The Cannabis Industry Remains Buoyed by North American Legislative Victories
NEW YORK, April 30, 2019 /PRNewswire/ -- Even though the cannabis industry has had a monumental 2018, challenges are still expected on the road ahead. Last year, the industry reached historic milestones as Canada fully legalized cannabis and numerous other countries ratified the use of cannabis for medical applications. Overall, the industry has made significant progress, however, in order to continue its development, more positive data, and research are required. For instance, the U.S. Food and Drug Administration had approved Epidiolex last year after overwhelmingly positive data showed that it can effectively treat childhood epilepsy. Notably, Epidiolex is the first and only cannabis-based drug to be approved by the FDA. Moving forward, however, the FDA noted that it will require more large-scale clinical trials in order to proceed with approving more cannabis-derived treatments. Currently, the medical cannabis market is much more prevalent on a global scale, but the recreational marketplace is now also thriving in the North American region. In particular, many investors, politicians, and analysts are focusing their attention on Canada's adult-use market. Following Canada's legalization, the country is facing immense pressure on how it will develop in the future. Moreover, strong economic and medical results from the North American region are expected to bolster the overall global cannabis industry. According to data compiled by MarketsandMarkets research, the global cannabis market is projected to grow from USD 10.3 Billion in 2018 to USD 39.4 Billion by 2023. Additionally, the market is forecast to accelerate at a CAGR of 30.7% during the period. Cleanspark, Inc. (OTCQB: CLSK), OrganiGram Holdings Inc. (OTC: OGRMF) (TSX-V: OGI), Green Organic Dutchman Holdings Ltd. (OTC: TGODF) (TSX: TGOD), KushCo Holdings, Inc. (OTC: KSHB), Medicine Man Technologies Inc. (OTC: MDCL)
In order to remain at the top of the market, companies are aggressively seeking mergers and acquisitions or are working on developing new products for the marketplace. Mergers and acquisitions are prevalent in almost every major global industry, allowing companies to grow and progress. Specifically, for the cannabis industry, larger players are actively acquiring smaller companies to expand their operations to different regions or to add key components to their business models. As for emerging products, the marketplace has swiftly outgrown the traditional flower in preference for products such as oils, tinctures, creams, concentrates, and edibles. For instance, the concentrates market outpaces the flower and edible segment, as in 2014, concentrates only accounted for 10% of cannabis sales. However, by the end of 2018, the segment was estimated to account for 27% of the market, according to BDS Analytics and ArcView Market Research. "Companies with unique assets or business models are likely to be more appealing to potential buyers. Different geographies or modes of production are often cited by the buying companies," said Alan Brochstein, Founding Partner of New Cannabis Ventures, "Consolidation is picking up in the cannabis space, and investors are rewarding the companies that are buying by pushing their stocks up after the deals are announced. This will likely encourage other companies to be me more aggressive in their M&A strategies."
Cleanspark, Inc. (OTCQB: CLSK) earlier last week announced breaking news that it, "has secured $20m in financing to support various microgrid initiatives for commercial customers. This committed financing will help accelerate the development and deployment of CleanSpark's Distributed Energy Resource (DER) Solutions to commercial customers.
Matthew Schultz, CleanSpark's Chief Executive Officer, said, "This transformative financing sets into motion a game-changing industry model for bringing customized energy solutions to a rapidly growing number of commercial customers providing low upfront costs and provable savings. Our Energy Savings Agreement (ESA) financing model provides a host of different financing options and structures for our clients and investment partners to jointly pursue. Nowhere are the benefits and savings from these solutions more relevant than in the rapidly growing cannabis industry where both energy needs and the need to be intensely competitive are elevated. Given the backlog we are witnessing and the level of interest we are confident in our ability to execute on a wide variety of projects and scale our industry leading software platform."
How do Energy Savings Agreements (ESAs) Work?
Funding Stage
-- SPE (Special Purpose Entity) Formed to own the System asset.
-- SPE funded by CleanSpark (CLSK) and a Tax Equity Partner (TEP).
