REPEAT - AgraFlora Organics Reviews Vertically Integrated Asset Portfolio

GlobeNewswire - finance.yahoo.com Posted 1 year ago

VANCOUVER, British Columbia, June 18, 2019 (GLOBE NEWSWIRE) -- AgraFlora Organics International Inc. (“AgraFlora” or the “Company”) (CSE: AGRA) (PU31.F) (OTCPK: PUFXF), a growth oriented and diversified international cannabis company, is pleased to provide the following corporate updates pertaining to the Company’s vertically integrated cannabis (“THC”) and cannabidiol (“CBD”) asset portfolio.

Over the past four quarters, AgraFlora has continued to deploy an assertive corporate acquisition stratagem, amassing a diverse portfolio of vertically integrated cannabis assets and industry partnerships. Culminating with the Company’s recent acquisition of a suite of unique downstream and cannabinoid product formulation assets from Organic Flower Investments Group Inc. (“Organic Flower”) (CSE:SOW)(2K6.F)(QILFF), AgraFlora now boasts the following upstream/downstream operations, partnerships, off-take agreements, exclusive licences and asset exposure:

70 PER CENT OWNERSHIP STAKE IN PROPAGATION SERVICES CANADA (“PSC”)

Pursuant to the terms of an executed asset purchase and sale agreement between AgraFlora and Organic Flower, the Company now controls 70 per cent of PSC’s flagship Delta Greenhouse Complex. The Delta Greenhouse Complex is equipped with 2.2 million square feet of dedicated cultivation area under glass and is widely considered to be one of the most technically advanced and environmentally efficient greenhouse operations in the world.

AgraFlora continues to achieve material progress with regard to the retrofit and licensing of its bellwether Delta Greenhouse Complex. After a comprehensive review of its anticipated final preparations and submissions, including its affirmation of readiness and video evidence package, the Company anticipates, based on recent standard timelines for review and award and assuming no major required amendments or augmentations, the award of a cultivation licence from Health Canada by the fourth quarter of 2019.

Upon successful award of its aforementioned Health Canada cultivation license, the Delta Greenhouse Complex will hold claim to the highly coveted spot as the world’s second largest cannabis cultivation operation under glass, with an estimated replacement cost of $190,000,000.

AgraFlora’s internal corporate projections indicate that upon receipt its aforementioned cultivation license from Health Canada, the Company’s Delta Greenhouse Complex will be the fourth largest Licensed Producer (“LPs”) in Canada by 2020 funded production metrics (see Figure 1), strategically positioned in close proximity to Canada’s largest cannabis economic centres; Toronto and Vancouver.

Figure 1.

Issuer 2020 Estimated Annual Capacity (in grams) Current Market Capitalization
Aurora Cannabis 700,000,000 $10,272,832,000
Canopy Growth Corp. 525,000,000 $19,036,764,000
Aphria 255,000,000 $2,283,968,000
AgraFlora & PSC 251,250,0001 $173,852,000
Tilray 225,000,000 $3,793,000,000
The Green Organic Dutchman 195,000,000 $894,586,000
Cronos Group 150,000,000 $6,910,173,000
OrganiGram Holdings 113,000,000 $1,304,743,000
Hexo Corp. 108,000,000 $1,930,895,000
CannTrust Holdings 105,000,000 $944,630,000

AgraFlora’s forecasted production metrics are further substantiated the Delta Greenhouse Complex’s industry-leading cultivation infrastructure, including:

  • Fully integrated on-site natural-gas-powered power plant;
  • Providing ample heat and electricity, while repurposing carbon dioxide emissions to benefit the plants;
  • Proprietary energy-efficient air exchange;
  • Advanced climate and humidity control management infrastructure;
  • Ebb-and-flow watering systems to enhance complete irrigation recapture and water treatment;
  • 1.5-million-gallon hot water storage tank configured to store energy produced during the day, for redistribution during non-peak hours, thereby increasing operational efficiencies and reducing associated energy costs; and,
  • Multistage supplemental lighting augmented by natural sunlight to foster optimized illumination equilibrium.

ACMPR LICENSED AAA HEIDELBERG FACILITY

AgraFlora’s wholly-owned subsidiary, AAA Heidelberg Inc. is a licensed cannabis cultivation facility under Health Canada's Access to Cannabis for Medical Purposes Regulations (“ACMPR”). The AAA Heidelberg facility is equipped with five partitioned flower rooms, affording the company ample canopy earmarked for ultra-premium, artisanal craft cannabis cultivation.

