Niche Cannabis Extraction in British Columbia
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Osoyoos Cannabis Inc. (CSE:OSO) intends to process raw cannabis to produce cannabis extracts for Canada’s medicinal and recreational cannabis markets. The company will generate revenue through third-party contract and toll processing, wholesaling of oils and distillates, white-label solutions and through selling Osoyoos Cannabis-branded products.
The company has also re-submitted its processing license application to Health Canada through the Indigenous Navigator program, which the Company believes will help expedite the licensing process.
Osoyoos Cannabis has secured a lease with the Osoyoos Indian Band in Oliver, British Columbia (BC) for a cannabis extraction facility, which will be built out in two phases. Phase 1 is currently underway, with the capacity to process up to 50,000 kilograms of dried flower and produce 4,900 kilograms of cannabis oil annually. Once the facility is fully operational, it will be able to process up to 100,000 kilograms of dried flower and produce approximately 9,800 kilograms of cannabis oil annually.
The company is also in discussions with the Osoyoos Indian Band to lease 100+ acres of land adjacent to the extraction facility for an outdoor cultivation site. The Okanagan has a hot, dry climate, which makes it an ideal location for outdoor cannabis cultivation.
Osoyoos Cannabis is committed to fostering their relationship with the Osoyoos Indian Band and will be looking to the community for labor resources when applicable.
The company is led by a strong management team and board of directors who have had numerous years of success in the cannabis and financial industries. Osoyoos Cannabis’ CEO Gerald Goldberg is a Certified Public Accountant, with over 30 years of accounting and public company auditing experience, and was interim-CEO for a licensed cannabis producer and patient aggregator. Joining him as head of quality assurance is Dr. Shane Lu, who has over 10 years of extraction, quality assurance and regulatory affairs in the health sector. Notably, former Premier and Treasurer on Ontario Ernie Eves, investment banking professional John McMahon, pharmaceutical marketing and sales professional Michael Ash and nationally-recognized cannabis advocate Sara Lee Irwin sit on the board and provide their insights into the cannabis regulatory environment and pharmaceutical applications.
- CBD extracts market expected to reach $2.1 billion by 2020
- Four-pronged revenue generation model
- Re-submitted processing license to Health Canada through the Indigenous Navigator program, expediting the application process
- In association with the Osoyoos Indian Band, a well-regarded and entrepreneurial band
- Annual production of approximately 9,800 kilograms of cannabis oil once fully operational
- Led by a strong and experienced management team and board of directors
The Cannabis Extraction Market
The CBD extracts market is expected to reach $2.1 billion by 2020, making it one of the fastest growing segments in the global cannabis market. In the first three months of 2018, cannabis oil sales surpassed dried flower sales by 56 percent.
As a safer alternative to smoking, the extracts market is expected to boom as consumers turn to naturally-based products and discrete consumption methods. Additionally, as more research is conducted on the plant, doctors are more likely to prescribe cannabis to their patients.
CBD is believed to reduce chronic pain and inflammation, and numerous research programs are underway to test its efficacy in treating a broad range of illnesses, such as epilepsy, anxiety and post-traumatic stress disorder.
Multiple Revenue Streams and Alignment with FNMI Communities in Canada
Osoyoos Cannabis will generate revenue in four ways: contract and toll processing, wholesale extraction, white label solutions and the production and sale of Osoyoos Cannabis branded products.
The company’s focus on serving third-party licensed producers benefits micro-cultivators, who are not permitted to sell cannabis directly to consumers and do not have the infrastructure needed to produce cannabis extracts. Health Canada only grants these licenses to companies that produce up to 600 kilograms of cannabis annually and have at least 200 square meters of canopy space.
Osoyoos Cannabis is primarily focused on supplying the cannabis extracts market and will provide contract and toll processing services for third-party licensed producers for the extraction of pharma-grade cannabis and hemp oil. Additionally, the company intends to produce cannabis and hemp oil in-house for wholesale purchase.
As the company grows, Osoyoos Cannabis intends to develop cannabis concentrate materials and product formulations that they will offer as ready-to-sell, white-labeled solutions to third-party licensed producers, in addition to manufacturing and distributing their own branded products.
