Valens GroWorks Has an Edge in Organic Cannabis Oil Extraction

We believe Valens GroWorks Corp.’s (CSE:VGW) process will help distinguish it from its competitors and help the Company maintain a strong competitive advantage

SmallCapPower | June 7, 2019: Valens GroWorks Corp. (CSE:VGW) (OTC:VGWCF) is a vertically-integrated pure play cannabis extraction company that focuses on downstream secondary extraction methodology, distillation and cannabinoid isolation and purification, and the associated quality testing. The Company currently has a 25,000 sq. ft extraction, post processing and analytical testing facility that it operates from in Kelowna, British Columbia. In February, the Company’s facility expanded to over 50,000 sq.ft from the acquisition and expansion of 230 Carion Road and 180 Carion Road in Kelowna, BC. As the properties are so close in proximity, they are considered the same property and Valens GroWorks does not need to apply for another license. On July 14, 2018, the Company announced that its wholly-owned subsidiary, Supra THC Services, received ISO 17025 accreditation for cannabis testing. The Company announced on June 20, 2018, the finalization of its subsidiary Valens Farm’s greenhouse expansion plans to build a 400,000 sq. ft cannabis cultivation and production facility.

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On February 13, 2019, Valens GroWorks announced an expansion of its annual extraction capacity to 240,000 kg of dried cannabis (was 6,000 kg). With this expansion, the Company estimates that it has secured the spot as the largest third-party extraction company in Canada. The increased capacity should allow the Company to expand its offerings to meet the demand for new products, such as edibles and infused beverages, which are expected to become legal in Canada in October 2019. On April 29, 2019, the Company announced it was the first third-party extraction company in Canada to receive its organic certification for cannabis oil productions. Pro-Cert is qualified by the Canadian Food Inspection Agency to give third-party certification to an operator that wants to package goods with an organic claim. Valens GroWorks is now in the process of becoming EU GMP certified.

With Canada’s legalization of edibles expected in October 2019, Valens’ recent expansion to have 240,000 kg of capacity should allow it to meet the growing demand for derivatives that will likely occur after October. We believe this will provide Valens with a competitive advantage, as they will have the capacity and equipment set up to optimize the growing demand for edibles and cannabis-infused beverages, among other derivatives.

Valens GroWorks is the first extraction company in Canada to obtain organic certification for cannabis oil production from Pro-Cert Organic Systems Ltd. for its CO2 and ethanol extraction processes. This license will allow Valens to begin providing certified organic cannabis oil processing, which will fit with the increasing demand for organic oil. Demand for organic oil is increasing as it provides more benefits, is chemical free and aligns with the trend of people being more concerned with their well-being (Zion Market Research, 2019).

Valens GroWorks aims to capture the high-quality extract market and has done so through its wholly-owned subsidiary, Agritech Ltd., which has harvested premium cannabis crop with 24% potential THC content, which is 5.5% higher than the industry average. We believe this will help distinguish Valens from its competitors and help the Company maintain a strong competitive advantage.

Extraction Agreements Signed

The Company currently has 10 contracts with cultivators. These are as follows:

Tantalus Labs

Valens, on May 28, 2019, signed a multi-year cannabis extraction agreement with Tantalus Labs, which has an initial two-year date. Valens excepts to begin processing Tantalus’ biomass in Fiscal Q3 of 2019.

HEXO Corp.

On April 25, 2019, the Company announced an initial two-year term extraction agreement with HEXO. HEXO will supply Valens with a minimum of 30,000 kg of cannabis and hemp biomass in the first year and 50,000 kg in the second.

Green Organic Dutchman Holdings Ltd. (TGOD)

Valens signed a two-year agreement with The Green Organic Dutchman Holdings Ltd. on March 11, 2019. This agreement has TGOD supplying a minimum of 30,000 kg of cannabis and hemp biomass in the first year and 50,000 kg in the second to Valens.

Tilray Inc.

On February 26, 2019, the Company announced a multi-year extraction agreement with Tilray Canada Ltd, which requires Valens to extract a minimum amount of 15,000 kg of dried cannabis per year.

Organigram Inc.

On January 29, 2019, the Company signed a multi-year extraction agreement with Organigram. With this agreement, Valens will extract cannabis flowers, hemp and trim from Organigram’s Moncton operation to develop extract concentrate.

Sundial Growers Inc.

Announced on January 21, 2019, Valens signed a three-year term with Sundial, which will allow Sundial to shop bulk amounts of dried cannabis to Valens. Valens will then process the cannabis on a fee-for-service basis into bulk resin or other cannabis-oil derivates. Valens will also provide R&D services to help support Sundial’s product development.

Canopy Growth Corp.

