Vancouver, BC, Canada, November 20, 2020, Xebra Brands Ltd. (“Xebra”) is pleased to provide a comprehensive snapshot of its activities to date and current status in Mexico, in light of yesterday’s approval by the Mexican Senate of a proposed cannabis legal framework.
The momentum in Mexico to legalize cannabis began unofficially in 2014 with the decriminalization of possession of small quantities of cannabis, followed in 2015 with the granting of the first Supreme Court injunctions for limited personal consumption, on the grounds that it was unconstitutional to deny such right to the individuals making the claim. Over the next several years additional injunctions were granted by the Supreme Court for personal consumption, and also for the ability to grow a limited amount of plants in a household for personal use. To rectify this uneven playing field that favored only certain individuals with Supreme Court injunctions, an initial legal framework was adopted by the Mexican government in 2017 for medicinal cannabis, however not for recreational.
Soon after this new legislation was adopted, a group of Mexican entrepreneurs formed ELEMENTS BIOSCIENCE S.A.P.I. DE C.V. and SATIVA GROUP BIOSCIENCES S.A.P.I. DE C.V and submitted 13 CBD wellness products, including tinctures, oils, capsules, topicals and intimate lotions to the COFEPRIS (the Mexican FDA equivalent) for approval. The newly elected incoming administration lead by a new President of Mexico, froze all applications at the end of 2018, pending a review of the regulatory framework and the creation of secondary regulations, hence the Elements and Sativa CBD products, which were at that time at a late stage of processing, are still pending COFEPRIS approval; subsequently Xebra Brands acquired Elements Bioscience and Sativa Group Biosciences.
In 2018, DESART MX S.A. DE C.V., a company controlled by a former group of high ranking COFEPRIS officials, identified an opportunity to challenge the constitution of Mexico for an injunction to commercialize hemp derived cannabinoids such as CBD and CBG. The constitutional claim was filed in January 2019, and the injunction requested includes the right for the importation of seeds, cultivation, harvesting, processing, and the creation of cannabis products with less than 1% THC, and the right to sell those products domestically or by export. In August 2019, the Mexican Supreme Court formally ruled that cannabis prohibition was unconstitutional and ordered the government to draft comprehensive regulations specifically for medicinal cannabis, but did not mandate recreational regulations. In early 2020, Xebra Brands acquired Desart and in September 2020 after making its way though various lesser circuit courts, the claim was received by the Mexican Supreme Court of Justice for a final ruling.
On November 19, 2020, the Mexican Senate approved a bill to legalize cannabis, both medicinal and recreational. The bill proposes allowing adults 18 and older to purchase and possess up to 28 grams of marijuana and to cultivate up to six plants (8 max per household) for personal use, and it does not explicitly prohibit vertical integration, foreign ownership, nor cannabis infused edibles and beverages, however it limits commercial cultivation to 1 hectare per licence but does not specify how many licences can be held. If legalized, cannabis regulation will be removed from the responsibilities of the COFEPRIS and a new federal administrative body will be created called The Mexican Institute of Cannabis. To become law, the Chamber of Deputies must approve the bill next, followed by the President of Mexico; the Supreme Court has set December 15, 2020, as the deadline for these approvals.
The implications of legalization to Desart’s (i.e. Xebra’s) constitutional claim depend entirely on timing. If the Chamber of Deputies and the President approve the bill as written, by the December 15 deadline, then Desart’s constitutional claim will likely be invalidated. If either the Chamber of Deputies or the President insist on amendments to the bill, then the bill will return to the floor of the Senate and the Supreme Court would likely extend the deadline for legalization by up to several months, thereby keeping very much alive the possibility of a Supreme Court injunction being granted to Desart. For clarity, a Supreme Court decision on Desart’s constitutional claim is imminent, as long as cannabis cultivation in Mexico is not legal. Legalization prior to the grant of an injunction however, renders the claim invalid and this is a real possibility. What occurs in government between now and December 15 will be vital in establishing the strength of Xebra’s position. In the interim, Xebra is planning for success and has identified four different agricultural regions in Mexico with large tracts of available organic agricultural land, perfectly suited for hemp cultivation.