Osoyoos Cannabis will be working closely with the Osoyoos Indian Band as they are leasing their facility in Oliver from the band. The Osoyoos Indian Band is considered to be one of Canada’s most successful First Nations groups and is known for their entrepreneurial success. The band is led by Chief Clarence Louie, a Canadian Business Hall of Fame Inductee who has chaired Canada’s National Indigenous Economic Development Board for over a decade.
The band has also opened the Nk’Mip winery, which is located on band lands and is the first indigenously-owned and operated winery in North America. The winery was named Canadian Winery of the Year in 2016 and has helped bring prosperity and opportunity to the band. The relationship with the band allows Osoyoos Cannabis to market to a new and under-served demographic.
According to the Department of Indigenous Affairs, Canada’s FNMI community is growing at four times the rate of the rest of Canada’s population. Analysts estimate that 20 percent of the Canadian workforce will be FNMI by 2040 due to the rapid growth of younger demographics. Eighty percent of Canadians believe that FNMI participation in the economy strengthens the country’s social fabric and 73 percent of Canadians want privately-owned businesses to participate in FNMI entrepreneurship.
To date, there has not been an emphasis placed on serving the FNMI cannabis markets, and little effort has been expended to consult and engage FNMI communities in the cannabis market. Subsequently, Osoyoos Cannabis is committed to hiring, educating and involving FNMI communities in their business.
Osoyoos Cannabis has secured a lease, with the option to purchase, from the Osoyoos Indian Band for a 10,410-square-foot facility in the Senkulmen business park in Oliver, BC. The company has also re-submitted its processing license to Health Canada through the Indigenous Navigator program, which will help expedite the application process.
The former storage warehouse will be retrofitted to convert it into a state-of-the-art extraction facility in two phases. Phase 1 will encompass 3,500 square feet.
Osoyoos Cannabis has acquired four Vitalis Supercritical CO2 extraction systems, which will be operational throughout Phase 1. The four systems will be able to process up to 50,000 kilograms of dried flower and are expected to produce 4,900 kilograms of cannabis oil annually.
Phase 2 will facilitate the retrofit of the rest of the building, which will double the facility’s processing and production capacity. The company will be able to process up to 100,000 kilograms of dried flower and are expected to produce approximately 9,800 kilograms of cannabis oil annually. Additionally, Phase 2 will see the installation of additional processing and packaging equipment.
Osoyoos Cannabis is also in negotiations with the Osoyoos Indian Band to lease 100+ acres of land in close proximity to the extraction facility for an outdoor growing operation. The Okanagan Valley is known for its hot, dry climate, making it an ideal location for outdoor growing and offers the company competitive cost-per-gram advantages.
Brands and Products
Osoyoos Cannabis will be offering a wide range of branded products to consumers across Canada. Predominantly the company’s products will feature extract-based products, such as oils, creams, gel capsules and edibles, among others.
Osoyoos Cannabis will market some of their products in ways similar to other successful brands, such as Lakota and Burt’s Bees. Lakota was founded by a Cree man who uses indigenous images and messaging to create natural and effective products based on traditional knowledge. Osoyoos Cannabis believes that they can produce products similar to Lakota’s, but with cannabis.
Burt’s Bees was founded in 1984 as a small-scale craft operation and has become a widely-recognized natural products brand. The ethos behind the brand includes responsible farming and sustainability, and Osoyoos Cannabis will bring that mandate to its products and cultivation practices as well.
Gerald Goldberg, CPA, CA — CEO, Chairman of the Board and Director
Gerald Goldberg is a CPA and former senior partner at two major accounting firms. He has over 30 years of audit experience and was the head of the public company audit division at a major firm. He has industry expertise in cannabis cultivation and aggregation, distribution, retail, mining for natural resources and oil and gas, real estate, “not-for-profit” entities and manufacturing industries, with a strong emphasis on taxation and business advisory services. He was active in corporate finance and development and was involved in the structure and design of numerous innovative financing instruments, tax shelters and syndications, both in Canada and the US. He was actively involved with the audit of various public Canadian, US, Chinese and other foreign companies listed in the US and Canada.
He holds the designation of CTA from the University of South Africa and is a member of the Institute of Chartered Professional Accountants of Ontario. He was also active in the medical cannabis industry and until recently was Interim CEO of an integrated licensed producer and patient aggregator.
