Gaia Grow’s (GAIA.V) relationship with CannGroup Development (CDC) has been expanded to include an exclusive-use extraction line in CDC’s new subsidiary Site 2 licence in Calgary, which they anticipate to be fully licensed and operational by the end of Q3 2020.
At the beginning of March, Gaia entered into an agreement with CDC to sell 15,000 kilograms of milled hemp powder at $110 a kilogram for processing into CBD oil and distillate. The agreed upon rate of delivery was 1,000 kilograms every week for 15 weeks, or until the total was shipped.
“We are now positioned to take advantage of every revenue stream available. We are working on the definitive with TRU and securing our equipment delivery to the Calgary, Alberta location. Having a great working relationship with CDC and TRU, and a mutual ideology of revenue-based growth, I feel we have a recipe for success. With the ability to turn our Enagon milled hemp into extracted products, we can sell wholesale and directly to retail which has always been a goal of ours and it is now one that we will be achieved faster than expected,” said Frederick Pels CEO of Gaia.
CDC’s site in Enderby, B.C., deals with cultivation and processing with its own in-house cannabis production and access to third-party biomass. They have created TruExtracts (TRU) to handle their medical sales capacity and logistical reach across Canada, as well as increase their processing volume potential, and filed documentation with Health Canada to expand their current license to their Calgary site.
Originally, Gaia and TRU had a memorandum of understanding dictating that Gaia’s capital investment was to take two forms:
- Initially, in the form of high-volume biomass extraction and refining equipment for use within the licensed square footage inside the TRU Calgary facility. The initial goal of this installation is to ensure GAIA has its own uninterrupted extraction capacity for Gaia’s 2019 harvest hemp biomass to crude, distillate and isolate in one production line, creating saleable finished product to serve the varying and growing demands of the Canadian medical cannabis marketplace.
- From the profit generated via the sales of extracted/refined product, sold via CDC’s Medical Sales License, Gaia would also commit to an investment of no less than $2,000,000 into TRU in exchange for an equity position in TRU’s operations. Gaia will only reinvest from revenues generated at the Calgary facility and will not be placing any upfront treasury funds into the venture.
TRU will be taking control of all operations, quality control and assurance, and sales in the Calgary facility, governed by TRU’s standard operating procedures and licensing. The joint-owned processing line will ensure capacity of Gaia’s milled hemp biomass, processed by Enagon, in Lacombe, Alberta.
“By being patient and waiting for the right opportunity we were able to get to this phase with zero capex, something I am very proud of and I feel builds significant value for our shareholders. Gaia now has hemp cultivation, biomass upgrading, storefront retail and with the successful completion of this joint venture, full extraction capabilities. I look forward to keeping shareholders updated as developments become available,” said Frederick Pels CEO of Gaia.
The JV between CDS and TRU remains subject to negotiation and finalization of a definitive agreement which will replace the MOU, and the company will provide further information about the agreement when they have it.