Market Overview

Cannabis Cultivators Ramp Up Production to Satisfy a Growing Consumer Base

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NEW YORK, Oct. 9, 2019 /PRNewswire/ -- As the popularity of cannabis products continues to grow, cultivators are tasked with the challenge of meeting consumer demands. As such, cultivators around the world are building large scale facilities in order to produce tons of cannabis per harvest. For instance, U.S. states such as Arizona, Colorado, California, and Oregon are creating greenhouses that yield upwards of 50,000 pounds of flower. Similarly, Canadian producers are building mega greenhouses in regions such as Europe and Australia, as their respective markets begin to grow. However, obtaining licensing in order to operate a grow facility is highly competitive. The Government of Canada reported that there were 179 companies that obtained licenses from Health Canada for cultivation, distribution, and production. The number of applicants also sharply rose when Canada fully legalized cannabis back in October 2018. Health Canada has been steadily approving licenses, yet, companies are still challenged with meeting a consumer base of millions. And according to Statistics Canada, by the end of the first quarter of 2019, there were reportedly 5.3 million or 18% of Canadians aged 15 years and older who smoked cannabis in the prior 3 months. Among the group, 646,000 users reported that they were trying cannabis for the first time, nearly double the estimated number of 327,000 a year beforehand. Moreover, almost half of Canadian cannabis users reported that they obtained their products from a legal source compared to just 23% back in 2018. OVerall, the staggering change highlights just how swiftly the legalization of cannabis has impacted Canada. So far, the Canadian government has limited many companies in terms of their grow house sizes and the quantity of cannabis they can produce. The strictly enforced regulations ultimately led to major shortages across Canada shortly after legalizing cannabis. Nonetheless, more and more companies are now gradually obtaining licenses and agreements in order to produce cannabis to meet the accelerating demand. 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. Pasha Brands Ltd. (OTC:CRFTF) (CSE:CRFT), Nightfood Holdings, Inc. (OTC:NGTF), Greenlane Holdings, Inc. (NASDAQ:GNLN), Neptune Wellness Solutions Inc. (NASDAQ:NEPT) (TSX:NEPT), Aleafia Health Inc. (OTC:ALEAF) (TSX:ALEF)

Over the past several decades, the retail industry has drastically changed due to the development and propagation of e-commerce. Today, many consumers tend to prefer purchasing products online because they can simply browse stores anywhere at the palm of their hands. However, transitioning towards a digital business is not as simple as it seems for certain industries. Specifically, the cannabis industry has faced countless legal barriers that have hindered its expansion into the digital marketplace. For instance, because of cannabis' legality concern, companies in industries like finance, marketing, and advertising have steered clear. However, as more regions continue to move towards legalization, various industries have become interested in locking into agreements and partnerships with cannabis companies. In particular, the U.S. passed the Farm Bill in 2018, which legalized hemp-derived CBD products. Initially, many companies explicitly noted that they wouldn't partake in the cannabis industry because of legal concerns. Nevertheless, after the passage of the Farm Bill, large corporations had begun to commercialize and advertise CBD products. And as the cannabis industry continues to expand, it is expected that technology will play a pivotal role in the development of the industry. While brick-and-mortar dispensaries will still be popular in legal regions, digital platforms are projected to further accelerate overall sales.

Pasha Brands Ltd. (OTC:CRFTF) (CSE:CRFT) is also listed on the Canadian Securities Exchange under the ticker (CSE:CRFT). Today, the Company announced breaking news that, "its wholly owned subsidiary, BC Craft Supply Co. Ltd. ("BC Craft"), has signed a supply agreement with Waterloo, Ontario based Greenterra Cannabis ("Greenterra").

The founders of Greenterra, Adam and Drew Anger, 30 and 24, are two brothers and successful businessmen who saw a tremendous opportunity to get into legal cannabis with a minimal investment. They completed their application using Tamra Follett's do-it-yourself standard operating procedure kit, and will be cultivating cannabis in a greenhouse using hand-mixed soil and organic inputs.