On December 13, 2018, the Company announced a multi-year extraction agreement with Canopy Growth. This will allow Canopy Growth to utilize the Company’s extraction services that incorporate Valens’ proprietary technology to process whole flower and trim into high-grade cannabis resin.

Harvest One

On November 14, 2018, Valens announced its entrance into a multi-year extraction services agreement with Harvest One for cannabis extraction and value-added services. With an initial three-year term, Harvest One’s subsidiary will ship bulk amounts of dried cannabis to Valens who will process the cannabis on a fee-for-service basis into bulk resin and other cannabis oil derivative products. Valens will also help develop Harvest One’s health and wellness products, beverages, vape pens and nutraceuticals by offering R&D services.

GTEC Holdings

On November 5, 2018, Valens announced the signing of its multi-year extraction agreement with GTEC Holdings. With this agreement, Valens will process cannabis on a fee-for-service basis into crude, distillate or other cannabis oil derivates on an initial four-year term for GTEC, which will ship bulk amounts to the Company.

SpeakEasy Cannabis Club Ltd.

On May 17, 2018, the Company announced a multi-purpose partnership agreement with SpeakEasy. With this agreement, SpeakEasy will provide an interim supply for Valens of 2,500 to 5,000kg per month of cannabis material.

Strategic Partnerships

Thermo Fisher Scientific

On November 29, 2018, Valens announced the formation of an expanded research collaboration agreement with Thermo Fisher Scientific. With this collaboration, Valens will gain access to Thermo Fisher’s instruments and consumables to create and validate analytical methods for the analysis of cannabis. Any findings from these studies will be co-promoted with research notes, peer-reviewed published articles, corporate presentation and webinars.

Tarukino Holdings Inc.

On October 1, 2018, Valens announced the signing of a two-part, multi-year agreement with Tarukino Holdings Inc. The terms of the agreement grant Valens exclusive rights to the production and distribution of Tarukion’s proprietary emulsion technology that converts cannabis oil and oil-based terpenes into water soluble forms that are needed in the production of beverages, edibles and topicals. This agreement should allow Valens to gain further expansion of its product and service offerings and gain a strong position in the developing Canadian cannabis-infused beverage, edible and topical categories. In return for the exclusive rights, Valens has granted Tarukino 4.3M shares and 1M warrants with a strike of $3.50 to $4.00/share.

Figure 1: Valens Strategic Partnerships have Helped Solve these Problems

Source: (Valens, 2019)

Canopy Growth Corp

Valens announced it joined Canopy Growth’s CraftGrow program in October 2017. This will allow Valens to have the opportunity to bring to market cannabis products through Canopy Growth’s leading platforms. With the Company’s receival of its standard process and standard cultivation license under the Cannabis Act, Valens is predicted to leverage this partnership and channel when it is ready to sell branded products.

Methods of Extraction Used

Valens is one of the few extraction companies in Canada to offer a wide range of extraction methods. This allows the Company to reach a larger customer base, as it is able to provide a wider variety of end products. On April 24, 2019, Valens reported Q1/19 financials and provided an operational update. In Q1/19, the Company processed 1,796 k g of dried cannabis and hemp biomass. In terms of financials for Q1/19, Valens also announced that within the first 55 days after the end of the quarter, the Company processed 4,976 kg.

Extraction Methods

Figure 2: How the Company Gains Revenue

Source: (Valens, 2019)

The methods of extraction that the Company is involved in include:

Super/Sub Critical CO2

This method is used to extract high-quality oils and is done by inducing high temperature and pressure on CO2 to bring it to its liquid state. This allows the CO2 to act as a solvent and dissolve unwanted components out of the starting material.

Figure 3: Super/Sub Critical CO2

Source: (Valens, 2019)

Ethanol

By using ultrasonic cavitation, a solvent is added into the individual plant cells where it absorbs cannabinoids, terpenes and, flavonoids among other compounds. The plant mixture is then filtered to remove the solid plant components so the remaining mixture can be separated with a rotor-evaporator. The ethanol solvent can then be collected and recycled.

Figure 4: Ethanol

Source: (Valens, 2019)

Hydrocarbons

A hydrocarbon, either butane or propane, is used as a solvent to dissolve the active components of the plant. The hydrocarbons bond to fat-soluble cannabinoids and terpenes to separate them from the rest of the plant material. Hot water is then added to evaporate the hydrocarbon so only a purified oil remains.

Figure 5: Hydrocarbon

Source: (Valens, 2019)

Solvent-less

Ice hash, or bubble hash, and pressure rosin are created through a solvent-less process. The ice hash is made by sifting cannabis trichomes in the presence water. This creates a cannabis concentrate such as hash, dab and bubble hash. The pressure rosin is made by pressing two hydraulic plates against the input material to from a smooth ‘whole flower’ concentrate.

Figure 6: Solvent-less

Source: (Valens, 2019)

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