VAUGHAN, ON, June 19, 2019 /CNW/ - Today, CannTrust Holdings
Inc. ("CannTrust" or the "Company", TSX: TRST, NYSE: CTST), a
federally regulated licensed producer of medical and recreational
cannabis with more than 72,000 patients in Canada, announced that it is establishing
operations in the United States
("U.S."), starting in the State of
California. CannTrust has signed a non-binding letter of
intent ("LOI") that will provide access to over 3,000 acres of
farmland for hemp production with Elk Grove Farming Company, LLC
("Elk Grove"), a diversified farming company with operations in the
State of California, to secure
low-cost hemp with high cannabidiol ("CBD") content. CannTrust and
Elk Grove will each have 50%
ownership of a new entity (the "Joint Venture").
The opportunity in the U.S. for CannTrust is to become a trusted
supplier of consistent, standardized and high-quality hemp-derived
CBD formulations at scale. The Company believes there will be
increasing demand for hemp-derived CBD formulations from
international retailers and product manufacturers, and those
organizations require expertise in genetics and value-add
processing to ensure products are desirable and meet the highest
safety standards.
CannTrust will guarantee the off-take of biomass produced by the
Joint Venture, and will use its expertise to process, formulate and
sell hemp-derived CBD products in U.S. markets where such sales are
lawful. As an experienced operator meeting rigorous regulatory
standards, CannTrust is well positioned to execute on this
cultivation, processing and formulation strategy with the goal of
becoming a leading supplier of hemp-derived CBD products in the
U.S.
"This agreement represents another bold move for CannTrust. Our
U.S. operation is expected to deliver a significant increase in
low-cost production capacity, which will leverage our expertise in
standardized CBD-based product formulation, and will give the
Company a foothold in the largest international CBD market in the
world with an experienced and knowledgeable partner," said
Peter Aceto, Chief Executive
Officer. "Following our successful equity offering, we have the
liquidity we need to fund our ambitious growth plans including our
greenhouse expansion in Niagara, our outdoor cultivation operation
in British Columbia, our global
footprint expansion and now our U.S. operation. We continue to
focus on delivering on our vision of becoming a global provider of
innovative cannabis-based and hemp-derived products."
Elk Grove has
multi-generational experience in farming across a wide variety of
commodities and value-added expertise in leading crop protection
products, application and input supply with operations throughout
the State of California. The team
at Elk Grove specializes in
consulting on agricultural development and has unique knowledge of
farming in California, one of the
most prolific agricultural regions in the world.
"We are thrilled to be partnering with CannTrust. Our knowledge
of farming operations in California coupled with CannTrust's expertise
in developing award-winning formulations is the perfect match to
become a trusted supplier of CBD products in the U.S," said
Morgan Houchin of Elk Grove Farming
Company, LLC.
CannTrust U.S. Operations
This initiative is the first step in CannTrust's development of
full-scale U.S. operations. Upon establishment of the Joint Venture
in California, CannTrust will have
secured a long-term source of significant supply of low-cost
industrial hemp from a trusted and proven partner. Prior to
commercial scale cultivation from the Joint Venture in 2020, the
Company plans to execute on (1) its processing strategy from the
biomass produced from the Joint Venture, and (2) its product
development strategy.
CannTrust is well positioned to use extracted product from its
U.S. operations in proprietary products that have already been
developed and that are ready for commercial production (e.g.,
CannTrust's patented single-serve beverage pods), products
currently under development with existing partners, and in
formulations required by future partners.
Investment in the U.S. operation is expected to be up to
$20 million through to the end of
2020. This capital investment includes the Company's share of
cultivation, harvest and post-harvest processing for the Joint
Venture, as well as extraction and processing investments that will
be funded by CannTrust. This level of capital investment assumes
starting with up to 300 acres for cultivation in 2020.
Details of the LOI
The Joint Venture will secure a long-term lease for over 3,000
acres of farmland designated for hemp production in Southern California, which is currently
wholly-owned by the Houchin family or through partnership
investment. CannTrust will provide its expertise in grow
methodology, drying techniques, and experience in extraction, as
well as provide genetics that are legal under state and federal
law. Elk Grove will lead
operations, farm management services, packaging and transportation,
and provide suitable land area and warehouse space for drying and
value-added handling of the hemp biomass produced.
