CanaFarma entered into an agreement effective September 20, 2019 for the development of proprietary hemp-based products. The Product Development Agreement is with Lekhram Changoer, who will also serve as Chief Chemist & Technologist of CanaFarma, with a primary focus on the development of new products. The first product developed under this agreement is a liquid center-filled chewing gum, for which a patent has been filed.

Patents for products developed under the agreement will be owned jointly by CanaFarma and Mr. Changoer, with CanaFarma owning 51% and being in control of the use of the patents. The patent pertaining to the liquid center-filled chewing gum product states , “The present invention now pertains to a chewing gum and/or lozenge composition that delivers CBD and CBD-related compounds. The composition is suitable for oral administration and provides a pre-set dose to the user of a CBD containing composition. The invention also pertains to a method of making a chewing gum and/or lozenge composition. The invention further relates to the use of the chewing gum and/or lozenge composition as a medicament or for the treatment of a variety of ailments.” 

CanaFarma expects further products to be developed under the Product Development Agreement, with potential products including (but not limited to) creams and tinctures that are aimed at delivering specific benefits as the CBD industry and general medical understanding thereof continues to mature. Mr. Changoer will be paid a royalty of 1.5% of gross revenues of all products produced and sold under the Product Development Agreement, together with a monthly retainer of $5,000. 

The Product Development Agreement is for a term of two (2) years, with automatic renewals for successive one-year terms thereafter. In addition to seeking patent protections over products that CanaFarma is developing and producing on its own, CanaFarma also has the benefit of patent protection in connection with its YOOFORIC chewing gum. CanaFarma owns the YOOFORIC name. A trademark application has been submitted to the United States Patent & Trademark Office.

The legal cannabis market in the U.S. was estimated to have grown to $9.7 billion in 2017.  In 2018, approximately 2.3 million people in the U.S. consumed marijuana for medical purposes and an additional 1.8 million consumed marijuana recreationally. Many analysts estimate that the potential cannabis market will grow to approximately 44 million people in the U.S. and analysts predict that the cannabis market may exceed $100 billion in revenue annually.

CanaFarma’s products are derived from hemp biomass. Hemp is a strain of the cannabis sativa plant different from marijuana. Unlike CBD processed from marijuana, hemp-derived CBD contains .3% or less THC, meaning it lacks the psychoactive effects of THC.  Products manufactured using hemp-derived CBD are regulated in a less restrictive manner than marijuana, and those regulations vary by state and at the U.S. Federal level. In fact, the hemp provisions of the 2018 Farm Bill stipulate that only entities licensed and regulated by approved states or the FDA are permitted to cultivate or process hemp, thereby providing a significant barrier-to-entry. At least in the early stages of the newly created licensing and regulation process, approved states and the FDA are expected to limit the number of cannabis cultivation licenses based on relatively strict standards and requirements. Despite these hurdles, demand for CBD products continues to grow considerably year over year.

The industry’s leading CBD market research firms, Hemp Business Journal and Brightfield Group, are forecasting aggressive revenue growth within total U.S. CBD market sales, with Hemp Business Journal predicting that the market will exceed $2.1 Billion in 2020, while Brightfield Group more conservatively estimating that it will hit $1 Billion.

* All of the information in this article is taken directly from the December 2019 Prospectus, and edited for simplification.