Westleaf Signs One-Year, $4-Million White-Label Cannabis Derivative Product Sale Agreement with an Option to Increase to $16 Million

CALGARY, July 24, 2019 /CNW/ – PRESS RELEASE – Westleaf Inc. has announced that its subsidiary, Westleaf Labs LP, has entered into a white labeling agreement with Delta 9 to supply approximately $4 million of cannabis derivative products from its large-scale extraction and manufacturing facility located in Calgary, known as The Plant. Under the terms of the agreement, the contract will begin on Oct. 1, subject to receipt of final license approval from Health Canada, and will carry an initial term of one year, whereby Delta 9 will be required to purchase a minimum of ~$4 million of various white labelled derivative products (such products are expected to include a mix of vape pens, gel caps, tincture oil, and edibles) with an option to increase such amount up to $16 million per year.

“This is an important milestone for The Plant and for Westleaf in securing contractual revenue,” noted Scott Hurd, president and CEO of Westleaf Inc. “This is the first of what we believe will be many derivative product sales and manufacturing agreements for our facility, Phase I of which is designed to process up to 65,000 kilograms of dried cannabis flower per year.”

Hurd added that The Plant has an additional 45,000 square feet of space available for expansion which has the potential to increase its processing capacity in excess of 1,000,000 kilograms per year. Additionally, the expansion will greatly increase its capacity to formulate and produce the next wave of cannabis derivative products such as vapes, edibles and topicals, once they are legalized later this year. 

“When looking at our suite of options for white-labeled derivative cannabis products, Westleaf stood out as the clear choice,” said John Arbuthnot, president and CEO of Delta 9. “Given Westleaf’s large menu of existing product formulations and distribution capabilities through their cannabis retail chain, Prairie Records, we view this agreement as positive step in expanding our Delta 9 branded product offerings and distribution footprint.” 

Highlights

• Contractual Revenue – Approximately $4 million of committed revenue stream (depending on mix of derivative products selected) expected to be received by Westleaf over the 12-month term with an option for Delta 9 to increase that amount up to $16 million per year and extend for an additional year on the same terms and conditions;
• Retail Distribution – Given Westleaf’s wholly-owned distribution channels, the Delta 9 branded white-label products are anticipated to be sold through Westleaf’s chain of cannabis retail stores, Prairie Records, in addition to Delta 9’s retail in Manitoba and provincial cannabis regulatory bodies across Canada; 
• Leveraging Existing U.S. Product Formulations – The facility was designed by U.S. cannabis extraction industry leaders, XABIS, and Westleaf will leverage their existing product formulation expertise, which includes over 24 different form factors developed and over 200 individual  product SKUs produced, all of which remain exclusive to Westleaf within Canada;
• Multiple Revenue Streams – Westleaf plans to secure additional white-labelling and contract manufacturing agreements with other third parties in addition to producing their own suite of branded derivative products, Loon, Backstage and General Admission.