TOBAF - CBD Could Help Smokers Move on From Tobacco

FinancialBuzz.com News Commentary

New York, NY (7/27/2020) – In recent years, CBD and hemp-derived products have seen a massive surge in popularity. Generally, most consumers use CBD products for medicinal purposes. Similarly, retailers are advertising CBD products as therapeutic treatments, however, there is still a large recreational market for the industry. Primarily, most consumers intake CBD to treat a wide range of medical conditions such as chronic pain, mood disorders, neurological disorders, and diabetes. In the healthcare industry, most independent pharmacies have already begun selling CBD products. While there are many ways to consume CBD, the oils marketplace is expected to be the fastest growing segment within the overall CBD sector. Overall, the CBD oil market size is expected to grow by USD 3.52 Billion during the period of 2020 to 2024, according to Technavio. “The 29 U.S. states reporting licensed hemp cultivation acreage total almost half a million acres in combined cultivation land area, which is a massive increase compared to 2018 figures of a total land area barely over 100,000 acres. While there continues to be uncertainty and a healthy amount of confusion around hemp cultivation for CBD production, it is clear that demand is nonetheless continuing to rise across the U.S.,” noted Giadha Aguirre de Carcer, New Frontier Data CEO and Founder. TAAT Lifestyle & Wellness Ltd. (OTC: TOBAF) (CSE: TAAT), 22nd Century Group, Inc. (NYSE: XXII), Universal Corporation (NYSE: UVV), Altria Group, Inc. (NYSE: MO), Philip Morris International Inc. (NYSE:PM)

CBD and hemp can also be used in fighting addiction. According to the World Health Organization (WHO), the tobacco epidemic is one of the biggest public health threats the world has ever faced, killing more than 8 million people a year around the world. A study from 2018 indicates that, “Cannabidiol (CBD), a non–intoxicating cannabinoid found in cannabis, may be a promising novel smoking cessation treatment due to its anxiolytic properties, minimal side effects and research showing that it may modify drug cue salience.” According to the study results, a single 800–mg oral dose of cannabidiol reduced the salience and pleasantness of cigarette cues, compared with placebo, after overnight cigarette abstinence in dependent smokers. Cannabidiol did not influence tobacco craving or withdrawal or any subjectively rated side effects.

TAAT Lifestyle & Wellness Ltd. (OTC: TOBAF) (CSE: TAAT) announced last week that, “shortly after entering into an agreement with its first distribution partner for Beyond Tobacco cigarettes, it has added new distributorship with California-based West Coast Vape Supply, Inc. (“WCVS”) with a one-year comprehensive distribution agreement that took effect on July 24, 2020. WCVS has a flagship retail location in Huntington Beach, CA, in addition to an e-commerce platform with more than 300,000 customers, and a distribution network that ultimately reaches more than 20,000 retail stores across the United States. In anticipation of the planned Q4 2020 launch of Beyond Tobacco cigarettes, the Company has prioritized the procurement of distribution partners to maximize early-stage retail availability to the general public.

The Company’s flagship brand Taat Herb Co. has created Beyond Tobacco, a tobacco-free and nicotine-free alternative to traditional cigarettes that is designed to closely emulate the experience of smoking legacy tobacco products. Between cigarette-style packaging and a cigarette “stick” format, a proprietary blend of tobacco flavouring, and an enhanced volume of smoke, Beyond Tobacco cigarettes have been carefully engineered to closely mimic each and every aspect of the experience of smoking a tobacco cigarette. To potentially assist users in transitioning away from smoking tobacco cigarettes, Beyond Tobacco cigarettes each contain at least 50mg of cannabidiol (“CBD”, a non-psychoactive derivative of hemp) per stick, which has been shown to mitigate tobacco withdrawals and reduce dependency. In the first phase of retail market testing finalized in June 2020, anecdotal responses from test subjects in more than 50 retail stores in California and Nevada generally reflected the sentiment that Beyond Tobacco cigarettes had no significant experiential differences compared to regular tobacco cigarettes. In addition to an “Original” version with tobacco flavouring, Beyond Tobacco cigarettes are also to be offered in a “Menthol” version which could appeal to smokers of menthol cigarettes, as detailed in the Company’s July 3, 2020 press release.

