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Canada Comes Knocking for Cannabis

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Canadian companies are starting to show a lot of interest in North Coast cannabis.

On Nov. 27, Vancouver-based Chemistree Technology Inc. announced that it has entered into a "strategic partnership" with an unnamed cannabis processing company based in Arcata.

In a press release, the company announced that the partnership will see Chemistree loan the processor $450,000 and a still-to-be-negotiated additional line of credit to expand the business, including the purchasing of new equipment and improvements to the processing facility. Chemistree, a publicly traded company, has also agreed to give the processor's principal owner 100,000 of its common shares.

"This is a great advancement for Chemistree," company President Karl Kottmeier said in the release. "Not only is the processor a highly regarded service provider in the Humboldt cannabis industry, with deep relationships with local cultivators, we believe they are also primed for growth in their sector. We believe that Chemistree can provide capital and management depth to rapidly expand the processor's business, both in the local Humboldt area, across the state of California and ultimately into new jurisdictions across the United States where legal cannabis processing and product development is in formative stages. Chemistree will also work with the processor to purchase cannabis biomass on a proprietary basis and process that biomass to ultimately be sold as a Chemistree or Sugarleaf branded product."

According to its website, Chemistree's strategy is to acquire and develop vertically integrated cannabis companies, infusing them with the cash to expand quickly. In Washington, the company purchased the Sugarleaf brand, which had developed a reputation for producing high-quality cannabis after its head grower, Jason Flynn, won consecutive Cannabis Cup People's Choice Awards for its strains Presidential Kush and White 99, which boast THC levels of up to 32 percent.

With Chemistree's help, Sugarleaf expanded and is now sold in dozens of dispensaries throughout Washington.

Chemistree also grabbed headlines this summer when it purchased almost 10 acres of land in Desert Hot Springs' cannabis cultivation zone for $1.23 million and announced plans to erect more than 200,000 square feet of greenhouses across three facilities.

But Chemistree isn't the only Canadian company sniffing around the North Coast cannabis industry.

CordovaCann, a corporation based in Toronto, announced Oct. 31 that it had agreed to a $6.2 million deal in Covelo in northern Mendocino County, under which the company purchased almost 300 acres of land and a 16,000-square-foot processing facility. The company plans to begin cultivating in 164,000 square feet of greenhouse space on the property beginning early next year.

If CordovaCann rings a bell, it should. The corporation announced back in March that it had entered into a memorandum of understanding with Humboldt Healthcare LLC to purchase a majority stake in the company, which is itself a subsidiary of Emerald Family Farms LLC. Under the terms of that agreement, CordovaCann paid Humboldt Healthcare $100,000 to retain the option to either purchase the entire company — and its assets, which include a more than 100,000-square-foot processing facility — for $8 million or a 51-percent interest for $4.08 million.

While the memorandum was initially only slated to remain in place for up to 120 days as CordovaCann assessed whether to go through with the purchase, a company prospectus released earlier this month indicates it will "remain in effect until the agreement is terminated by either party."

So what's this all mean? It's hard to say. But one thing that seems certain is that while local farmers are struggling to make ends meet and local retailers are complaining of declining sales receipts amid fears of a post-legalization recession, a couple of the bigger names in Canadian cannabis are working to leverage big investments in the Emerald Triangle.

Thadeus Greenson is the Journal's news editor. Reach him at 442-1400, extension 321, or thad@northcoastjournal.com. Follow him on Twitter @thadeusgreenson.

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