Tyler Devenyl, J.D., BA (Hons) — COO
Tyler Devenyi is a graduate of Osgoode Hall Law School and a member of the Law Society of Ontario. In addition to having worked in both full service and criminal law firms, he has worked as an investment banking analyst and was in charge of operations for an international medical real estate development company.
Rakesh Malhotra, B.COm (Hons), CPA, CA, FCA — CFO
Rakesh Malhotra has over 25 years of experience in accounting, finance and internal controls, including senior management positions in public and private companies. He serves as CFO and consultant to various public companies listed in both Canada and the US and started his career working for A.F Ferguson & Co., a large accounting firm and Indian correspondent for KPMG.
Malhotra moved to the Middle East and worked for five years with the highly successful International Bahwan Group of Companies in a senior finance position. From 2001 to 2005, he worked as VP of Finance for a private group of service companies in Toronto.
Dr. Shane Lu, Ph.D. — Quality Assurance Manager
Dr. Lu holds a Ph.D. in Microbiology from Murdoch University in Australia. He has over 10 years of experience in quality assurance and regulatory affairs for strictly regulated health products, including medicinal cannabis and other natural health products. He has worked extensively with a wide range of herbal extracts that possess various medicinal properties.
Dr. Lu has significant knowledge and experience in interfacing with Health Canada, the US Food and Drug Administration, and other international regulatory authorities. He was one of six members of the Health Canada Technical Working Group for Natural Health Products. This group was formed to develop GMP standards and licensing regulations to improve the level of quality assurance for natural health products sold in Canada.
Michael Ash, BA — Director
Michael Ash brings a wealth of pharmaceutical industry expertise in the areas of domestic and international sales and distribution, product and brand development and product packaging. From 1997 to 2013, he held the role of Senior VP of Sales and Marketing at Pharmetics Inc. where he successfully grew sales of vitamins and over the counter (OTC) products from $15 million to close to $100 million dollars. He was able to accomplish substantial sales growth due to his strong retail relationships allowing the business to become the number one supplier of private label OTC products in Canada. From 2015 to 2018, he was President of Pharmetics Inc. and was identified as the ideal industry expert capable of rebuilding the business, increasing sales, which led to the sale of the company in 2018.
From 2013 to 2015, he was President of NutraLab Canada Ltd. where he developed and launched private label brands of vitamins, minerals and supplements for large retailers across the country. From 1984 to 1995, he held progressive sales roles at Apotex Inc., including the role of Managing Director International where he was accountable for developing international distribution networks for the company’s generic drug brands. He holds a BA in Political Science from McGill University.
Ernie Eves, QC — Director
Ernie Eves is the former Premier of the Province of Ontario. Prior to serving as Premier, he was Deputy Premier and Minister of Finance. He has had a distinguished career in both the public and private sectors.
Eves is also a director of Nighthawk Gold Corp. and Gravitas Financial Corp. Currently, he serves as an advisor and board member for several firms in Canada and the US. He is a graduate of Osgoode Hall Law School. He was called to the bar in 1972, and in 1983 was made a Queen’s Counsel.
Sara Lee Irwin — Director
Sara Lee Irwin is a nationally recognized public voice on cannabis and cannabinoids for therapeutic use. With decades of experience as both an industry consultant and chronic pain patient, she has leveraged her personal experience to become a leading representative and liaison working to bridge interests across multiple stakeholder groups, including patients, physicians, researchers, the pharmaceutical industry, investors, institutional brokers and government. An early advocate of the benefits of the pharmaceutical application of cannabinoids, Irwin was the Director of Investor Relations at Cannasat Therapeutics (CTH, 2004-2010), an early stage cannabinoid pharmaceutical company that in 2006 became the first publicly-traded cannabis company in North America.
John McMahon — Director
John McMahon is the Managing Partner of Thought Launch Capital and Advisory Inc. based in Toronto. Prior thereto, he has held a number of senior banking roles within the investment industry. He was Managing Director of Investment Banking for Industrial Alliance Securities. He also served as Vice Chairman and Head of Investment Banking for Mackie Research Capital Corporation. He is also a director of Big Dougie Capital Corp.
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