the cannabis “Get-Big-Fast” era, where weed companies buy stuff (grow-ops, dispensaries, websites, manufacturing plants, brands etc.) and post gigantic quarterly losses, it’s refreshing to see one company do it the old-fashioned way.

On July 15, 2019 Chemesis International (CSI.C) announced a partnership with U.S.-based Happy Tea, a brand of CBD-infused sachets and shots.

At the closing of the deal, CSI received a CND $5.2 million minimum purchase order.

“Do-a-modest-deal-that-generates-revenue” is such a quaint concept that Chemesis may as well be huddling by an airtight stove, sipping Ovaltine while reciting “Grimms’ Fairy Tales”  to the rosy-cheeked grandkids.

Chemesis has 4 main branches of operation:

  • Cultivation:  Hemp cultivation in Michigan, grow facility in Puerto Rico with 30,000+ lb overall grow capacity. Grow opportunities currently under review in California. Also, a 1,000-acre Colombian grow facility in development.
  • 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, Desert Zen has emerged as a fully compliant first mover.  In Puerto Rico market, CSI serves the entire island from seed to sale.
    Retail:  Chemesis distributes and transports California Sap, Jay and Silent Bob’s Private Stash and 3rd-party brands to over 600 dispensaries in California and Puerto Rico.

Happy Tea currently offers 3 products including powdered drink mixes and flavoured oil shots that are comprised of a blend of all-natural ingredients, antioxidants and are infused with 10mg of CBD.

Although the company is only six months old, Happy Tea already has a large loyal customer base (60,000 Instagram followers).

CBD, a non-psychoactive ingredient in cannabis, is used to treat pain, inflammation and anxiety. Currently, the U.S. Food and Drug Administration (FDA) won’t allow CBD to be added to food or beverages.

According to the FDA, CBD is a drug that requires research and trials to determine its suitability in food and drink markets.

Happy Tea survives in this regulatory environment by selling a powdered product: “Open one stick pack, pour it into a bottle containing 12 – 16 oz. of cold water, close the lid, shake it up until the powder has fully dissolved.”

On July 13, 2019 the FDA announced that it is “expediting” the development of CBD rules, and expects to issue recommendations in the next three months.

“FDA is expediting its work to address the many questions about cannabidiol (CBD),” tweeted the FDA, “it’s an important topic for American hemp farmers and many other stakeholders.”

Consumers can currently buy Happy Tea products individually or get monthly deliveries, which are shipped via the company’s e-commerce sales channels across the U.S.

 Happy Tea will leverage Chemesis’ multi-state operations to increase production capabilities and create retail brick and mortar exposure.

Chemesis will assist Happy Tea in expanding its current 3 SKU’s to a product line of 9 SKU’s.

SKU stands for “Stock-Keeping Unit.”  The term is often used synonymously with “Product.” But unlike a product, an SKU is bound to a particular location.

The company will manufacture Happy Tea products at its U.S.-based facilities and will increase production as demand rises.

“Every CBD company on the block along with their manufacturers are making creams and drops,” stated Jarrod Swanger, COO of Happy Tea. “We [Chemesis & Happy Tea] are the only two entities striving to redefine delivery. With their capacity and capability and our branding, we will own the CBD market.”

Two weeks ago, CSI’s subsidiary, Natural Ventures, signed a three-year, USD $6M minimum purchase agreement with PR ONE, a medical cannabis company based in Puerto Rico.

Purchase orders of this variety “serve as validation for our processes and continued dedication to quality and consistent products,” stated Chemesis CEO Edgar Montero.

“CSI has made great strides in Latin America, including in Colombia through its local subsidiary, La Finca Interacviva-Arachna Med SAS,” wrote Equity Guru’s Ethan Reyes, “With nearly one billion people on both continents, it’s clear Chemesis has its eye on the Americas while others turn to Europe.”

Chemesis now has US operations in California, Arizona, Puerto Rico and Michigan. The long-term growth strategy is to target other U.S. states with favourable regulations and assets that compliment CSI’s philosophy and skill-set.

In a May 27, 2019 podcast, Montero spoke with Equity.Guru’s Guy Bennett about the personal catalyst that propelled him into the cannabis industry, and how CSI cross-pollinates innovation between its international operations.

Q3, 2019 Chemesis Fiscal Highlights:

  • Revenue of $3.7 million, a 33% increase over the previous quarter
  • Gross Profit of $1.1 million.
  • Closed the acquisition of La Finca, an integrated Colombian cannabis company with access to over 1,060 acres of outdoor cultivation.
  • Signed agreement to manufacture a Proprietary Patent Pending THC Flake.
  • Partnership with First Medical Cannabis bringing immediate access to 1,000 acres of hemp cultivation in Puerto Rico- with option to expand to an additional 5,000 acres.

Chemesis international has access to $32.6 million in drawdown equity facilities between New York-based Alumina Partners Inc. and Global Emerging Markets at the company’s discretion.

CSI’s branded products have attracted an endorsement/collaboration with filmmaker Kevin Smith and “Silent Bob.”  Chris Parry considers Kevin Smith “One of the top three best endorsement targets (for a cannabis company) in the world today.”

“We are extremely pleased to be working with Happy Tea,” stated Montero. “Chemesis will continue its efforts in creating lasting partnerships that bring strong revenues.”

Full Disclosure: Chemesis is an Equity Guru marketing client.

Disclaimer: ALWAYS DO YOUR OWN RESEARCH and consult with a licensed investment professional before making an investment. This communication should not be used as a basis for making any investment.

Lukas Kane

Lukas Kane is a Vancouver-based investor and writer.Previously the CEO of a North American investment news syndicate, Mr. Kane was also the Communication Director for a consortium of resource extraction companies.In the course of his career, he has toured copper mines on the Antagfonasto desert in Chile, potash projects in Saskatchewan, cannabis labs in California and clothing factories in Shenzhen, China. A rudimentary speaker of Mandarin, Mr. Kane’s passions are his family, writing and playing football (real football - with the spherical ball).

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