-- CLSK owns at least 51% of the SPE.
-- TEP funds the SPE at a premium due to their ability to rapidly harvest
the tax benefit in year one.
-- Commercial customer spends $5,000 - $20,000 for a feasibility and
engineering study.
Deployment Stage (Option 1)
-- Commercial customer purchases the system outright and enjoys 100% of the
energy savings.
Deoployment Stage (Option 2)
-- CLSK builds, owns, and operates the system/project.
-- CLSK award the customers around 10% of the annual energy savings.
-- CLSK offers a discounted buyout option (40-60% of original cost) at year
5 or 6.
-- After buyout, customer enjoys 100% of the energy savings.
Projects Create Long Term Value
-- CLSK can also sell projects to third parties after 12 months of
operation.
-- Projects are valued on a simple value of discounted future cash flows.
-- In most cases, after 12 months of operation, the value of a project will
exceed the value that would have been realized had the project been sold
to the customer on day one.
Benefits of the CleanSpark ESA
-- Minimal upfront costs for commercial customers.
-- Conserves capital expenditures for business expansion needs.
-- Payments for the system are based on the energy savings that the
customer can realize.
-- Capital is readily available to fund large scale projects.
-- Management and expertise of CleanSpark's software and consulting
services provide turn-key solution.
"Our solution is unique, revolutionary and tailor-made to relieve the economic and practical pressures facing today's cannabis growers. We are energized by the backlog," added Schultz. "Whether these projects are sold outright, operated, or held by CleanSpark until a future sale date, the result is the same, i.e. value is created for our stockholders by getting to scale in an industry that is projected to exceed $2b in the not too distant future."
Focus on Cannabis
While the Company is garnering interest across multiple industries and sectors, the cannabis space is of keen interest to us. CleanSpark's microgrid energy solution dramatically decreases the cost of energy associated with producing each pound of final product.
A cannabis business using $90,000 per year in energy has the potential to reduce its operating costs (flowering stage) from $270/lb. to $200/lb., producing a 15% ROI over 10 years.
For an illustration of how CleanSpark helps Cannabis growers optimize their competitive advantage, please visit this link: www.cleanspark.com/cannabis.
"The solar industry proved that long-term financing that generates real cost savings, an environmental benefit, and tangible ROI for both investors and customers can expect to grow to scale on an expedited timeline.", added Schultz. "With this recent capital infusion, CleanSpark intends to continue to blaze trails in the microgrid arena as we deliver strong returns to our customers, investment partners, and shareholders."
About CleanSpark, Inc: CleanSpark provides advanced energy software and control technology that enables a plug-and-play enterprise solution to modern energy challenges. Our services consist of intelligent energy monitoring and controls, microgrid design and engineering, microgrid consulting services, and turn-key microgrid implementation services. CleanSpark's software allows energy users to obtain resiliency and economic optimization. Our software is uniquely capable of enabling a microgrid to be scaled to the user's specific needs and can be widely implemented across commercial, industrial, military, agricultural and municipal, deployment. For more information on CleanSpark, please visit http://www.cleanspark.com"
OrganiGram Holdings Inc. (OTCQX: OGRMF) (TSX-V: OGI) is a TSX Venture Exchange listed company whose wholly owned subsidiary, Organigram Inc., is a licensed producer of cannabis and cannabis-derived products in Canada. Organigram Holdings Inc. recently announced it has signed a letter of intent with the Société québécoise du cannabis (SQDC). This agreement solidifies the Company's position as a true national player in Canada's legal adult use recreational cannabis marketplace. Organigram now has distribution in place for all ten Canadian provinces. Quebec is an important part of Organigram's national strategy. The Company will offer consumers in the province access to a portfolio of products which will include mainstream, value and premium flower, along with an assortment of pre-rolls and oils. "Organigram's growth strategy has always focused on establishing a strong national footprint and building our brand presence with the Edison Cannabis line nationally," says Greg Engel, Organigram's Chief Executive Officer. "We are proud to work with our partners across the country to help ensure Canadians have access to a reliable supply of premium cannabis products for both medical and adult recreational use. We look forward to continuing to build on these relationships as we look ahead to the legalization of cannabis edibles."
