Chemesis International

Bringing Vertically-Integrated Cannabis to Puerto Rico and California

This profile is part of a paid investor education campaign.*

Overview

Chemesis International Inc. (CSE:CSI, OTCQB:CADMF) is a vertically-integrated seed-to-sale cannabis company that operates in Puerto Rico and California and is focusing on long-term growth and stability in cannabis markets across the globe. Chemesis International provides consumers with a variety of high-quality products and has exclusive agreements with a number of renowned cannabis brands, such as California Sap. Through its wholly-owned subsidiary, Chemesis Latin America, the company is also conducting due diligence on opportunities for cultivation, production and export within the Latin American market.

In May 2015, Puerto Rico’s then Governor Alejandro García Padilla signed an executive order that legalized the use of medical marijuana. The Puerto Rican Health Department has reported that there are tens of thousands of patients registered at the Puerto Rico Medical Cannabis Association (PRMCA), who are being treated for a variety of debilitating diseases including epilepsy, Parkinson’s disease, multiple sclerosis, anxiety disorder, fibromyalgia, arthritis and cancer. Additionally, the PRMCA estimates that the cannabis industry has generated more than $35 million and has created more than 1,000 direct and indirect jobs.

In July 2017, Governor Ricardo Rosselló signed a law that regulates and formally legalizes the use of medicinal cannabis on the island. After the legalization of medicinal cannabis in Puerto Rico, Chemesis International entered the market as a first-mover and expects an annual revenue of $6.7 million by year four, with a net income of $2.8 million from its operations in the region. Chemesis International has also signed a definitive agreement to acquire 80 percent of Natural Ventures PR LLC, a seed-to-sale medical cannabis company based in Puerto Rico.

California has a total population of nearly 40 million and a medical cannabis market that includes roughly one million patients. In 2016, California’s licensed medical market was worth an estimated $2.81 billion. As of January 1, 2018, California legalized adult-use cannabis, which will make it one of the largest recreational cannabis market in the world. According to a recent report by BDS Analytics, California’s legal cannabis market could grow to $3.7 billion in 2018 and reach $5.1 billion to rival the beer market by 2019. With these promising market projections, Chemesis International has also developed a presence in California’s legalized cannabis industry.

Chemesis International has an 80 percent stake in SAP Global (SAP), a California corporation licensed for both cultivation and manufacturing at its 2,000-square-foot state-of-the-art facility in Cathedral City, from which Chemesis International will manufacture and distribute THC products for the medical and recreational markets in the golden state. SAP is a founding member of the National Cannabis Industry Association (NCIA), and it used this position to promote changes to regulations that helped evolve the current legal framework. During this time, SAP was endorsed by publications such as the Ed Rosenthal book release, Culture Magazine, Cannabis Now Magazine and High Times Magazine, among others.

SAP’s facility is able to process up to 2,000 pounds of agricultural trim, with an expected yield of 200 pounds of cannabis oil. The company expects that it will see an annual revenue of $61.5 million by year four, with a net income of $27.2 million in California.

Chemesis International has also recently announced the acquisition of the California Sap brand and catalogue, which includes both cannabis oil (Gramqul) and vape cartridges, which will be produced at the SAP facility. California Sap has been recognized since 2012 with numerous awards across California and Nevada, including 25 gold rankings for best CO², best topical, best product, best concentrate, best cartridge, highest terpene and more.

Chemesis International has also closed a definitive agreement acquiring Desert Zen, a fully compliant recreational and medicinal cannabis manufacturing, distribution and transportation company also located in Cathedral City. The company has a significant existing network serving farmers and dispensaries, as well as other organizations like Desert Zen.

As part of its brand development strategy, Chemesis International has signed a multi-year licensing agreement with Kevin Smith and Jason Mewes, also known as Jay and Silent Bob, for the development and promotion of cannabis products in the US market. Holding a collective social media presence of 12.4 million followers, Smith provides access to a large selection of potential consumers.

In addition to California and Puerto Rico, Chemesis International is working towards opening exclusively branded retail locations in multiple cannabis markets across the globe, and has begun this with the agreement to acquire La Finca Interacviva-Arachna Med, a licensed cannabis company in Colombia that has strategic relationships across the agricultural and educational industries. Chemesis International also provides consumers with a variety of extracts, formulations and products.

Chemesis International recently closed $25 million in equity financing with Alumina Partners, LLC. Under the agreement with the private equity firm, the company will continue its growth strategy with financial flexibility and freedom, with the ability to access the available funds at their discretion.

Chemesis International’s management, insiders and strategic shareholders notably own 75 percent of the company shares. Management owns 14 percent of the shares in the company.