Both parties will provide equal contribution of capital to
finance operations of the Joint Venture, including capital
investments, operating expenditures and working capital. All
profits will be distributed based on ownership percentage of the
Joint Venture.
Upon execution of a binding agreement, commercial operation of
the Joint Venture is targeted to begin in 2020, subject to local
regulatory approval.
Regulatory Framework
The California Industrial Hemp Farming Act became effective in
January 2017. The federal Agricultural Improvement Act of
2018 became effective January 2019,
removing hemp from Schedule I of the Federal Controlled Substances
Act, thereby removing industrial hemp, which is defined as having
less than 0.3% THC content, as a federally regulated controlled
substance.
In the State of California,
growers of industrial hemp for commercial purposes must register
with the county agricultural commissioner prior to cultivation;
there is currently no state registration required to grow
industrial hemp.
CannTrust, Elk Grove and the
Joint Venture intend to develop its cultivation and processing
operations according to both federal and state laws.
About CannTrust
CannTrust is a federally regulated
licensed producer of medical and recreational cannabis in
Canada. Founded by pharmacists,
CannTrust brings more than 40 years of pharmaceutical and
healthcare experience to the medical cannabis industry and serves
more than 72,000 medical patients with its dried, extract and
capsule products. The Company operates its Niagara Perpetual
Harvest Facility in Pelham,
Ontario, and prepares and packages its product portfolio at
its manufacturing centre of excellence in Vaughan, Ontario. The Company has also
purchased 81 acres of land in British
Columbia and expects to secure over 200 acres of land in
total for low-cost outdoor cultivation which it will use primarily
for its extraction-based products.
About Elk Grove
Elk
Grove Farming Company, LLC is a diversified farming and farm
management company with headquarters in Bakersfield, California. Elk Grove is a company owned by Tech
Agricultural Corporation and the Houchin family. Tech
Agricultural Corporation also offers industry leading crop
protection products and application, adaptable financing for crop
production and input supply, agricultural real estate brokerage and
investment services, custom farm management, corn and alfalfa seed
distribution and dairy mineral supplements.
Forward Looking Statements
This press release contains
"forward-looking information" within the meaning of Canadian
Securities laws and "forward-looking statements" within the meaning
of the United States Private Securities Litigation Reform Act of
1995 and other applicable United
States safe harbor laws, and such statements are based upon
CannTrust's current internal expectations, estimates, projections,
assumptions and beliefs and views of future events. Forward-looking
information and forward-looking statements can be identified by the
use of forward-looking terminology such as "believes", "expect",
"likely", "may", "will", "should", "intend", "anticipate",
"potential", "proposed", "estimate" and other similar words,
including negative and grammatical variations thereof, or
statements that certain events or conditions "may", "would" or
"will" happen, or by discussions of strategy.
The forward-looking information and statements in this news
release include statements relating to the Company's plans to reach
a definitive agreement with Elk
Grove as it relates to the Joint Venture, the timing of
commercial production of the Joint Venture and the anticipated
demand for hemp-based CBD formulations. Forward-looking information
and statements necessarily involve known and unknown risks,
including, without limitation: finalizing the Joint Venture; risks
associated with general economic conditions; adverse industry
events; loss of markets; future legislative and regulatory
developments in Canada,
the United States and elsewhere;
the cannabis industry in Canada
generally; and, the ability of CannTrust to implement its business
strategies.
Any forward-looking information and statements speak only as of
the date on which they are made, and, except as required by law,
CannTrust does not undertake any obligation to update or revise any
forward-looking information or statements, whether as a result of
new information, future events or otherwise. New factors emerge
from time to time, and it is not possible for CannTrust to predict
all such factors. When considering these forward-looking
information and statements, readers should keep in mind the risk
factors and other cautionary statements in CannTrust's Annual
Information Form dated March 28, 2019
(the "AIF") and filed with the applicable Canadian securities
regulatory authorities on SEDAR at www.sedar.com and filed as an
exhibit CannTrust's Form 40-F annual report under the United States
Securities Exchange Act of 1934, as amended, with the United States
Securities and Exchange Commission on EDGAR at www.sec.gov. The
risk factors and other factors noted in the AIF could cause actual
events or results to differ materially from those described in any
forward-looking information or statements.
The TSX and NYSE do not accept responsibility for the adequacy
or accuracy of this release.
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SOURCE CannTrust Holdings Inc.