Founded in 2013, WCVS represents several dozen brands of products for the tobacco-smoking alternative known as “vaping”. Its product categories include vaporizer liquid (commonly referred to as “vape juice”) in regular and nicotine salt varieties, as well as a selection of premium vaping hardware. WCVS’ online store has a database of more than 300,000 customers, with an order processing volume in excess of 1,000 U.S. orders per day. Additionally, between direct and indirect relationships that comprise WCVS’ distribution network, WCVS has access to more than 20,000 retail stores throughout the United States. To offer a customer experience enriched by product knowledge, WCVS posts original expert reviews of vaping products on its blog, as well as video reviews which have accumulated hundreds of thousands of views.

To view an image of the homepage of WCVS’ website, please visit: https://www.globenewswire.com/NewsRoom/AttachmentNg/634dc7b3-808f-4eaa-87a3-160553b4a4f3

As of this writing, the Company’s production capacity for Beyond Tobacco cigarettes can yield up to one million sticks per day (approximately 4,800 cartons). Taat anticipates that between the focus groups in its recently-announced second research phase, existing and potential new distribution agreements, and finalized availability of production resources, the Company is positioned favourably for the planned Q4 2020 launch of Beyond Tobacco cigarettes.

Mike Ibrahim, Chief Executive Officer of WCVS commented, ‘The vaping industry is built around the notion that many current cigarette smokers desire an alternative, whether that may be to switch from smoking to vaping out of preference, or to try vaping in an effort to quit smoking altogether. It is common for smokers to resist vaping because the user experience is so different from smoking a cigarette. This has created some ‘white space’ in the tobacco alternatives category, which Taat has targeted with their Beyond Tobacco product. I anticipate that between the ‘Original’ and ‘Menthol’ varieties of Beyond Tobacco, this product can be appealing to much of our retail and online customer base, in addition to the clientele of our distribution partners. We are pleased to have made this agreement with Taat, and we look forward to the planned launch of Beyond Tobacco in Q4 2020.’

‘Attaining both an online and retail presence is vital for any new product,’ said Joe Deighan, Founder of Taat. ‘Partnering with WCVS gives us an edge through both of these channels. For online, they have achieved a first-page search engine ranking for many keyword phrases related to vaping, which has helped them to grow a customer base of more than 300,000 users. With respect to retail, they have a flagship storefront in Huntington Beach, CA, in addition to a distribution network that can avail Beyond Tobacco to as many as 20,000 U.S. stores. As we get closer to our planned launch of Beyond Tobacco, distribution is a high priority for us so that we can begin selling at retail at the earliest possible moment. We are excited to begin working with Mr. Ibrahim and his team at WCVS as a distribution partner upon the planned launch of Beyond Tobacco.’

Amendment: In the Company’s July 20, 2020 press release in which it announced the results of its full-scale production run of Beyond Tobacco with Hempacco Co. Inc. (“Hempacco”), it was incorrectly stated that Hempacco has a second facility in western New York State. This error was the result of an internal miscommunication regarding facilities available to Taat in which the facilities of Redwood Reserves Ltd. (“Redwood”) were being discussed to include Redwood’s facility in western New York. To provide greater clarity to the public, Hempacco’s only production facility is located in San Diego, CA, and Redwood has facilities in both Oregon and western New York state. As the Company recently entered into an agreement to acquire Redwood (as announced in its July 13, 2020 press release), Taat does stand to benefit from facilities on both the west and east coasts of the United States. This clarification is being given for the benefit of Taat’s investors and prospective investors, as well as for the benefit of Hempacco. Any questions regarding this misstatement may be directed to Taat’s investor relations department.”