Company Highlights

  • First mover in Puerto Rico’s recently legalized and growing medical cannabis market.
  • Selling cannabis products in approximately seven locations across Puerto Rico.
  • Access to Latin American cannabis market through Chemesis Latin America subsidiary.
  • Expected annual revenue of $6.7 million by year four with a net income of $2.8 million in Puerto Rico.
  • Developing presence in California’s legalized medical and adult-use cannabis market.
  • Expected annual revenue of $61.5 million by year four with a net income of $27.2 million in California.
  • Exclusive agreement with California Sap.
  • Binding agreements for distribution and sale of tested cannabis oil.
  • Strategic agreement with Kevin Smith and Jason Mewes.
  • $25 million equity financing with Alumina Partners.
  • Management, insiders and significant shareholders notably hold 75 percent of the company shares.

A Vertically-Integrated Model

Chemesis International is currently operating in Puerto Rico and California with a seed-to-sale model.

Cultivation

In addition to the Cathedral City facilities, Chemesis International has holdings in Puerto Rico, including a state-of-the-art grow facility, which includes over 2,000 grow lights and has a production capacity of 30,000 pounds per year.

Having recently acquired 80 percent of Natural Ventures in Puerto Rico, the company now also has access to a licensed 100,000-square-feet of cannabis cultivation space.

Currently, Chemesis International is looking at expansion opportunities that are currently under review in both Puerto Rico and California.

Manufacturing

Chemesis International is a specialist in extraction techniques and has invested in equipment for alcohol, BHO and CO² extraction. The CO² extraction process used to develop the California Sap brand results in highly-concentrated cannabis oil made up of 89 percent THC, As part of its agreement with SAP, the company has the capacity to process over 2,000 pounds of raw material per day in California, allowing them to offer a variety of extracts formulations and products.

California Sap’s Gramqul product is a new form of packaging for cannabis oil. It is a versatile product that allows users to choose the best way to consume cannabis. It’s vape cartridges, meanwhile, have a standard 510 threading and are compatible with most batteries. They include an airflow control valve that can be adjusted according to the consumer’s preferences.

In Puerto Rico, Natural Ventures has 35,000 square feet of manufacturing floor space, currently producing solvent and CO²-based extraction for its oil-based products. It also has the capacity to produce edibles and other cannabis products.

Distribution

Chemesis has established relationships with distributors around the globe. Chemesis is able to serve Puerto Ricans across the island from seed-to-sale.

In line with new regulations set forth in January in California, Chemesis has emerged as a compliant first mover in distribution in the state. To this effect, Chemesis has entered into a binding supply agreement with a distribution company that delivers premium, lab-tested cannabis product to dispensaries and licensed producers in the state. Known for high compliance standards, the vendor has the capability to test cannabis for potency, moisture, terpenes and pesticides. As part of the agreement, the vendor will provide Chemesis with 10,000 pounds of clean tested trim per month, supplying the company’s production of California Sap and other white labeled products.

“This is a critical achievement that positions the Company for significant growth in the California market, particularly with recent regulation changes restricting many in the California market. The Company is confident this agreement will build a strong revenue stream while continuing to build an efficient and streamlined manufacturing facility in Cathedral City. Chemesis will continue to build value by maintaining cost efficiency and ensuring we are supplying the market with high quality oils,” said Edgar Montero CEO of Chemesis.

Retail

Chemesis has developed a retail presence in Puerto Rico and is entering the retail space in California. Chemesis is also planning on opening exclusively branded retail locations across the globe.

Chemesis Latin America

In September 2018, Chemesis International announced the opening of its wholly-owned subsidiary, Chemesis Latin America. The subsidiary will be responsible for exploring and evaluating opportunities for production, cultivation and export of cannabis across the region.

The company plans to capitalize on the positive shift of Latin America’s market, which recently saw the Mexican Supreme Court recommend the decriminalization of cannabis. Colombia also hosts a growing market, with the government expecting to see up to 40.5 tons of cannabis produced annually, capturing as much as one fifth of the global market.

“Chemesis Latin America is a big step forward in our global growth strategy,” said Chemesis CEO, Edgar Montero. “We believe Chemesis has a major advantage in this region, as the recent acquisition of Natural Ventures can be leveraged to quickly capitalize on upcoming opportunities. With progressive regulations, Latin America becomes a key market that will be a major part of our portfolio. The Company has positioned itself to take advantage of significant opportunities in both Mexico and Colombia. This allows Chemesis to execute on its ambitious growth strategy to identify opportunities that will build long-term shareholder value.”