Once fully optimized, it is forecasted that the AAA Heidelberg facility may achieve annualized dried cannabis production capabilities of circa one million grams, including the successful recapture of 225,000 grams of premium cannabis trim to be manufactured into ancillary value-added cannabis products.

The Company previously provided the following Q3 2019 - Q4 2020 operating guidance and licensing milestones pertaining to its AAA Heidelberg facility:

  • Application and anticipated receipt of a Health Canada awarded sales licence;
  • Application and anticipated receipt of a Health Canada awarded processing licence;
  • Application and anticipated receipt of a Health Canada issued export permit;
  • Proposed on-site dispensary as per Alcohol and Gaming Commission of Ontario (AGCO) regulations;
    • Potential 1.5-million-purchaser catchment area within a 90-minute radius;
  • Importation of a catalogue of premium craft cannabis genetics;
  • Fully optimized production capabilities of circa one million grams of ultra-premium dried craft cannabis flower, with potential production expansion based off surplus cultivation areas contemplated;
  • Successful recapture of 225,000 grams of premium cannabis trim to be manufactured into ancillary value-added cannabis products;
  • Successful harvest of inaugural ultra-premium craft cannabis crop;
  • Proposed export of finished cannabis form factors to emerging marketplaces, including India and Thailand, achieving unit contribution of up to $15 per gram.

INDUSTRIAL HEMP LICENSE 

AgraFlora has applied for licensing with Health Canada under the industrial hemp regulations of the Cannabis Act. The Company anticipates that licence approval could be granted in the third quarter of 2019, which will subsequently equip AgraFlora with the ability to seed, cultivate and harvest industrial hemp at its flagship 2.2 million square foot Delta, B.C. facility.

Upon successful grant of an industrial hemp licence, AgraFlora intends to aggressively pursue proprietary CBD cultivar development, as well as:

  • Seedling development;
  • Cultivar experimentation; and,
  • Specialized fibre production.

AgraFlora anticipates that upon achieving full scale production, its planned industrial hemp operations will provide ample feedstock for its unique portfolio of product formulation and downstream THC/CBD assets, including cannabinoid-infused beverages, edibles and topicals.

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CANNABINOID-INFUSED CONFECTIONARY, CHOCOLATE AND EDIBLES MANUFACTURING

By way of an executed Asset Purchase Agreement (the “Agreement”) with Organic Flower, AgraFlora controls an 80 per cent interest in The Edibles and Infusions Corp. (“Edibles and Infusions”), a joint venture (the “JV”) with one of North America's largest and most storied manufacturer and distributor of chocolate and sugar confectionary products.

The Company’s JV partner was established nearly a century ago and has since become North America's largest confectionary fruit slice manufacturer, supplying products to over 20,000 locations across North America - most prominently Costco and Wal-Mart. AgraFlora’s JV partner currently manufactures and distributes several hundred unique stock keeping units (“SKUs”).

The JV will design and develop a 50,000-square-foot manufacturing and product formulation facility, located in Winnipeg, Manitoba. The facility will be operated by a roster of experienced chocolatiers and confectioners, as well as equipped with state-of-the-art manufacturing equipment capable of producing an assortment of both cannabinoid/terpene-infused products for medicinal, functional and adult use, including:

  • Gourmet snacks including caramel popcorn, cheese biscuits, cocoa cookies, glazed pecans and salty pretzels;
  • Chocolates, toffees, caramels;
  • Gummies, confectionary, gum;
  • Baked goods;
  • Flavoured tinctures;
  • Powdered drinks; and,
  • CBD- infused pet products.

Edibles and Infusions is working to finalize its applications for a Health Canada standard processing licence, as well as a cannabis sales licence. The Company anticipates the facility will be fully operational by the first quarter of 2020 and, once optimized, will be capable of generating in excess of $750 million in annual sales revenue. Projected revenues are derived from logical assumptions including the facility achieving full capacity and the equipment operating seven days per week, 20 hours per day with all product being sold to downstream distributors, with the sales price based on current comparable retail pricing in the USA.

Existing downstream capabilities will be buoyed by one of Canada's leading sales forces, affording the JV the ability to secure immediate shelf space across all major retail channels, including:

  • Groceries;
  • Pharmacies;
  • Convenience stores;
  • Gas stations; and,
  • Quick-service restaurants.

NON-ALCOHOLIC CANNABINOID-INFUSED BEERS AND CIDERS FORMULATION

Through an exclusive partnership agreement with a leading Toronto-based brewery (the “Brewhouse”), AgraFlora holds claim to the exclusive formulation, manufacturing and distribution rights for all cannabinoid-infused beverages developed at said Brewhouse. Composed of a consortium of experienced brewery partners, the Brewhouse has completed multiple production runs for prominent European beverage brands, such as:

  • Guinness;
  • Augustiner; and,
  • Innes & Gunn.

