Since its founding in 2019, Xebra has been committed to obtaining dominant positions in emerging markets where cannabis can be cultivated and cannabis products manufactured at low costs and eventually exported to developing and maturing markets, where Xebra can introduce its unique branded products. With these objectives in mind, and considering ongoing bearish head-winds in capital markets, Xebra has completed a thorough strategic analysis of the four markets it has a presence in Canada, Mexico, the Netherlands, and Colombia, with an objective to focus its resources in jurisdictions where it can add the most shareholder value. As a result, Xebra management has resolved to exit Colombia and the Netherlands and prioritize activities in Mexico, where it has an outright first mover advantage, and in Canada, where it has developed unique beverage brands and formulations.
The Colombian cannabis landscape is saturated with hundreds of cannabis licenses, making it, in Xebra's opinion, very difficult to gain a competitive edge or to create a profitable business model with scale, even in the longer term. In March, Xebra harvested and delivered its first cannabis crop in the Netherlands in a competitive pilot trial for an exclusive government contract to supply medicinal cannabis. The selection process includes, among other things, the submission of samples from three cannabis trial crops by March 2023, evaluated for certain criteria, including consistency and technical parameters. Xebra's first crop was marginally near the desired ideal THC and CBD target ratios, which, if successfully contested, could be adjusted under a second crop to achieve the desired outcome. However, it became evident from the expenditures associated with performing the first trial that the costs of cultivation in the Netherlands are far too high and that operating there would be contradictory to Xebra's objective of being a lowest cost producer and exporter of cannabis products. Xebra will endeavor to recover costs by selling any equipment of value in the Netherlands and Colombia.
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