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Newsletter 36: Canopy Growth Acquires the Rights to Acreage Holdings

EXECUTIVE SUMMARY

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• Canopy Growth Acquires the Rights to Acreage Holdings

• Germany’s Halo to Enter Hemp CBD Extraction Market

• PAX Labs Completes $420 Million Capital Raise

• Congress Weighs Reforming Cannabis Laws Amid Heavy Lobbying


COMPANIES: Canopy Growth Acquires the Rights to Acreage Holdings

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On April 19th, 2019, Canopy Growth (TSX: WEED) (NYSE: CGC) and Acreage Holdings, Inc. (OTC: ACRGF) announced a definitive arrangement granting Canopy Growth the rights to acquire all shares of Acreage Holdings, with a requirement to do so once cannabis production and sale becomes federally legal in the United States.


Canopy Growth is a multifaceted cannabis and hemp company, which offers distinct brands and curated cannabis varieties in dried, oil and Softgel capsule forms. Canopy Growth also offers medically approved vaporizers through its subsidiary, Storz & Bickel GMbH & Co. KG. With an ever-expanding footprint, Canopy Growth now has operations in over a dozen countries across five continents.


Acreage Holdings is a leading multi-state operator in U.S. cannabis, headquartered in New York City and currently operating in 19 states, holding licenses for cultivation, extraction, and retail. Its Board of Directors includes former Canadian Prime Minister Brian Mulroney and former Speaker of the US House of Representatives, John Boehner.


COMPANIES: Germany’s Halo to Enter Hemp CBD Extraction Market

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On April 19, 2019, Halo Labs Inc. (OTC: AGEEF) announced that it has entered into a binding Letter of Intent to secure a hemp processing facility in Southern Oregon to expand the Company’s production capabilities into manufacturing cannabidiol (CBD) isolate and distillate. Production at the facility is expected to start in the 3rd quarter of 2019.


With the optimization of their planned facility, Halo plans to process roughly 10,000 kilograms of hemp per month, with projected yields expected to be 700 to 900 kg of high-grade distillate or isolate, and figures which stand to drive monthly revenues around US$3.5 million considering current wholesale pricing trends. The location of Halo’s planned facility in Talent, Oregon bodes well for accessing raw hemp biomass; they’ll be situated just 20 miles from the California state line and 10 miles from Halo’s already existing extraction facility in Oregon.


With the recent passage of the US Farm Bill excluding hemp from the Controlled Substances Act, CBD-derived hemp products can now flow freely across US state lines. Indeed, major drug chain retailers are moving quickly to enter the nascent CBD market. CVS and Walgreens are two notable retailers on the forefront of this trend, currently rolling out CBD products to 800 and 1500 stores, respectively. Brightfield Group projects CBD products to grow rapidly from US$594 million in 2018 to US$22 billion by 2022, representing a 147% compound annual growth rate () during the time period.


COMPANIES: PAX Labs Completes $420 Million Capital Raise

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PAX Labs, Inc., a leading consumer technology brand, has secured $420 million in equity financing from global institutional investors and support from existing investors, including Tiger Global Management and Tao Capital Partners.


PAX has been known for delivering quality cannabis vaporizers through its flagship products: the PAX Era for concentrates and the PAX 3 for flower. Both products boast mobile app integration, allowing consumers to control the temperature and other aspects of their vaporizer to ensure accurate and predictable cannabis vapor delivery.


PAX CEO Bharat Vasan expressed enthusiasm about the growth opportunities, “PAX is investing heavily in growing its brand as well as developing innovative new products to scale and capture an enormous opportunity. This financing round allows us to invest in new products and new markets, including international growth in markets like Canada and exploring opportunities in hemp-based CBD extracts.”


POLICY: Congress Weighs Reforming Cannabis Laws Amid Heavy Lobbying

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On March 28, 2019, the US House Financial Services Committee endorsed the Secure and Fair Enforcement Banking Act of 2019 (SAFE Banking Act of 2019) on Thursday by a 45-15 vote, the most significant cannabis-related legislation to get this far in the history of Congress. The SAFE Banking Act, would provide legal protection from prosecution for banks and federally-regulated creditors that do business with state-legal cannabis businesses. The Act is expected to head soon to the full House of Representatives for consideration.


Cannabis advocacy groups have spent more than half a million dollars during the first quarter of the year on cannabis-related lobbying. During the quarter, the National Cannabis Industry Association and Cannabis Trade Federation spent the most -- $200,000 and $270,000 respectively. They were followed by the National Cannabis Roundtable, a lobbying organization chaired by former House speaker John Boehner, which spent $45,000. Industry-funded lobbying efforts are outspending traditional advocacy groups: In 2018, "just under $1 million was spent by cannabis organizations, and just under $2 million by cannabis companies and their executives."