Hellenic Dynamics has signed a Memorandum of Understanding ("MoU") with Deutsche Medizinalcannabis GmbH, which trades as Demecan Holding, for the cultivation and supply of medical cannabis flowers.
This MoU represents the first commercial agreement for Hellenic Dynamics under the expanded contract cultivation strategy it announced last week, whereby it will allow, for the first time, medical cannabis distributors to have their own dedicated white-label cultivation facilities by way of a Hellenic Dynamics Product Outsourcing Development ("POD") agreement.
Under the MoU, Hellenic Dynamics will grow and supply medical cannabis flowers from Demecan-provided cultivars in an indoor cultivation area of 1,000 square meters capable of producing circa 1,200 kg of medical cannabis flowers per annum under Good Agricultural and Collection Practice ("GACP"). Demecan will then process the delivered flowers in its own EU-GMP facilities for onward sale to the German market. It is anticipated that the binding agreement with Demecan will be in place in line with Hellenic Dynamics' cultivation strategy, as per the Company's previous announcement.
Hellenic Dynamics is also in discussions with a number of other licensed European distributors who have their own GMP processing facilities for similar POD agreements. The model allows distributors to fully define the specific type of medical cannabis they want to receive using either Hellenic Dynamics' strains or the distributor's own strains. Hellenic Dynamics will then cultivate and dispatch directly to the distributor, branded under the distributor's chosen brand name. It is currently anticipated that customers will be contractually obliged to take a POD area for a minimum of two years.
This outsourced model means that Hellenic Dynamics handles the entire fit out of the POD and all cultivation requirements, with oversight from the distributor if they so wish. Hellenic Dynamics' distributor customers can also benefit from certain of the Company's relationships, for example, the recent MoU agreement it has with ELGO-DIMITRA, the Institute of Plant Breeding and Genetic Resources located near Thessaloniki in Greece, which may enable POD owners to have their products registered and IP protected in Europe.
Under this strategy of white-label cultivation, Hellenic Dynamics intends to have a select number of distributors utilizing a POD agreement, while the Company will continue as planned to produce its own crop of medical cannabis plants. The medical cannabis markets in Europe are rapidly evolving, and in the last 18 months, cultivators have been struggling with soaring energy costs. In addition, many distributors have been building their own EU-GMP facilities. As mentioned in the last Company announcement, Hellenic Dynamics, in adapting to the market changes, has seen fit to expand its strategy to include the production of customized GACP products cutting down its production cost and the time to deliver products, which should enhance the business turnover and generate earlier cash flows. This strategy also allows the Company to diversify and accelerate cash flows while strengthening its relationships with a number of key distributors across Europe and establishing production at scale.
Davinder Rai, CEO of Hellenic Dynamics, commented: "This POD agreement represents another development in the future of the Company's medical cannabis cultivation and underpins the long-term value inherent in the business and our operating model. We can allow distributors to grow the products they want in their own dedicated white label cultivation areas, which we then ship to their EU-GMP facilities for processing, enabling us to widen our client base and create more value for our shareholders."
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