Green Organic Dutchman Holdings Ltd. (OTCQX: TGODF) (TSX: TGOD) is a publicly traded, premium global organic cannabis company, with operations focused on medical cannabis markets in Canada, Europe, the Caribbean and Latin America, as well as the Canadian adult-use market. The Green Organic Dutchman Holdings Ltd. recently announced that its wholly owned subsidiary, HemPoland, has received organic certification from EKOGWARANCJA PTRE. This organic certification is provided by the Polish Center for Accreditation on authority from the Minister of Agriculture and Rural Development. HemPoland's facilities, production processes and product offerings are now certified organic. TGOD's extraction and formulation of premium high-quality hemp oils from certified organic raw materials within Poland, sets the foundation for novel and proprietary products to be offered throughout Europe and global markets with official PL-EKO-01 EU certificates. TGOD's newly certified facility expands its global reach for certified organic production. "We are incredibly excited that HemPoland's facilities, production and processes have received organic certification within Europe," stated Brian Athaide, Chief Executive Officer of TGOD. "This is a major point of differentiation that offers consumers a premium experience. We are proud to continue to deliver and execute on our global organic strategy."
KushCo Holdings, Inc. (OTCQB: KSHB) is the premier producer of ancillary products and services to the cannabis and hemp industries. KushCo Holdings, Inc., in line with its previously announced sustainability initiatives, recently announced it has signed a long-term development and distribution agreement with IEKO Corporation, for the production of compostable and biodegradable packaging products for use in the cannabis and CBD industries. Pursuant to the agreement, IEKO will work with KushCo to develop formulations and products designed for the unique demands of the cannabis and CBD industries, while ensuring that all new products are environmentally friendly by featuring proprietary, biodegradable materials from renewable resources. All packaging solutions produced under the agreement will be tested using ASTM and BPI standards to guarantee proper certification. Additionally, IEKO will provide dedicated research and development, quality control and account management personnel. KushCo Holdings' Chief Executive Officer, Nick Kovacevich commented, "It's our responsibility to reimagine our products today to ensure the viability of our planet tomorrow. Customers are demanding an environmentally conscious solution for their everyday packaging needs. Partnering with Bob Meers and IEKO is a huge win for us. It's inspiring to see the former Chief Executive Officer of Reebok and Lululemon so impassioned about the environment and I'm honored to be a part of the eco-sustainability movement our customers are yearning for. With a demonstrated ability to design and produce ground-breaking products, we are confident in the capabilities of the IEKO team and look forward partnering with one of California's top packaging engineers."
Medicine Man Technologies Inc. (OTCQX: MDCL) is Colorado's leading cannabis retailer with four locations across the state in Aurora, Denver, Longmontand Thornton. Medicine Man offers a large variety of cannabis, edibles, concentrates, and CBD products for both medical and recreational patients. Medicine Man recently opened its newest retail dispensary in Longmont, Colorado, on February 20th. The store opening comes after Medicine Man's January announcement of entering a binding agreement that is expected to lead to the near-term acquisition of Medicine Man by Medicine Man Technologies, a leading consulting, intellectual property licensing and products company in the cannabis industry. To celebrate the opening of the Longmont store, Medicine Man is offering eight discounted retail promotions, including special pricing on cartridges, CBD products, edibles, shatter, smoking accessories, topicals and wax grams. "Medicine Man is one of the pioneering operators that helped establish the burgeoning cannabis industry over the past decade with brand recognition far beyond its immediate market," says Andy Williams, Medicine Man Technologies' Chief Executive Officer. "Our expansion into retail stores allows us to leverage our reputation and expertise in the market and accelerate our growth in a segment of the business that we believe is highly scalable and profitable. The opening of the fourth Medicine Man retail location in Longmont is a key asset as we enter this exciting time of transition into a vertically integrated cannabis operator."
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