HTC Extraction Systems (TSX.V: HTC) Poised for Growth in Biomass Processing After Farm Bill Legalizes Hemp

• The hemp-derived CBD market is projected to reach $22 billion by 2022
• The company recently entered into a tolling agreement to process five million kilograms of hemp biomass
• HTC has entered into an agreement with Canaccord Genuity Corp. for a C$15 million bought deal private placement

With the passage of the Agriculture Improvement Act of 2018 (commonly known as the 2018 farm bill), hemp production and distribution in the United States became permissible under federal law. Freed from its legal shackles, the industry is experiencing rapid growth. As production and distribution of hemp increases, the business of extracting CBD from hemp biomass, as opposed to extraction from marijuana, is looking more feasible, so much so that industry analyst Brightfield Group projects that the hemp-derived CBD (cannabidiol) market will grow to $22 billion by 2022 (http://ibn.fm/xD28h). This market expansion is already increasing demand for extraction technology such as the Delta Purification System provided by HTC Extraction Systems (TSX.V: HTC). The company has inked one agreement and is in negotiations with other biomass providers in Canada and the United States.

HTC’s proprietary biomass processing occurs in three phases: pre-oil preparation, oil extraction and oil refinement. During the pre-oil extraction stage, the hemp is pulverized and dried. The resulting biomass is then immersed in ethanol, and the resulting mixture – containing cannabinoids, oils, ethanol and plant liquids – is separated from the plant fibers. During the last phase, the oil is collected, with 90 percent of the ethanol being removed and recycled, resulting in an approximate 50 percent CBD crude oil. The crude is then subjected to further distillation to achieve full spectrum oil (FSO) and/or pure CBD isolate.

HTC recently announced its entry into a hemp biomass tolling agreement, which will involve the processing of hemp biomass for the 2019 crop year (http://ibn.fm/hjw4g). The agreement covers 4,200-5,000 acres of hemp in Saskatchewan, utilizing five varieties of Health Canada-approved cultivars as the genetic foundation. HTC will process an estimated five million kilograms of hemp biomass to extract CBD full-spectrum oil (FSO). The company will be paid a “toll fee,” or a percentage of the extracted CBD FSO distillate, for its processing, extraction, purification and distillation services. Toll fees are payments made to companies that provide specialized manufacturing or processing services.

Additionally, HTC is in negotiations with a large hemp biomass producer that has some 60,000 acres of hemp under cultivation. The company intends to enter into a tolling contract with this producer for production crop years 2019, 2020, 2021 and beyond. Hemp biomass tolling contracts with producers are also being negotiated in the United States for the 2020 hemp-crop growing year, under which HTC will provide local-to-grower, drying-to-biomass storage capability and transportation of dried biomass to an HTC extraction facility.

HTC boosted its capital in 2019 by entering into a letter agreement, with Canaccord Genuity Corp. acting as sole book runner and lead underwriter on behalf of a syndicate of underwriters that have agreed to purchase, subject to completion of due diligence, on a bought-deal, private-placement basis, 15 million units of the company’s common shares, at a price of C$1 per unit for aggregate gross proceeds of C$15 million (http://ibn.fm/ZTiVq).

With such endorsements, HTC seems set to capitalize on the mushrooming hemp biomass extraction business.

For more information, visit the company’s website at www.HTCExtraction.com

NOTE TO INVESTORS: The latest news and updates relating to HTC are available in the company’s newsroom at http://ibn.fm/HTC

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