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Discerning Consumers Demand Innovative Cannabis-Derived Alternatives

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NEW YORK, May 30, 2019 /PRNewswire/ -- A 2014 United Nations World Drug report highlighted that in 2012, between 125 million and 227 million people were estimated to have used cannabis, corresponding to between 2.7% and 4.9% of the population aged 15-64 years. Flower had long been what most consumers turned to when using cannabis. However, flower sales are witnessing a sharp decline as consumers get accustomed to more innovative delivery methods. For instance, Colorado was one of the first regions to fully legalize recreational use of cannabis and during its first year of legal cannabis sales, flower sales accounted for 67% of its total sales. Moving forward four years, Colorado has witnessed its flower sales market share plunge down to just 44%. During the same period, the share of concentrates in the market filled the gap, expanding from 15% to 31% of the total revenue, according to BDS Analytics. Additionally, countries such as Australia and the United Kingdom have begun to receive cannabis-based oils from Canadian exporters. Moreover, shares among other products, such as edibles and extracts, are also rapidly increasing amid the flower sale decline. Specifically, extracts and concentrates have become very popular among legal adult-users as consumers are opting for the two alternatives as they are typically more potent and cleaner when compared to regular flower. As opposed to smoking flower through joints or other paraphernalia, consumers can ingest various forms of extracts or concentrates such as kief, hash oil, rosin, shatter, crumble, and budder. Notably, these extracts and concentrates can be used for both recreational and medicinal purposes. Recreationally, consumers want a more potent effect that lasts longer and has a quicker onset. Medically, patients are choosing stronger methods in order to effectively suppress or treat symptoms associated with their medical ailments. As a result, the demand for cannabis alternatives is accelerating quickly, further driving the overall industry. While flower sales continue to decline, other forms of cannabis-based products are expected to close the gap. According to data compiled by Ameri Research, the global legal marijuana market was valued at USD 14.3 Billion in 2016. By 2024, legal marijuana global sales are projected to reach USD 63.5 Billion while exhibiting a CAGR of 21.1% from 2017 to 2024. WeedMD Inc. (OTC: WDDMF) (TSXV:WMD), Tilray, Inc. (NASDAQ:TLRY), Medipharm Labs Corporation (OTC:MEDIF) (TSXV:LABS), Neptune Wellness Solutions Inc. (NASDAQ:NEPT) (TSX:NEPT), Valens GroWorks Corp. (OTC:VGWCF) (CSE:VGW)

Extracts and concentrates may seem broadly similar, however, the two differ in the way they are produced. The primary difference between the two product types is the way the trichomes are collected. Trichomes are the outgrowth or appendages on a plant, but they also produce hundreds of cannabinoids, terpenes, and flavonoids, which dictate the potency and effectiveness of the strain, according to Leafly. Concentrates are primarily produced through methods of a mechanical process, using CO2 without heat or pressure, or by using water, vegetable glycerin, vegetable oils, and other solubles. On the other hand, extracts are made through hydrocarbon-based solvents, according to Gabe Sutton, Budtender at Five Zero Trees. Typically, the price for a gram of flower will cost significantly less than a gram for extracted cannabis oil, but the potencies between the two vary greatly. Traditional flower maintains THC levels between 10% to 25%, while concentrates can reach levels anywhere from 50% to 90%. The initial investment may be quite hefty as opposed to purchasing flower, but extracts are expected to last much longer. For instance, a half gram of oil can last an occasional dabber a couple of weeks, but a high tolerance user can consume it in just a day or two. Dabs are concentrated doses of cannabis that are made by extracting THC and other cannabinoids and turning them into a sticky, oily substance. The substance obtained from extracting THC and other cannabinoids creates a much healthier alternative and consumer mainly heat extracts or concentrates rather than burning them. On the other hand, burning flower via joints or through paraphernalia can cause adverse effects on the consumers' lungs. "It is healthier in the sense that you're getting a purer product that's been refined off of the plant," says Darin Carpenter, Director of Cultivation for Tryke Companies, in an interview with Mike Pizzo, Marketing Content Manager at Reef Dispensaries. "The reason that flower is not as healthy is that you are not filtering it and might be getting tar build up."

WeedMD Inc. (OTCQX: WDDMF) (TSXV:WMD) is also listed on the TSX Venture Exchange under the ticker (TSXV:WMD). Yesterday, the Company announced that, "it is converting its fully-licensed 26,000 sq. ft. Aylmer, Ontario facility to a large-scale cannabis extraction and processing operation. 

