Westleaf (TSX-V: WL) (OTCQB: WSLFF) announced that Health Canada has granted a standard processing license to its cannabis extraction, processing and product formulation facility called The Plant by Westleaf Labs.
The license will allow Westleaf to process bulk cannabis to create and sell derivative products through a variety of commercial arrangements. The company said it is ready to start operations immediately.
“This is a major catalyst for Westleaf to generate material revenue through the sale of derivative cannabis products and by offering contract manufacturing services,” said Scott Hurd, President and CEO of Westleaf. “The issuance of the Standard Processing Licence is timely as Westleaf prepares to launch its cannabis 2.0 products upon legalization which is expected on October 17, 2019”.
Cannabis 2.0 is the legalization of the next wave of recreational and medicinal cannabis products currently set to begin in Canada on October 17th, 2019. It will allow cannabis manufacturers and retailers to provide consumers with a wide range of new cannabis products including high quality and safe vape cartridges, edibles, concentrates and other oil products.
The 15,000 square foot Phase I of the facility has been built to European Union good manufacturing practice (GMP) specifications and is designed to process up to approximately 65,000 kgs of dried cannabis per annum into anticipated high quality edibles, concentrates, vape and oil products, including Westleaf’s first in-house product, a line of vape pens under the brand General Admission, as well as products under the Company’s other house brands, Backstage, and wellness brand, Loon.
The Plant has an additional 45,000 square feet of space to expand extraction capacity as well as add additional product lines based on consumer preferences once the additional products are licensed post October 17, 2019.
With the pending legalization of cannabis derivative products, Westleaf anticipates strong industry wide demand for efficient extraction, processing and formulation capacity. The scalability of The Plant ensures Westleaf is well-positioned to capitalize on the expected demand growth for contract manufacturing, tolling arrangements, white labeling, and in-house product formulation. In July 2019, Westleaf signed its first extraction contract with Delta 9 for white label derivative cannabis products worth at minimum approximately $4 million per annum with an option to increase up to $16 million per annum.
“The Delta 9 contract is the first of what we hope to be a number of similar arrangements between licensed producers, product developers and others who are preparing for the coming legalization of derivative cannabis products such as vapes, edibles, topicals and beverages, or what is called Cannabis 2.0,” noted Hurd. “We are preparing Westleaf to be in a strong position to capitalize on the expected spike in consumer demand for these products later this year and into 2020 and beyond.”
In addition, Westleaf has now satisfied ATB’s condition precedent to draw the previously announced $3.7 million of additional capital in the form of a $2.7 million term loan and a $1.0 million line of credit for working capital purposes.