This exclusive partnership provides AgraFlora with preeminent exposure to a collective of domestic and global brewery partners, as well as further crystallizes a leading production platform for the Company's cannabinoid-infused carbonated beverage product offering, including:

  • Non-alcoholic beers;
  • Seltzers; and,
  • Ready-to-drink (“RTDs”) beverages.

With its exclusive brewing partner, the Company plans to commence product formulation and batch testing during third quarter of fiscal 2019, with forecasted commercial production slated to begin in fourth quarter 2019.

Equipped with custom production equipment and a captive research, development and testing facility, as well as a state-of-the-art brewing infrastructure, the Brewhouse is armed with annual output capacity capabilities of 120,000 hectolitres (“hl”). By comparison, Canadian brewer Steam Whistle Brewing produces approximately 95,000 hl on an annualized basis.

The Brewhouse is nearing completion of major facility retrofit initiatives, which are projected to increase its output capacity to over 200,000 hl per annum. Upon completion of the retrofit, aggregate capital expenditures deployed on the Brewhouse build out will exceed $20 million.

In addition, the Brewhouse possesses the ability to package both steel kegs and plastic one-way kegs in a plethora of fittings, and is equipped with a 24-head rotary canning line, capable of packaging a variety of container dimensions at a rate of over 100 million containers per year. The Brewhouse also boasts an adjoined tasting and viewing facility (the “Taproom”) affording AgraFlora the ability to showcase product launches, beer dinners, community events and gallery showings.

CBD-INFUSED/HEMP OIL COSMETICS MANUFACTURING

Via its wholly-owned subsidiary Canutra Naturals Ltd. (“Canutra”), AgraFlora is equipped with cultivation, extraction, manufacturing and distribution capabilities from its flagship facility in Kent County, New Brunswick. Canutra manufactures and distributes premium skin care, cosmetics and cannabinoid product lines, including a suite of trusted consumer brands such as Whole Hemp Health; a Canadian all-natural, hand-made skin care line, formulated with organic hemp seed oil.

Canutra markets the Whole Hemp Health product line by way of brick-and-mortar retail outlets, Amazon Prime, as well as direct to consumer, through an integrated Shopify e-commerce platform.

Canutra's wholly owned subsidiary, Canutra Farms, owns and operates 76 acres of unzoned agricultural land with 1,000 feet of river frontage in Kent county, New Brunswick. Canutra Farms was formerly a federally owned farm and research facility and is equipped with over 17,500 square feet of commercial-grade facilities and 12 separate structures. Canutra Farms was granted an industrial hemp licence by Health Canada for its New Brunswick land parcel in 2017.

Canutra was also awarded a cannabis research licence by Health Canada in 2018. Additionally, Canutra boasts a research and development partnership with the Universite de Moncton (“UM”). Canutra will collaborate with UM to augment its portfolio of IP including:

  • Optimized cannabis/hemp cultivation techniques;
  • Extraction methodologies;
  • Cultivar development;
  • Inoculation formulations;
  • Proprietary cannabinoid profiles for future skin care product lines.

Canutra's products are strategically manufactured in the same county as Canutra Farms, affording Canutra the ability to swiftly expand the breadth of its product line from its current SKUs to more than 40 SKUs.

This turnkey manufacturing infrastructure positions AgraFlora to capitalize on current and future market trends in the rapidly expanding cannabis consumer products space. Canutra is finalizing the development phase of a suite of innovative SKUs including:

  • Organic cosmetics with anti-aging properties;
  • Shampoos and conditioners; and,
  • Sunscreens.

CBD-INFUSED PERFORMANCE PRODUCTS

By way of an exclusive North American manufacturing and distribution agreement with the Toronto Wolfpack RLFC (“TWP”) and HowlBrands, AgraFlora is positioned at the nexus of the burgeoning CBD-infused performance products marketplace and the vast captive audience of professional sports.

In collaboration with TWP and HowlBrands, the Company will leverage its unique downstream and product formulation asset portfolio to manufacture and distribute a suite of athlete-focused, CBD performance products, including:

  • CBD-infused topical creams;
  • Therapeutic relief balms;
  • Sport pain CBD tinctures;
  • CBD-infused soaks; and,
  • CBD-infused roll-ons and healing sticks- engineered for optimal topical absorption.
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