Christina Lake Cannabis Corp. released the following open letter to shareholders today:
I am pleased to provide a summary of the operational progress made by Christina Lake over the past 12 months as we go into 2022, which is poised to be an exciting year for us. We will be growing our third crop of sun-grown cannabis, with a primary focus on strains with cannabinoid profiles that are ideal for producing distillates and other cannabis extracts with high levels of tetrahydrocannabinol (“THC”) and terpenes, a specialty we have embraced in accordance with trends in the cannabis market.
In Q1 of fiscal 2021, we closed our first commercial purchase orders, generating sales of approximately $62,421 with direct costs of approximately $19,711 excluding changes in fair value of inventory sold. In the subsequent two fiscal quarters, we generated sequential sales growth by approximately 247% to $216,738 in Q2 and 496% to $1,290,722 in Q3, with $71,794 and $532,428 in direct costs, respectively. Anticipated sales in Q4 increased approximately 60% from the prior quarter to approximately $2,063,569* with direct costs of approximately $745,428 excluding changes in fair value of inventory. The growth throughout fiscal 2021 was attributed to additional investment in processing equipment and continuously refined production methods, resulting in higher quality/in-demand inventory. The sales team was able to form supplier relationships with licensed producer accounts across Canada, establishing repeat demand from several key industry players.
It is becoming clear to us that our reputation as a reliable and efficient grower/processor/supplier of high-quality cannabis products has developed and continues to grow. Although our primary offering is high-potency distillate oil, we have also added new product categories to downstream licensed producers of cannabis in Canada. As we kick off 2022, our business plan will be anchored by a principal focus on further establishing a dominant position in the cannabis oil market as we continue to improve our efficiencies and refine our production methods.
Below, are some more detailed updates:
Yield Numbers from Second Growing Season in 2021
In a press release dated July 14, 2021, the Company announced that several of its experimental proprietary strains of cannabis were performing especially well during the record-high temperatures in southern British Columbia during summer 2021. This performance was sustained through the harvesting phase, ultimately resulting in an overall yield of approximately 38,000 kg of dried biomass (roughly 15% higher than our inaugural harvest in 2020) during 2021.
Impact of Pre-Processing Equipment
In 2021, the Company outfitted its facility with leading pre-processing equipment. Our master growers have determined that the use of this equipment has enabled the Company to systematically capture high-potency elements of feedstock while discarding low-value parts with minimal wastage, resulting in significantly reduced production costs. This has also helped to ensure that biomass with a high concentration of THC is the predominant input into Christina Lake’s extraction machinery, without the inefficiencies caused by the presence of low-value elements, even in small quantities. This was a significant milestone in the Company’s production efficiency over the previous year. As such, the Company has been able to begin manufacturing new product ranges at a scale that would not have been possible with our previous equipment configuration.
Improvements to Christina Lake’s Cannabis Extraction Facilities and Processes
In 2021, a co-solvent injection system was added to our extraction facility, enabling an acceleration in our processing workflows, and reducing production time by more than 60%, which resulted in improved efficiencies and economics. This equipment gives the Company the ability to capture terpenes; it can be operated using CO2 as a mono-solvent if desired; and it remediates residual ethanol from the spent biomass. This solution has enhanced the Company’s extraction process without forcing it to make a trade-off between quality, purity, or profit. Christina Lake continues to see a decrease in extraction runtime, lower operating pressures, greater selectivity in the extraction process, and an overall increase in extract quality; all while utilizing minimal quantities of ethanol.
Furthermore, in 2021 Christina Lake designed and invested in a proprietary filtration system that allows the Company to continue to the next step with higher purity and potency than ever before. To complement this improvement, additional distillation equipment was recently purchased and commissioned. This combination allows for even further refinement of our already pure high-potency oils, while increasing distillation throughput to meet growing sales demand.
Next Steps into 2022
We are confident that, as a result of the application of these technologies, along with our strong outdoor genetics and highly experienced team combined with our cost structure, we are positioned well going into 2022. I am extremely proud of the team’s achievements this year. At the outset of 2021, our goal had been to de-risk our business model by developing a broad sales channel and establishing a market for our consistent and high-quality distillate and other cannabis products. After just one year, I believe we have made significant progress towards achieving that goal. Our processing and extraction facilities are presently operating at capacity based on expected sales orders and fortunately have not been negatively impacted by the COVID-19 pandemic to date. Our site management has in place a robust COVID-19 Prevention and Control Policy as well as contingency plans in the event of on-site incidents. Further, the sales team was able to develop a strong pipeline in the final quarter of 2021 and will focus on carrying that momentum throughout 2022.
In Conclusion
Overall, I am very pleased with the direction in which the business is going as we strive to become known for producing the most reliable, consistent, and cost-effective premium-quality oils in the marketplace. The recognition the Company is receiving is very encouraging to me, and we are looking forward to growing our customer base in 2022.
Yours truly,
Joel Dumaresq
Chief Executive Officer
ABOUT CHRISTINA LAKE CANNABIS CORP.
Christina Lake is a licensed producer of cannabis under the Cannabis Act. It has secured a standard cultivation licence and corresponding processing amendment from Health Canada (March 2020 and August 2020, respectively) as well as a research and development licence (early 2020). Christina Lake’s facility consists of a 32-acre property, which includes over 950,000 square feet of outdoor grow space, offices, propagation and drying rooms, research facilities, and a facility dedicated to processing and extraction. Christina Lake also owns a 99-acre plot of land adjoining its principal 32-acre site, which allows for future expansion. Christina Lake cultivates cannabis using strains specifically developed for outdoor cultivation and in its inaugural harvest year produced 32,500 kg (71,650 lb). For more information, please visit www.christinalakecannabis.com.
