The cannabis industry has been in the middle of a major expansion as countries all over the world reform legislation and this has created significant opportunities for the companies that are levered to this emerging industry.
During the last year, the cannabis industry has recorded exponential growth, and this is a trend that we expect to continue for years to come. Since 2014, we have been laser focused on the cannabis industry and have been targeting companies that are actually capitalizing on this market.
Chemesis International Inc. (CSI.CN) (CADMF) is a cannabis company that we have been excited about and is one that we suggest keeping an eye on. Chemesis has been focused on burgeoning cannabis markets in North and South America and is one of the few companies to have legitimate leverage to these markets.
When it comes to the United States cannabis market, Chemesis has attractive leverage to California and Puerto Rico. The company has been focused on the Colombian cannabis market in South America and we have been favorable on the markets that it has been targeting. One of the reasons why we are favorable on Chemesis is due to the continued execution and have issued an update on this opportunity.
Enhances Leverage to Puerto Rico via a Significant Investment
Earlier this month, Chemesis was able to enhance its leverage to the cannabis markets in California and Puerto Rico through an agreement to acquire 19.9% of GSRX Industries Inc. (GSRX). This move complements the company’s existing position in these markets due to GSRX being is in the business of acquiring, developing and operating retail cannabis dispensaries in Puerto Rico and California.
We are favorable on this relationship and believe that there is significant value that can be created between the two businesses. One of the reasons why we are excited about this opportunity is due to the skills that each company brings to the table. Chemesis has extensive manufacturing, processing and extraction capabilities, which complements GSRX’s ability to professionally operate dispensaries and CBD stores.
Another reason why we are favorable on this relationship is due to the way it impacts the amount of people that Chemesis can reach. GSRX currently operates one Pure and Natural retail kiosk and is in the process of launching two additional hemp-CBD retail stores in Tennessee and Texas. This relationship will greatly expand Chemesis’ footprint in strategic locations, specifically Puerto Rico, California, Tennessee and Texas.
Under the agreement, Chemesis has a right of first refusal to manufacture GSRX’s current and future production requirements in all jurisdictions where Chemesis has production capabilities. GSRX will also make sure that each of its licensed locations has dedicated shelf space for Chemesis’ brands of products. This is an important part of the relationship and we will monitor how this potential revenue stream benefits Chemesis.
When it comes to making investments in strategic partners, we think Chemesis has done a fantastic job and are favorable on this development. GSRX recently raised its first quarter revenue guidance and we are favorable on this. It is important for companies to build relationships with companies that are executing and GSRX represents one of these companies as it is in the middle of a major expansion in Puerto Rico.
A Execution Story with Significant Growth Prospects
Chemesis has attractive leverage to the California cannabis market and we expect this to be a major growth driver for the business in future quarters. This is the world’s largest cannabis market and we are favorable on Chemesis’ leverage to it. The company’s industrial scale extraction facility in California has obtained all the necessary licensing and has proceeded with commercialization. Over the coming months, Chemesis plans to scale its existing operations on order to meet the increasing demand for cannabis in the legal California cannabis market.
Earlier this year, Chemesis announced plans to add an additional 25,000 sq. ft. of manufacturing capacity to its facility in Cathedral City, California. This is a significant development and we are favorable on the planned expansion especially due to the company’s growth plans. With this expansion, Chemesis will have the ability to further increase its finished goods portfolio, which will include beverages, edibles, and other consumer goods.
One of the reasons why we are excited about the expansion, besides for the increased production capacity, is going to be the company’s ability to cut costs and improve margins. The manufacturing expansion will maximize efficiencies and will also increase production capacity for Chemesis’ brands as well as third party brands. The ability to produce a significant amount of cannabis products is especially important for brands that are operating in a market as large as California. We are bullish on the growth prospects associated with expansion and believe that it will lead to Chemesis having a larger market share in California.
Another reason why we are excited about Chemesis is due the focus on the cannabis oil opportunity. The company recently acquired intellectual property as well as the physical equipment for an extraction methodology to preserve all of the phytocannabinoids and terpenes from cannabis while utilizing a low-temperature process to create “live resin”.
The extraction method will allow the company to produce a unique variety of finished goods such as tinctures, shatters, vapes, oils and other consumer products that can be varied to achieve desired potencies of different cannabinoids and terpenes. The California cannabis oil market represents a massive opportunity and we believe that this technology will provide the company with a major avenue for growth.
Puerto Rico Represents a Significant Growth Driver
In late 2018, Chemesis completed the acquisition of Puerto Rico based Natural Ventures and has been building out its operations on the island to serve increasing customer demand. Natural Ventures is a fully integrated medical cannabis company, with 100,000 sq. ft. of cultivation and 35,000 sq. ft. of CO2 based extraction. Natural Ventures is servicing approximately 90% of the dispensaries in Puerto Rico and is on pace to be the largest third-party manufacturer based on volume in 2018.
Following the acquisition, Chemesis announced that it will be cultivating and manufacturing CBD products for the Puerto Rican market and we are monitoring this opportunity. Over the next year, we expect the Puerto Rican cannabis market to become more significant and believe that the investment in GSRX will prove to be a wise decision.
Earlier this year, Natural Ventures signed a definitive agreement for an annual purchase order of at least USD $4,000,000. Under the agreement, Natural Ventures will cultivate, manufacture, package and distribute for the Puerto Rico based dispensary network from its fully licensed, state compliant facility.
The products are white labelled under the dispensaries brand and delivered on a weekly basis. In February, Natural Ventures began fulfilling purchase orders and is providing the vendor with edibles, vaporizers, lotions, beverages, and flower. We are favorable on this aspect of the story and execute this to be a significant value drier for the company in future quarters.
Working to Become a Global Cannabis Company
During the last year, Chemesis International has significantly advanced its fundamental story and has accomplished this through a series of organic and inorganic growth initiatives. The company represents a multi-faceted growth opportunity that has leverage to some of the most exciting cannabis markets and we are bullish on its focus on the cannabis oil opportunity.
One of the reasons why are confident in Chemesis’ ability to execute is due to the strength of its management team and its balance sheet. The company is well capitalized and well positioned to execute on its previously announced growth initiatives. Chemesis has benefited from being able to use its stock as a currency to conserve cash while making strategic investments/acquisitions.
We have been highlighting Chemesis since early 2018 and this is an opportunity we have been excited about. The company does not seem to be flying under the radar anymore and the market has responded favorably to the recent developments. Although the recent rally has been significant, we believe that Chemesis is in the early stages of a major expansion and this is an opportunity to be watching.
To learn more about Chemesis International or to stay up to date with its developments, please contact email@example.com.
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