Legal Cannabis Market Expected to Grow, Thanks to California's Impact

Wednesday, January 17, 2018 Drug News
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NEW YORK, January 17, 2018 /PRNewswire/ --

According to Hexa Research,

the U.S. medical cannabis market is projected to reach $19.48 billion by 2024. The expected growth is driven by the expanding acceptance of medical advantages associated with cannabis, particularly for patients dealing with
cancer, diabetes and chronic pain. Symptoms and conditions that may be treated by cannabis include, cancer, HIV, AIDS, Alzheimer's disease, and multiple sclerosis. Chronic pain accounted for 46 percent of the U.S. cannabis medical market share in 2016. According to the research, the solid cannabis edibles segment in 2016, within the U.S. market generated $2.47 billion in revenue and is expected to continue to dominate the cannabis industry to 2024. FinCanna Capital Corp. (OTC: FNNZF), CannaRoyalty Corp. (OTC: CNNRF), Cannabis Sativa, Inc. (OTC: CBDS), iAnthus Capital Holdings, Inc. (OTC: ITHUF), Lifestyle Delivery System Inc. (OTC: LDSYF)

Now that the state of California has legalized products for recreational use the legal sales of which went into effect on January 1, alone is expected to play a significant role in the development of the industry. The new industry is also expected to contribute to California's tax revenue. The LA times reported that, California is on the verge of creating a legal market for marijuana worth more than $5 billion that will help make the state a destination for pot-loving tourists.

FinCanna Capital Corp . (OTC: FNNZF) also listed on the Canadian Securities Exchange under the trading symbol "CALI". Earlier this week the company reported, "a significant development in the extraction business of its flagship investment in California. Cultivation Technologies Inc ("CTI") has announced that it is now directly operating its interim medical cannabis extraction facility ("Interim Extraction Facility") and plans to directly operate its permanent facility ("Permanent Extraction Facility") to be constructed at its 6-acre site in Coachella, California. This change was made possible due to the new regulations in California that took effect on January 1st of this year.  In conjunction with this restructuring, FinCanna and CTI have amended their funding agreement and can capitalize on these significant economic opportunities.

The Interim Extraction Facility, which commenced operations in October 2017, had been operated by a third-party tenant of CTI on its site in Coachella. Under this prior arrangement, CTI was entitled to a maximum of 20% of the production capacity of the Interim Extraction Facility, with at least 80% of production capacity belonging to this third-party tenant, on which CTI was entitled to a minor profit share. CTI has assumed the operational role and obtained state licenses for Type 7 manufacturing and distribution, and has the rights to 100% of the production capacity, which it will allocate towards extraction services, including white labeling for other brands, and CTI-branded sales. The new operating structure is expected to result in significant economic opportunities to CTI. FinCanna continues to be entitled to receive 50% of the profits of CTI which are derived from this Interim Extraction Facility.

This Interim Extraction Facility can currently process an estimated 6,000 pounds of biomass per month to produce approximately 3.7 million grams of raw oil per year. Under the new operating arrangement, CTI has the ability to add an additional extraction machine and fractional distillation and winterization equipment. This would result in additional capacity to process 3,000 pounds of biomass per month and the ability to service third-party vaporizer, winterization and distillation customers at a scale of approximately 100,000 grams of finished product weekly.

The Permanent Extraction Facility was planned to be operated by a third-party tenant under similar operating and economic terms as those initially contemplated for the Interim Extraction Facility. The new arrangement provides CTI with the ability to drive new products lines, add distribution services and improve control over sales channels. The economics of this new operating arrangement result in potential revenues to CTI that are significantly higher than those expected prior to the restructuring. As FinCanna receives a royalty based on sales, this translates to a significant increase in expected royalty revenues to FinCanna from the Permanent Extraction Facility once in operation.

CTI and FinCanna have also agreed to amend their funding agreement to provide for certain changes to the terms of FinCanna's investment. CTI to receive US$3.15 million dollars in tranches under the existing loan agreement with FinCanna. The funds will be used for the restructured extraction operations, to secure an additional 5MW power commitment at the Coachella site and for working capital purposes. The investment allows CTI to capitalize upon the immediate opportunity in California through extraction, manufacturing, and distribution before construction of the Coachella Project."

FinCanna CEO, Andriyko Herchak, comments, "We are thrilled with the new operating structure of CTI's extraction operations. As revenues from the extraction and manufacturing business are now expected to be the largest segment of CTI's Coachella Campus, the increase in expected royalties to FinCanna are very significant. We continue to be impressed by CTI's exceptional management team and support their strategic approach to the market."

CannaRoyalty Corp. (OTCQX: CNNRF) is an active investor and operator in the legal cannabis industry. Recently, the company announced that one of its investee companies, Anandia Laboratories Inc., has closed a private placement financing of $13.4 million at a post-money valuation of $63 million. Anandia Labs is Canada's leading independent cannabis analytics, testing and genetics company. With one of 33 Health Canada-issued Dealers Licenses, Anandia Labs is able to cultivate, extract, analyze, import/export and buy/sell/trade cannabis in any form. The company also uses genomics and plant breeding technology to develop innovative products and next generation cannabis varieties. Anandia Labs currently operates out of a 5,400 square foot facility in Vancouver, British Columbia and has plans to construct a 40,000 square foot purpose-built cannabis innovation centre in British Columbia during 2018. The Financing will fund the land purchase and construction of the initial phase of Anandia Labs' Cannabis Innovation Centre, including a 20,000 square foot R&D cultivation facility and a 20,000 square foot building to house tissue culture and extraction infrastructure, including the equipment required for its breeding, laboratory analysis and commercial scale extraction activities. Cannabis Sativa, Inc. (OTCQB: CBDS) is engaged in the licensing of cannabis related intellectual property, marketing and branding for cannabis based products and services, operation of cannabis related technology services, and ancillary business activities. On December 4, 2017, the company announced that its subsidiary, PrestoDoctor, is expanding its online medical marijuana recommendation services into New York. PrestoDoctor currently serves patients via both their online platform and with dispensary kiosks operating in California and Nevada and will now extend their online services to patients located in the State of New York. "We appreciate and applaud all the hard work and diligence the Presto Doctor team has done to expand its service into the New York market", said Cannabis Sativa President David Tobias. iAnthus Capital Holdings, Inc. (OTCQB: ITHUF) provides investors diversified exposure to best-in-class licensed cannabis cultivators, processors and dispensaries throughout the United States. On January 2, 2018, the company announced that Mayflower Medicinals, Inc. received its final certificate of registration and certificate of occupancy from Massachusetts regulators and local officials on December 28, 2017 to begin cannabis cultivation and production operations at its facility in Holliston, Massachusetts. Mayflower is a non-profit Massachusetts corporation that has received two provisional licenses to operate Registered Marijuana Dispensaries in Massachusetts, with a third RMD application pending before the Massachusetts Department of Public Health. Lifestyle Delivery System Inc. (OTCQB: LDSYF) is a licensed, state-compliant vertically integrated cannabis related company. On November 22, 2017, the company announced that on November 16, 2017, the Company submitted plans for a cultivation facility to be developed on the Company's ten acre parcel to the city of Adelanto planning department. The proposed 202,500 square foot cultivation facility will be an environmentally controlled hybrid greenhouse capable of producing over 150,000 mature cannabis plants from seedlings every 100 days. The Company plans to subdivide the facility which will be leased to permitted and licensed cultivation entities that meet the Company's strict requirements. The Company anticipates receiving the construction permits in time for construction to commence before the end of its fiscal 2017.

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