'WeedMD is optimizing its two licensed facilities to allow each to focus on a core vertical and to streamline our operations. We are transitioning the Aylmer site to produce a wide range of extracts and concentrates,' said Keith Merker, CEO of WeedMD. 'All cultivation has been consolidated to our greenhouse and outdoor Strathroy facility, which is delivering consistently improving yields at increasingly competitive costs.'

About the Aylmer Extraction Facility

WeedMD is retrofitting its Aylmer operation into a purpose-built cannabis oil extraction facility that will be operational by summer 2019. Additional details: 

  • WeedMD is building on its experience in extract production, having processed oils onsite at Aylmer since June 2017
  • The site is fully licensed for cannabis oil production and sale
  • The Company will have four extraction lines in operation with the ability to process over 200,000 kgs of biomass annually
  • WeedMD will utilize various extraction methods in order to meet the demands of the market
  • The Company will provide formulation capabilities for wholesale and white label manufacturing
  • The facility is being built to GxP* standards to support compliance for both domestic and international markets
  • The existing fully-licensed 26,000 sq. ft. facility is located on an expandable four-acre site wholly-owned by WeedMD
  • WeedMD will supply a large quantity of input material for cannabis extraction from the greenhouse and outdoor production from its Strathroy site

*GxP encompasses a broad range of compliance-related activities such as Good Laboratory Practices, Good Clinical Practices and Good Manufacturing Practices.

As recently announced, WeedMD's Strathroy cultivation facility is expected to yield more than 150,000 kgs of dried flower per year in 2020. Outdoor grow video here  (https://www.youtube.com/watch?v=QnApYAnXDtw).

For more information, access WeedMD's investor presentation here (https://www.weedmd.com/investing-in-weedmd/) and recently updated corporate video here (https://www.youtube.com/watch?v=ktgJ_BQtBCs&feature=youtu.be).

About WeedMD Inc: WeedMD Inc. is the publicly-traded parent company of WeedMD Rx Inc., a federally-licensed producer and distributor of cannabis products for both the medical and adult-use markets. The Company owns and operates two facilities: a 26,000 sq. ft. indoor facility in Aylmer, Ontario and a 158-acre state-of-the-art greenhouse and outdoor facility located in Strathroy, Ontario. The Company currently has 136,000 square feet of licensed production space across its facilities and is expected to have a total footprint of more than 550,000 square feet of indoor and greenhouse production in addition to more than 25 acres of outdoor cultivation space online in the first half of 2019. WeedMD has a multi-channeled distribution strategy that includes selling directly to medical patients, strategic relationships across the seniors' market and supply agreements with Shoppers Drug Mart as well as six provincial distribution agencies."

For our latest "Buzz on the Street" Show featuring WeedMD Inc. recent corporate news, please head over to: https://www.youtube.com/watch?v=AqV5iDMOx0c

Tilray, Inc. (NASDAQ:TLRY) is a global pioneer in the research, cultivation, production and distribution of cannabis and cannabinoids currently serving tens of thousands of patients and consumers in twelve countries spanning five continents. Tilray, Inc. recently announced the closing of a previously announced definitive agreement (the "Agreement") in which Tilray has acquired all of the issued and outstanding securities of FHF Holdings Ltd. ("Manitoba Harvest"), from Compass Group Diversified Holdings, LLC ("The Compass Group") (NYSE:CODI) and other shareholders of Manitoba Harvest (the "Transaction"). Under the terms of the Agreement, Tilray has acquired Manitoba Harvest on a cash and debt-free basis, for an aggregate maximum purchase price, including cash and class 2 Common Stock in the capital of Tilray ("Tilray Shares"), of CAD 419 Million pending the achievement of certain milestones after the closing of the Transaction. Founded in 1998, Manitoba Harvest is the world's largest hemp food manufacturer and a leader in the natural foods industry. It produces, manufactures, markets and distributes a broad-based portfolio of hemp-based consumer products, which are sold in over 16,000 stores at major retailers across the U.S. and Canada. Products in the Manitoba Harvest portfolio include: Hemp Hearts™, Hemp Oil™, Hemp Yeah! ™ granola, Hemp Yeah! ™ protein powder and Hemp Bliss™ milk. Manitoba Harvest has plans to launch a line of CBD containing Broad Spectrum Hemp Extracts as well as a line-up of Hemp Yeah! wellness bars this summer. "We're proud to officially welcome Manitoba Harvest to Tilray's growing portfolio of brands and network of experts," Brendan Kennedy, Tilray President and Chief Executive Officer. "We look forward to working collaboratively to develop and distribute a diverse portfolio of branded hemp-derived CBD food and wellness products in the U.S. and Canada."

