Temporary suspension of production

by Cannerald
Posted on Dezember 13, 2022 00:00

Dear Cannerald and CannerGrow Community,

as already described in the four-part blog article series, especially in these two blog articles,
1: Detailed explanation of the increase in service costs (2/4) (click)
What does the increase in service costs mean for Cannerald and outlook for the future (3/4) (click)
the current service costs are higher than the harvest (grams) per plant * sales price (Euro).

Please read the two blog articles carefully if you have not already done so before reading this blog article.

1️⃣ Current situation:
Since the publication of the four-part blog article series up to the current time of publication of this blog article, our management has tried everything and exhausted all possibilities to prevent a temporary production stop.
Based on the facts, the current service costs, the reduced CBD market price and the harvest yields (grams) of Canadian genetics, we have no choice but to temporarily stop production.

The calculation formula of the harvest is as follows:
Service costs (EUR) / sales price (EUR per gram) = Deduction of service costs (grams)
Plant harvest (grams) - Deduction of service costs (grams) = Plant harvest after deduction of service costs (grams)
Harvest amount customer (grams): Plant harvest after deduction of service costs (grams) * 0.5

The position “Plant harvest after deduction of service costs (grams)” is relevant here.
This position is currently negative, so a negative amount would always result if the production of the grow rooms continued.
Neither the customer nor Cannerald receives a share of the harvest from a negative amount.
In addition, as a company, we still have to use capital
from our group, Emerald Group AG (click), so that we can cover the costs of production (service costs).

This means that even if we wouldn't stop our production, neither the customer nor Cannerald would receive a harvest share, since the current service costs are higher than crop yield (grams) * selling price (euros).

2️⃣ What is the current procedure:
For this reason we have to inform you that we will not start any more grow rooms for the current situation.
For this purpose, all active grows in the grow rooms on the first floor that are not about to be harvested (end of the flowering phase) are stopped.
This is for the simple reason that the service costs incurred if we would continue to grow until harvest are higher than the crop yield * sales price that would result.
Only the grows in the grow rooms India and Juliet on the first floor are continued until harvest, so that we can cover at least part of the service costs.

The 5 grow rooms in the basement (or part of the 5 grow rooms) are further extended for testing purposes, optimization of staff processes, training purposes for our staff and preparation for the pharmaceutical GMP THC area.
We bear the resulting costs for this through the capital of our group, the Emerald Group AG (click).

All grows from the currently 13 active grow rooms Alpha, Bravo, Charlie, Delta, Echo, Foxtrot, Golf, Hotel, India, Juliet, Kilo, Lima, Quebec and Romeo will be deleted from the main menu item "Cultivation" in the CannerGrow backoffice to prevent confusion.
There are therefore no harvest distributions from these grows or from the grow rooms that have already been harvested from these grows, since the service costs were higher than the resulting yield from the plant harvest (grams) * sales price (euros).

For reasons of transparency, the webcams of active grow rooms will remain active.

3️⃣ What's next?
How long will the temporary shutdown of production be?

From the beginning/middle of January we will receive new Cannabis CBD varieties (genetics/strains) from our newly acquired partner.
We will receive 4 top CBD varieties (genetics/strains) that have already proven themselves in the CBD market in terms of yield (grams) and 10-20 other CBD varieties (genetics/strains) for test purposes.
From these cannabis genetics we will grow mother plants, which will take around 2-2.5 months.
We will cut cuttings from the mother plants, with which one of the 4 top genetics will probably be grown in 1 grow room each in the basement and the 10-20 other genetics will probably be started within 1-3 further grow rooms.
With the new cannabis genetics we are hoping for yields (grams) like our previous top strain “Limoncello” and more.
For example, with the genetic "Limoncello" we were able to achieve up to 57.1g harvest per plant in 2021.

At the same time, we are already actively working with our B2B partner, a leader in the Swiss cannabis market, to implement our strategy of increasing our selling price of the harvest. The strategy is already in full swing and we have had some minor successes so far.
If our strategy works, we will ramp up our production again and start all our grow rooms in sequence.

Simultaneously to our strategy for the CBD market, there is another option in the near future.
As already mentioned in September this year, we are getting ever closer to the pharmaceutical THC cannabis market!
You can read the detailed blog article here: GMP certification, GMP location and sale of the last plants (click).

We already have a date from the authority for our GMP audit, which will take place between April - May 2023.
After a successful audit by the authorities, we receive approval for the cultivation, production, processing and selling of pharmaceutical GMP THC cannabis.

It is therefore very likely that we will not grow any CBD cannabis, except for 1-2 grow rooms at the request of customers who would rather have CBD cannabis grown, but will go directly to the cultivation of pharmaceutical THC cannabis after the temporary production stop.

Furthermore, we can announce that our two laboratories, our biology and our biochemistry laboratory are finished. Only the last devices have to be validated and approved by the manufacturers.
Once our two in-house labs are validated, we are allowed to start growing THC cannabis for research (not sale).
This gives us a huge advantage for entering the pharmaceutical THC cannabis market!

4️⃣ Additional: Activation of the private plant transfer and the community marketplace for plants from all grow rooms!
Due to the temporary suspension of production and the current global economic situation, we as a company have decided that we will enable the private plant transfer and the listing of plants in the CannerGrow Community Marketplace for each of our customers with immediate effect.
Previously and according to the purchase and service agreement, the customer had to wait 3 grow cycles before being able to transfer or sell the plants to someone else.

Since CannerGrow is a community project, we value you as our community very much and, as has often been the case in the past, we are accommodating and want to accommodate you in our possible ways, so we have decided to take this step.

As usual, if you receive/purchase plants via private transfer or marketplace, the first harvest of the following grow will not be distributed to you!
As from the beginning, you can only trade a plant once per grow cycle.
Due to the current temporary production stop, a plant can't be transferred again or resold until the first harvest has been distributed after the production stop.

The year 2023 will be the most important and most changing year for Cannerald, which we have been working towards for over 4 years!
We look forward to the pharmaceutical future, together with you as a community we are close to our goal!

Your Cannerald & CannerGrow team