NR - update TORONTO, ONTARIO--(Marketwired - July 11, 2016) -Nutritional High International Inc. (the "Company" or "Nutritional High") (CSE:EAT)(OTCQB:SPLIF)(FRANKFURT:2NU) wishes to provide a shareholder update to summarize the Company's business development over the last few months and the milestones that we have achieved at the project and the corporate level.
In the last few months the Company has augmented its board and management team by adding a new COO, Jim Frazier, who has been instrumental in reducing construction costs in Colorado, advancing our Pueblo Project and instituting other operational changes; a new CFO, Amy Stephenson, the former CFO of Bedrocan; and new director, Robert Keeler who has significant operational experience in the food manufacturing industry.
We have made significant progress regarding Phase I construction at the main facility on our Pueblo property, and have re-configured the equipment plan to allow Palo Verde to manufacture products with the attributes that are highly sought after in the Colorado market. Phase I is predominantly focused on developing a portion of the building to allow Palo Verde to launch its oil extraction business and to ensure that the mechanical, structural and security features provide an environment conducive for equipment installation and safe food manufacturing. We're also evaluating the possibility of launching the artisanal line, upon completion of Phase I. The space dedicated for Phase I is expected to occupy 20% of the total space at Pueblo facility and provides sufficient space to expand the extraction operation to include other methods (other hydrocarbon extraction, CO2 and lipids based methods) and manufacturing of edible products on semi-automated basis.
With the build out firmly underway the Company expects the completion of Phase I build-out by the end of summer 2016 with the equipment installation and inspections to follow. All equipment has been ordered and the timing of Palo Verde's production launch will depend on the timing of local inspections, expected to occur shortly after completion of construction. We will continue to post to our social media pages key points of information along with other critical developments of the ongoing construction as we move closer to full scale operations.
Palo Verde will employ a short-path distillation technology to purify its cannabis oil extracts and remove deleterious compounds such as pesticides and residual solvents; separate chlorophyll from the final product and isolate terpenes. The product has been dubbed as "Clear" in the industry due to its transparency and quality. The processing method uses ethyl alcohol as a solvent to manufacture extracts, which is less volatile and safer for human consumption, compared to other solvents.
The process selected by Nutritional High also provides for significantly higher processing capacity as the mechanical separation portion of the process enables pre-extraction of cannabinoids, which in turn increases the overall throughput. The equipment sourced by Nutritional High will also have custom modifications to fit our specifications.
With Nutritional High's support, Palo Verde continues to take steps to establish operations, which includes sourcing key personnel to operate the Pueblo facility, securing potential sources of trim and shake to be used for manufacturing extracts, and developing a market roll-out strategy. Palo Verde's production economics are estimated as follows:
- The processing technology is able to process up to 50 lbs of trim/shake per day, which in Colorado is estimated to cost ~$400/lb to purchase from growers;
- The extraction yield is expected to be 8%;
- Good quality oil extract sells for ~$25/g on the wholesale market ("Clear" typically goes for higher);
- Overhead cost to operate the facility is estimated at $30,000 per month;
- There is potential to increase margins by infusing the oil extract into gelatin caps, vape pens and tinctures, which are higher value add products and where the "effective" value per gram is significantly higher than $25/g. For example, a disposable vape pen with 250mg of THC content is sold for $10-15/piece on the wholesale market;
- The margins for edibles are even higher, as the average price for a package with 100mg, sells for $10-15/piece on the wholesale market.
Nutritional High will secure revenue from Palo Verde through multiple streams including rent, interest payments, and through the sale of branded packaging.
Nutritional High has also made strides financially, taking the steps to secure the necessary financing to execute the projects and provide sufficient working capital for operations. The Company has completed a re-financing of its Pueblo property, which has provided over USD $600,000 for capital expenditures and working capital. We are also continuing towards clearing the F-1 prospectus with the SEC, which would provide the Company access to an additional USD $1 million in equity financing from Kodiak Capital. We also continue to seek out other non-dilutive sources of financing such as equipment loans, which would minimize external equity capital requirements to execute our work plans. Lastly, as a part of our Illinois joint-venture, our partners have agreed to contribute USD $300,000 to advance our dispensary project, which provides the capital necessary to complete the build-out and commence operations.
We also continue to be encouraged by the market conditions in Illinois, where Amendment 3 to Senate Bill 10, was recently passed. This measure extends the state's medical cannabis pilot program by an additional 2 1/2 years, to July 1, 2020, and expands the list of qualifying conditions, to include post-traumatic stress disorder ("PTSD"). PTSD is the only medical condition that was approved for a research study by the US Drug Enforcement Administration ("DEA") in context of medical cannabis.
Also as part of the legislative change, in order for a patient to receive their medical marijuana card, their doctor must no longer "recommend" the use of cannabis. Instead, their doctor must simply certify that a legitimate doctor-patient relationship exists, and that the patient in question has a qualifying condition. This change is expected to accelerate growth of the patient count in the State.
These changes provide for improved access to medical cannabis in the State of Illinois and in the Company's view expands the potential patient base, further improving the fundamentals of the Company's business prospects in the State.
We've made a decision to move the location of the dispensary to Effingham, IL, which is located in a high traffic regional business and retail district with several major big box retailers within minutes of the major highway exit.
Lastly, we continue to monitor regulatory environment in different jurisdictions in an effort to identify the opportunities to continue expanding the Company's operations in a manner accretive to the shareholders. We are keeping a close eye on Oregon, Maryland, Arizona, Nevada, Washington, California, as well as Canada and a few other counties for potential developments where Nutritional High is in a position to capitalize on the regulatory shifts in a cost effective manner. We continue to pursue expansion strategies according to the mandate set out in the past, and will provide updates as the significant developments are available.
We hope that we have answered some of the questions posed by investors in the last few months and clarified the corporate direction of Nutritional High. The management is excited about the prospect of finishing construction at Pueblo and allowing Palo Verde to commence commercial production of oils extracts and MIPs.