Naturally Splendid Enterprises Ltd had a difficult decision to make. This hemp company was holding a majority interest in the POS BPC Manufacturing facility. The state-of-the-art plant provides both aqueous and alcohol extraction technology that is used for the extraction of a variety of components from plants and marine animals to oil, protein and starch, when first commissioned in the late 1990’s.
The facility has the potential to be retrofitted to include extraction of materials from cannabis. And although the facility was designed to be a pilot plant, which is smaller than a full-scale manufacturing facility, there was the opportunity through capital investment to increase the manufacturing capacity. So where was the dilemma?
Our Partner offered us approximately double what was paid for its majority interest. With this revenue opportunity presented to the Company, management took a hard look at operations. Their conclusion was that Naturally Splendid could capitalize on this profit-making opportunity and ultimately strengthen the Company’s position as a premier hemp corporation.
The bottom line is that Naturally Splendid has accepted the offer to sell their 51% portion of the POS facility, providing cash to the Company without further shareholder dilution. Management is excited about the new possibilities that have opened up.
Stockhouse recently caught up with NSP’s new CEO, Doug Mason, to dig deeper into this decision-making process, and to find out what new thinking has gone into the Company’s business model.
1) Could you summarize this transaction?
Naturally Splendid has sold it’s 51% interest in POS BPC for approximately double what we originally paid. This is an all cash transaction and the full payment in excess of $3.5M has already been received by the Company.
2) To help investors understand this decision, please provide a more in-depth description of the POS BPC facility.
The facility was built in the late 1990’s, and the technology and operations would require capital infusion to modernize. Having said that, the facility is capable of doing pilot scale, toll processing runs for clients in the oil, protein and starch industry. Modernization of the facility would have to include upgrading the processes to be more automated as the facility relies heavily on manual procedures as it currently stands.
As stated in our news release of February 20th, Naturally Splendid feels it is more prudent to invest in state of the art cannabinoid extraction technology, especially given the significant advances in this sector over the past few years.
3) NSP is a company focused on hemp-based products and technology. Is there better technology available for hemp-based cannabinoid extraction?
Absolutely. Before making the decision to dispose of BPC, Naturally Splendid conducted an extensive review of the technologies that are available for cannabinoid extraction. In fact, cannabinoid extraction is rapidly becoming a very specialized component to the entire cannabis value-chain. And that fact is the driving reason that we felt it advantageous to develop relationships and opportunities with extraction experts and specialists. We are now pursuing these opportunities to finalize which technology, or combination thereof, will be best suited to our needs within the many opportunities afforded us under the Dealer License that we have begun application for.
4) Does the Company already have plans to become more active in hemp-based cannabinoid extraction?
Most certainly. Since stepping into the role of CEO in January 2018, the Company has appointed a cannabis regulatory expert to our Advisory Board, retained Cannabis Compliance Inc to prepare our application to become a Licensed Dealer of cannabis products and extracts, as well as most recently selling our portion of BPC to focus on more effective manners of cannabinoid extraction.
These cannabinoid extracts will be used for our own NATERA® , NATERA FX® , Elevate Me™ Pawsitive FX™ product lines, as well as white label for the many clients who have contacted us in regards to our proprietary technologies and formulations.
5) For newer investors, why is Naturally Splendid more interested in hemp extraction versus marijuana extraction?
There are many reasons for our interest in cannabinoids extracted from hemp. Our application for a Dealer’s License will cover a number of significant activities with both hemp and marijuana, including the extraction of cannabinoids.
To address your question regarding cannabinoids extracted from hemp, there are several factors. Most notably perhaps is the regulatory environment regarding hemp and hemp extracts, which is typically less restrictive in most jurisdictions than with marijuana and its extracts. Additionally, we believe the market potential of cannabidiol (CBD) derived from hemp has significant potential with less barriers to market, as there are no psychoactive compounds such as the THC associated with marijuana, thus opening far broader commercial applications. For example, the World Anti-Doping Agency (WADA) recently removed CBD from their prohibited substance list.
6) So, this all comes down to looking for better ways to efficiently extract cannabidiol (CBD). There are more than 80 known cannabinoids, what makes CBD so special?
CBD is a powerful anti-epileptic, anti-depressant, anti-inflammatory, anti-nauseate, sleep aid, muscle relaxant, sedative and anti-proliferative.
The federal government in the United States has patented CBD. Here is what they say in their patent abstract:
“Cannabinoids have been found to have antioxidant properties, unrelated to NMDA receptor antagonism. This new-found property makes cannabinoids useful in the treatment and prophylaxis of wide variety of oxidation associated diseases, such as ischemic, age-related, inflammatory and autoimmune diseases. The cannabinoids are found to have application as neuroprotectants, for example in limiting neurological damage following ischemic insults, such as stroke and trauma, or in the treatment of neurodegenerative diseases, such as Alzheimer’s disease, Parkinson’s disease and HIV dementia. Non-psychoactive cannabinoids, such as cannabidiol, are particularly advantageous to use because they avoid toxicity that is encountered with psychoactive cannabinoids at high doses useful in the method of the present invention. A particular disclosed class of cannabinoids useful as neuroprotective antioxidants is formula (1) wherein the R group is independently selected from the group consisting of H, CH3 and COCH3.”
7) The Company is pursuing opportunities in producing CBD-enhanced food products and health supplements. What does NSP currently have on the market here?
The Company has assembled a team of cannabinoid extraction, formulation and market specialists to develop CBD fortified products in several categories. These products range from human to pet, both as consumables or topicals. Naturally Splendid is currently pursuing opportunities in Australia, Japan, South Korea and several European countries. Given the optics of the hemp plant, there is generally a more onerous regulatory process to have CBD fortified products approved for import into many countries.
As far as opportunities for CBD fortified products in Canada…presently it is illegal to extract CBD from hemp, so opportunities under current regulations are pretty much on hold. That does not mean that we are not aggressively positioning Naturally Splendid to be a prominent provider of CBD and CBD fortified products as regulations evolve. The Canadian government has announced that these regulations should be in place in the summer of 2018.
8) What CBD-based initiatives are Naturally Splendid pursuing over the near term?
The initiatives include:
a. Appointing cannabis regulatory expert / consultant, Mr. Scott Walker, to Advisory Board.
b. Applying for a Dealer License to allow for handling cannabis and cannabis derivatives & extracts.
c. Sold our position in POS BPC to focus on building a cannabinoid extraction specific facility in our existing processing / distribution facility in Pitt Meadows BC.
d. Forming strategic partnership with formulation experts to create proprietary, cannabinoid fortified products.
e. Have over 25 CBD fortified formulations completed.
f. Proceeding with our CBD import strategies including ‘permits’ for several countries including; Japan; South Korea; Australia; and multiple European countries.
9) Finally, let’s take a look at the Big Picture here. Why should cannabis investors want exposure to the hemp side of the cannabis market?
a. The hemp side of the cannabis market is less regulated with far greater global opportunity.
b. The hemp plant is far less expensive to grow than marijuana and doesn’t come with the intrusive and expensive security measures associated with marijuana.
c. The ability to scale up hemp supply, which is grown outdoors, is far easier than the capital intensive and time-consuming build of indoor grows.
d. In addition to cannabinoids, the hemp plant can be used for food, nutraceuticals, cosmeceuticals, fiber, fuel and much, much more.
naturallysplendid.com
FULL DISCLOSURE: Naturally Splendid Enterprises Ltd. is a paid client of Stockhouse Publishing.