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22nd Century Group, Inc. (NYSE: XXII) announced on April 30th that the Company and North Carolina State University (“NCSU”), have completed successful research field trials that have validated new non-GMO (genetically modified organism) methodologies for reducing nicotine in tobacco plants. The research was partially funded by 22nd Century and was conducted by NCSU’s Department of Crop and Soil Science with project oversight provided by 22nd Century’s R&D team. The research findings and paper can be viewed at the following link: https://doi.org/10.3389/fpls.2020.00368 “We are very pleased with the outcome of the research field trials completed in collaboration with NCSU, which demonstrate that non-GMO methodologies can be applied reliably to reduce nicotine levels in tobacco plants by up to 99%. To further validate our research, 22nd Century and NCSU will conduct larger scale and more extensive field trials in additional geographies,” said Juan Sanchez Tamburrino, Vice President of Research and Development for 22nd Century.

Universal Corporation (NYSE: UVV) Chairman, President and Chief Executive Officer George C. Freeman, III, announced last year that the Company’s subsidiary, Universal Leaf Philippines, Inc. will be increasing its purchases of leaf tobaccos in the Philippines, as part of a new leaf supply arrangement for the Philippines with Philip Morris International Management SA. Previously, PMFTC, Inc., an affiliate of PMIMSA, purchased certain quantities of leaf tobaccos produced by their own contracted grower base and processed that tobacco in their own facility. Starting with the 2019 crop, PMFTC will purchase processed grades of tobacco from ULPI. The new arrangement is expected to provide important supply chain efficiencies and is indicative of PMIMSA’s and Universal’s strong commitment to the grower communities in the Philippines and PMIMSA’s intent to remain a major purchaser of Philippine-grown leaf tobacco. Universal initiated operations in the Philippines in the late 1960s. Mr. Freeman stated, “We are very excited about this new opportunity to continue to meet the evolving needs of one of our long-standing global business partners, while expanding our leaf purchasing and grower support services in the Filipino grower communities. The expansion of direct contracting by ULPI will provide procurement synergies and economies of scale that will promote efficient leaf utilization of tobaccos supplied to PMFTC and our other customers, and will support the competitiveness of Philippine tobaccos in the global leaf markets. In addition, this new arrangement exemplifies our commitment to prioritize investments for the growth of our core tobacco business consistent with our capital allocation strategy.

Altria Group, Inc. (NYSE: MO) announced on earlier this month, that the U.S. Food and Drug Administration authorized the marketing of the IQOS tobacco heating system as a modified risk tobacco product with a reduced exposure claim. IQOS is the first next-generation inhalable tobacco product to be authorized as a modified risk tobacco product. Unlike cigarettes, the IQOS system heats but does not burn tobacco. Philip Morris USA, under an exclusive licensing agreement with Philip Morris International, commercializes IQOS in the United States. “We’re delighted that the FDA authorized IQOS to be marketed as a modified-risk tobacco product. This authorization gives PM USA an opportunity to communicate additional benefits of switching to IQOS and this decision is an important step for adult smokers. Our 10-year vision is to responsibly lead the transition of adult smokers to a non-combustible future. IQOS is a key part of that future as we develop our portfolio of FDA-authorized, non-combustible products and actively switch adult smokers to them,” said Billy Gifford, Chief Executive Officer of Altria.

Philip Morris International Inc. (NYSE:PM) announced earlier this year, a global collaboration agreement with the leading tobacco and nicotine company in South Korea, KT&G, to commercialize KT&G’s smoke-free products outside of the country. “To achieve PMI’s vision of a smoke-free future we must grow the smoke-free category worldwide which requires multiple players providing a wide array of better choices for adult smokers. While IQOS continues to be the leading product in the smoke-free category, and we plan to broaden our portfolio by launching IQOS MESH in the coming months, we believe that increased collaboration will benefit adult smokers by providing greater choice and drive accelerated adoption of smoke-free products worldwide,” said André Calantzopoulos, PMI’s Chief Executive Officer.

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