Acquisitions

Natural Ventures

Chemesis International has an 80 percent holding of Natural Ventures, a licensed cultivator, manufacturer and distributor of cannabis products. Headquartered in Puerto Rico, the company has strategic partnerships with a number of leading brands in the cannabis industry that span across numerous countries.

SAP Global 

SAP Global is a state-of-the-art production facility located strategically in Cathedral City, California. The Company manufactures and distributes recreational cannabis products for the California market. The facility and its operations are fully compliant with all California regulations.

California Sap

California Sap is a known for their experience, purity and products. They have also been recognized with multiple awards across California and Nevada for a variety of factors. They offer two main cannabis accessory products to consumers and have won multiple awards over the 15 years they have been in operation.

In July 2018, Chemesis International entered into two binding agreements with for sale and distribution of California Sap products. The agreements cover the distribution of 100 litres of tested cannabis oil per month and allow the company to significantly increase its distribution and sale networks.

Desert Zen

Acquired by Chemesis International in August 2018, Desert Zen is a recreational and medicinal cannabis manufacturing, distribution and transportation company based in California. The company is licensed under state and local laws to manufacture, package, distribute and transport cannabis product across its large existing network. The company has the ability to track products, monitoring them for safety and ensuring that they abide by all seed-to-sale laws across the supply chain.

La Finca Interacviva-Arachna Med

In November 2018, Chemesis International announced that it had signed a binding agreement to acquire 100 percent of Colombia-based La Finca Interacviva-Arachna Med. La Finca is an integrated, licensed cannabis company that has been operational in the country since October 2017, and has access to over 1,000 acres of land for outdoor cultivation purposes. It is also a founding member of the Association for the Promotion of Hemp Growing, which is a non-profit organization focused on cannabis education and providing technical advice for cultivation. La Finca also represents a strategic acquisition as it has relationships with over 2,000 farming families across Colombia through various co-ops.

The company has a number of manufacturing relationships as well as C$2.5 million in working capital that could be used for the expansion of its operations. La Finca’s licensed cosmetic products are certified under the organization equivalent to the US FDA, the Instituto Nacional de Vigilancia de Medicamento (INVIMA).

La Finca has also developed an R&D presence through partnerships with the Universidad Nacional de Colombia. Together, the two parties will develop seed strains that shorten crop cycles and increase biomass and flower yield. The company is also partnered with the Universidad Distrital Francisco José de Caldas, building an educational program on cannabis cultivation.

Partnerships

Kevin Smith and Jason Mewes

Chemesis has entered into a multi-year licensing agreement with Kevin Smith and Jason Mewes, also known as Jay and Silent Bob. The agreement covers the development and promotion of cannabis products in the US market, specifically flowers, oils, extracts, pre-rolls, edibles and more. Smith and his character, Jay, have a collective social media footprint of 12.4 million followers, as well as additional ongoing projects that amount to increased social reach.

Julian Marley Juju Royal™ brand

 Chemesis International has a fulfillment and distribution agreement for the Julian Marley Juju Royal™ brand, which consists of high-quality cannabis products. The products will be packaged, fulfilled and distributed from Chemesis’ Desert Zen facility and will cover Juju Royal’s™ Southern California operations.

“The agreement for JuJu Royal is another example of Chemesis’ ability to delivery consistent quality products, validating Management’s business plan and growth strategy,” said Montero. “Brands that require high quality services are recognizing our ability to consistently handle full compliance capacity for all of their high-quality products. As Chemesis gains more exposure in the market place, we anticipate the need for quality reliable services to continue to rise. Agreements such as this will ensure we are able to build stable, long term value for the Company.”

Rapid Dose Therapeutics

Chemesis and Rapid Dose Therapeutics, a Canadian biotechnology company developing proprietary drug delivery technologies, have signed a definitive agreement which enables Chemesis to produce Rapid Dose’s QuickStrips™ with infused cannabis oils. QuickStrip is an oral, fast-dissolving drug delivery system that Rapid Dose developed with McMaster University.

As part of the initial agreement, Chemesis has the rights to produce, distribute and sell QuickStrip products in California. The companies have also signed a subsequent agreement under which Chemesis will produce, distribute and sell QuickStrip™ Oral Thin Strips in Puerto Rico.

“We are pleased to bring RDT and their QuickStrip™ Oral Thin Strips to another growing cannabis market, and we believe this will allow the Company to further increase its market position in Puerto Rico,” said Montero. “With RDT recently announcing Aphria as a partner in select global markets, we feel our partnership will add tremendous value to our shareholders.”

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