Adam has owned several companies in the trucking and transportation industries and will be operating the business side of the greenhouse, while Drew, the owner of a marketing company, will be lead cultivator.

'Adam and Drew bring a youthfulness and excitement to their business that made signing a supply agreement with them so attractive to us,' said Patrick Brauckmann, Executive Chair of Pasha Brands. 'They truly represent what it means to be a family-oriented business in the cannabis industry and we're excited to get their product on the shelves of retailers across the country.'

With Canada's current licensed cannabis producers only able to supply an estimated 15 percent of what Canadians are consuming, Pasha is optimistic that yet another new supply agreement will help correct the cannabis supply imbalance. Each micro cultivator in Canada will be allowed to produce approximately 500 kg of cannabis per year. Canada has tens of thousands of craft producers operating in the illicit cannabis market and BC Craft is focused on helping as many small farmers transition into the regulated market as possible.

'It's hard to believe that we're breaking into this industry and turning our hobby into a business,' said Adam Anger. 'We're really excited to partner with a company like BC Craft because we know that they prioritize not only craft cannabis but a sense of family the same way that we do.'

About Pasha Brands: Based in Vancouver, British Columbia, Pasha is a vertically integrated, prohibition-era brand house firmly rooted in BC's craft cannabis industry, which boasts an international reputation. With proven capabilities in cannabis cultivation, genetic research and development, product processing, and retail, Pasha is uniquely positioned in the new legal cannabis market through its network of hundreds of craft cannabis suppliers under the Pasha umbrella. Pasha subsidiary, Medcann Health Products Ltd., is a Health Canada licensed cultivator and processor with a licence to sell medical cannabis products in Canada. Pasha and BC Craft are also developing a craft cannabis campus, which is dedicated to bringing craft quality into the newly legal cannabis market in Canada. BC Craft is driven to assist craft growers in obtaining security clearance and licensing to grow as micro-cultivators, specializing in education and compliance to bring growers into the regulated cannabis supply market. Pasha's common shares trade on the CSE under the symbol "CRFT" and on the FSE under the symbol "ZZD". For more information, please visit www.pashabrands.com."

For our latest "Buzz on the Street" Show featuring Pasha Brands Ltd. recent corporate news, please head over to: https://www.youtube.com/watch?v=80i_hHzj91Q

Nightfood Holdings, Inc. (OTCQB:NGTF), owns Nightfood, Inc. and MJ Munchies, Inc. MJ Munchies, Inc., a subsidiary of Nightfood Holdings, Inc. and Global Consortium, Inc. recently announced that the parties have entered into a Letter of Intent whereby Global Consortium subsidiary Infused Edibles would receive an exclusive license to manufacture and distribute marijuana and CBD-infused products under the Half-Baked™ mark owned by MJ Munchies. With commercial brands in the marijuana space increasingly frustrated by restrictive government advertising policies, both companies believe having the right brand name provides a distinct competitive advantage at retail in this rapidly-growing market. "We're excited to work with a company that shares our vision for national awareness and distribution," added MJ Munchies Chief Executive Officer Sean Folkson. "They have a track record of success in manufacturing and distributing a varied line of products that succeed at retail. We've been working on this for some time, which is why we have not been commenting publicly about the MJ Munchies side of our company. Now, the broad strokes are in place, and we're going to work together to quickly finalize the agreement."