If legalization occurs prior to the grant of an injunction, and the proposed bill passes into law as written, Xebra will however still be in a strong first mover status in Mexico. Xebra’s Elements and Sativa CBD wellness brands and formulations for example, are pending regulatory approval by the COFEPRIS (however it is not clear how these applications would be impacted by the creation of the new Mexican Institute of Cannabis), and Xebra’s shareholder relationships in the beverage sector in Mexico make it well positioned to introduce products quickly under a new cannabis legal framework. These important relationships could also possibly place Xebra among the first group of licence holders for cultivation and processing, in addition to manufacturing and retail licencing opportunities.
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+1 (604) 418-6560
Certain information contained in this press release constitutes forward-looking statements under applicable securities laws. Any statements that are not statements of historical fact may be deemed to be forward-looking statements, these include, without limitation, statements regarding Xebra Brands Ltd.’s (“XEBRA” or “XEBRA’S”) expectations in respect of its ability to successfully execute its business plan or business model; its ability to provide economic, environmental, social, or any benefits of any type, in the communities it operates in or may operate it in the future; its ability to be a first mover in a country, or to obtain or retain government licenses, permits or authorizations in general, or specifically in Mexico, Colombia, Canada, the Netherlands, or elsewhere; its ability to raise capital and fund its ongoing operations; its ability to list its shares on a stock exchange or attain a public listing, its ability to successfully apply for and obtain trademarks and other intellectual property in any jurisdiction; its ability to be cost competitive; its ability to cultivate, grow, or process hemp or cannabis in Mexico, Colombia, Canada, the Netherlands, or elsewhere; its ability to manufacture cannabis beverages, wellness products, or other products; its ability to commercialize or sell cannabis beverages, wellness products, or other products, in Mexico, Colombia, Canada, the Netherlands, or elsewhere; its ability to commercialize or to sell Vicious Citrus Lemonade in 2021 or at any time, in any jurisdiction; its ability to commercialize or to sell Elements wellness products in Mexico, in Colombia, or in any jurisdiction in 2021 or at any time; its ability to make cannabis beverages that taste good; its ability to create wellness products that have a therapeutic effect or benefit; plans for future growth and the direction of the business; financial projections including expected revenues, gross profits, and EBITDA (which is a non-GAAP financial measure); plans to increase product volumes, the capacity of existing facilities, supplies from third party growers and contractors; expected growth of the cannabis industry generally; management’s expectations, beliefs and assumptions; events or developments that XEBRA expects to take place in the future; and general economic conditions. All statements, other than statements of historical facts, are forward-looking information and statements. The words “aim”, “believe”, “expect”, “anticipate”, “contemplate”, “target”, “intends”, “continue”, “plans”, “budget”, “estimate”, “may”, “will”, and similar expressions identify forward-looking information and statements. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by XEBRA as of the dates of such statements, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Known and unknown factors could cause actual results to differ materially from those projected in the forward-looking statements. Such factors include, but are not limited to, the inability of XEBRA to generate sufficient revenues or to raise sufficient funds to carry out its business plan; the inability of Xebra to list its shares for trading on a stock exchange; changes in government legislation, taxation, controls, regulations and political or economic developments in various countries; risks associated with agriculture and cultivation activities generally, including inclement weather, access to supply of seeds, poor crop yields, and spoilage; compliance with import and export laws of various countries; significant fluctuations in cannabis prices and transportation costs; the risk of obtaining necessary licenses and permits; inability to identify, negotiate and complete a potential acquisition for any reason; the ability to retain key employees; dependence on third parties for services and supplies; non-performance by contractual counter-parties; general economic conditions; and the continued growth in global demand for cannabis products and the continued increase in jurisdictions legalizing cannabis; and the timely receipt of regulatory approval for license applications. The foregoing list is not exhaustive and XEBRA undertakes no obligation to update or revise any of the foregoing except as required by law. Many of these uncertainties and contingencies could affect XEBRA’s actual performance and cause its actual performance to differ materially from what has been expressed or implied in any forward-looking statements made by, or on behalf of, XEBRA. Readers are cautioned that forward-looking statements are not guarantees of future performance and readers should not place undue reliance on such forward-looking statements. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those set out in such statements.