Medipharm Labs Corporation (OTCQX:MEDIF) (TSXV:LABS), founded in 2015, has the distinction of being the first company in Canada to become a licensed producer for cannabis oil production under the ACMPR without first receiving a cannabis cultivation license. MediPharm Labs Corp. recently announced that it had entered into a multi-year supply agreement with Cronos Group Inc. MediPharm Labs will supply Cronos Group with approximately USD 30 Million of high-quality private label cannabis concentrate over 18-months, and, subject to certain renewal and purchase options, potentially up to USD 60 Million over 24-months. In addition, Cronos Group has selected MediPharm Labs' state of the art extraction facility in Barrie, Ontario, as a preferred partner to fulfill certain of its processing needs, under a separate tolling arrangement. "With the continued evolution of the Canadian cannabis industry, we are excited to partner with Cronos Group in their journey to launch new products and secure MediPharm Labs' high-quality private label supply of concentrates," said Patrick McCutcheon, Chief Executive Officer, MediPharm Labs. "We look forward to supporting the team at Cronos Group with our specialized extraction capabilities and expertise to address a rapidly expanding cannabis market and growing consumer demand."

Neptune Wellness Solutions Inc. (NASDAQ:NEPT) (TSX:NEPT) specializes in the extraction, purification and formulation of health and wellness products. Neptune Wellness Solutions Inc. recently announced the signing of a definitive agreement to acquire substantially all of the assets of SugarLeaf Labs, LLC and Forest Remedies LLC, a registered North Carolina-based commercial hemp company providing extraction services and formulated products. Through SugarLeaf, Neptune establishes a U.S.-based hemp extract supply chain, gaining a 24,000 sq. ft. facility located in the important U.S. Southeast region. SugarLeaf's cutting-edge cold ethanol processing facility with a processing capacity of 1,500,000 kg uses hemp cultivated by licensed American growers consistent with federal and state regulations to yield high-quality full and broad-spectrum hemp extracts. The U.S. market for hemp is developing rapidly and represents a significant opportunity for the consumer products industry. "With Neptune's Canada-based operations ramping up production and the cannabis industry growing exponentially around the world due to an evolving legal global framework, now is the time to establish a state-of-the-art supply chain in the U.S. marketplace," said Jim Hamilton, President and Chief Executive Officer of Neptune. "SugarLeaf's capacity, efficient production of high-quality extracts, and strong supplier relationships, combined with our existing competencies in customer relationships and science-based formulations, creates a strong value proposition to U.S. brands who want to offer differentiated products to consumers. Neptune's objective is to be a world's leader in extraction, purification and formulation of value-added cannabis and natural health products. We warmly welcome the SugarLeaf team to Neptune."

Valens GroWorks Corp. (OTCQB:VGWCF) (CSE:VGW) is a research-driven, vertically integrated Canadian cannabis company focused on downstream secondary extraction methodology, distillation and cannabinoid isolation and purification, as well as associated quality testing with three wholly-owned subsidiaries located in and around Kelowna, BC. Valens GroWorks Corp. recently announced that it had entered into an arm's length binding multi-year extraction services agreement to provide cannabis extraction services to Tantalus Labs, a leading British-Columbia-based cannabis producer. The Agreement has an initial 2-year term from the date of the first shipment from Tantalus. Valens will process the cannabis biomass provided by Tantalus on a fee for service basis into premium quality resins and distillates using the Company's leading proprietary extraction processing methods. The Agreement contains provisions under which it may be terminated with 180 days written notice after the one-year anniversary. Valens expects to receive and begin processing the first shipment from Tantalus early in fiscal Q3 of 2019 and currently holds all required licensing from Health Canada to carry out its obligations under the Agreement. "We are honored to be recognized by Tantalus, one of the industry's most respected players currently providing exceptional flower products to both medical and recreational users here in Canada," said Tyler Robson, Chief Executive Officer of Valens GroWorks. "We look forward to working closely with the team at Tantalus as they broaden their product portfolio under the anticipated new regulations this fall."

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