Greenlane Holdings, Inc. (NASDAQ:GNLN) is a leading distributor of premium vaporization products and consumption accessories in the United States and has a growing presence in Canada. Greenlane's customers include over 7,000 independent smoke shops and regional retail chain stores, which collectively operate approximately 11,000 retail locations, and hundreds of licensed cannabis cultivators, processors and dispensaries. Greenlane Holdings, Inc. recently issued the following statement regarding the city of San Francisco's final vote for the temporary suspension of manufacturing, distribution, and sale of e-cigarettes in the city – pending the outcome of the FDA's ongoing review of e-cigarette products. "Greenlane believes in sensible regulation and supports efforts to keep adult-use products out of the hands of minors. Like JUUL, we strongly support responsible legislation, such as raising the minimum-purchasing age for tobacco products, including vapor products like JUUL, to 21 years of age. We have always taken youth-use prevention seriously and Greenlane's e-commerce platforms and retail stores are fully age-gated to ensure minors are not purchasing the vaporization and accessory products we sell. In fact, age-restriction is beneficial to our business as the vast majority of B2B customers to whom we sell e-cigarettes are age-restricted stores where consumers need proof of age to enter. The more difficult it is for people to buy e-cigarettes in non-age-restricted locations such as gas stations and convenience stores, the more we benefit from business that is driven into our age-gated channels. Should a ban of e-cigarettes be enacted in San Francisco or Northern California more broadly, Greenlane does not anticipate a material impact to its business, as sales in these areas represent an immaterial percentage of our total JUUL sales. JUUL continues to be a strong partner and we see significant opportunities to grow our JUUL business, particularly in Canada where sales increased more than 70% in the first quarter of 2019 compared to the previous quarter. We distribute a diversified portfolio of consumption accessories across multiple categories and geographies and are actively expanding our global reach. In addition to our sales in the US and Canada, which both continue to grow across our broader portfolio of product offerings, we currently support and ship products to customers in Europe, Australia, and parts of South America on a limited basis. We are keenly aware of the growth opportunities in these markets and as we continue to expand our marketing, supplier relationships, sales bandwidth and expertise, we anticipate capturing market share in the cannabis, CBD and liquid nicotine end markets in those regions by opening our own distribution centers, acquiring existing international distributors and partnering with local operators."

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 that its wholly owned subsidiary, 9354-7537 Québec Inc., has received a notification letter from Health Canada indicating that all requested license amendments have been approved. The scope of the amendment received from Health Canada permits expansion of cannabis operation areas to include an additional extraction room where Neptune will perform cold ethanol extraction. Ethanol extraction is faster and more cost effective than the CO2 extraction currently used and will increase Neptune's input capacity from 30,000 kg to 200,000 kg. This seven-fold increase in the Company's capacity will accelerate production and enable fulfilment of commercial commitments. Start-up activities will begin immediately, including the final stages of commissioning the equipment, and Neptune will ramp up commercial operations on a progressive basis during the second fiscal quarter. "Congratulations are in order as this announcement marks another milestone achieved by our team by successfully meeting the stringent Health Canada requirements," said Jim Hamilton, Chief Executive Officer of Neptune. "The new regulations regarding cannabis edibles, extracts and topicals recently published by Health Canada are expected to result in significant additional demand for cannabis extraction and purification services. With our increased extraction capacity, Neptune is now well positioned to benefit from this rapidly growing market. In addition, our cannabis oil capsule technology provides the company a differentiated offering for which there is strong demand."

Aleafia Health Inc. (OTCQX:ALEAF) (TSX:ALEF) is a leading, vertically integrated cannabis health and wellness company with four primary business units: Cannabis Cultivation & Products, Health & Wellness Clinics, Cannabis Education, and Consumer Experience with ecommerce, retail distribution and provincial supply agreements. Recently, Aleafia Health Inc. had been granted approval by Health Canada for outdoor cannabis cultivation. On June 7th, 2019, the Company's wholly-owned subsidiary Aleafia Farms Inc., was granted a new Standard Cultivation License issued under Health Canada's Cannabis Regulations at the Company's Port Perry facility. "Our promise made last year to cultivate outdoors in 2019 is now a reality," said Aleafia Health Chairman Julian Fantino. "We will continue to lead the way in low-cost production. This milestone exponentially increases our total cultivation footprint while securing product supply for our medical cannabis patient base."

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