Operational update

RNS Number : 0552F

Zoetic International PLC

05 March 2020

 

THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED TO CONSTITUTE INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) NO. 596/2014. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

5 March 2020

Zoetic International plc

("Zoetic" or the "Company")

Operational update

Zoetic, the London listed vertically integrated CBD company, is pleased to provide the following update on its operations.

Highlights

· First US distribution contract in final form

· Contract manufacturing of smokables secured

· New UK rules on CBD to the Company's advantage

· Website launched for the sale of feminised seeds

· Selected to appear on "Behind the Scenes with Laurence Fishburne"

Retail products

Chill in the US

Further to the announcement on 5 February 2020, the Company is pleased to report that its contract to distribute smokable products and chew pouches with the first of the US national distributors is in final form.  It is Zoetic's intention to sign this contract once it has concluded successful trials with its contract manufacturing partners.  To date, the Company has finalised work on production of its smokable products and so will be in a position to proceed with the contract once equivalent work has been concluded on its chew pouches.  Operations have been going well and therefore the Company anticipates concluding the contract and commencing supply during March and April 2020.

As anticipated, retail prices for both products will be in the sub-US$10 range and Zoetic will sell to the distributors at around half of that price, earning around a 50% gross margin.  It is the parties' intention that the Chill chew pouches and smokables will be presented in display cases in all stores to enhance their visibility to customers.  Based on the display cases Zoetic already has in stock, the Company's objective is initially to supply around 500 new stores and build the network from there, subject to customer demand, fabrication of display cases and manufacturing constraints. 

Zoetic / Chill in the UK

During February the UK Food Standards Agency (the "FSA") announced that only CBD food products where a "valid novel food authorisation application" has been submitted by 31 March 2021 will be allowed to remain for sale in the UK-all other CBD food products will need to be removed from sale by this date.

Whilst this ruling came as no surprise, Zoetic welcomes the clarity that now exists in the CBD industry and the Board considers that this greater level of regulation will be to the advantage of companies such as Zoetic that are determined to supply only the highest quality products and to ensure that all products meet the required standards.  Furthermore, in anticipation of these new regulations, and in conjunction with its manufacturing partners, the management team had already commenced work to ensure compliance with the new regulations.  Barring any unexpected events, Zoetic's board is confident that its products will be fully compliant ahead of the deadline of 31 March 2021.

The new rules will have a number of consequences for the industry and these were well summarised in an article published by New Frontier Data on 23 February.  The author concluded that "Most current CBD companies are unlikely to survive past March of next year with their current offerings" and Zoetic in particular noted the observation that:

"Broad and full-spectrum extracts may have difficulty getting approved, as most producers are unlikely to have adequate toxicology data for every compound found present in such products. It will be easier to produce safety data for CBD isolate, which could usher in CBD isolate as the standard for oils, capsules, and additives in foods and beverages."

All of Zoetic's existing range of ingestible CBD products are manufactured using CBD isolate.  If the implications of the new rules are in line with many commentators' expectations, then the Company's existing portfolio of products is far better placed to obtain novel food authorisation than those of many of the Company's competitors.

The full text of the New Frontier Data article is available on the Company's LinkedIn page at www.linkedin.com/company/zoeticinternational.  Further details on the application process are set out at the end of this announcement.

Zoetic has also become a member of the Association of Cannabinoid Industries (www.theaci.co.uk).  It has been the Company's intention for some time to join a reputable trade association and the Board believes that the alignment with the ACI will provide Zoetic's customers with further assurance of the high standards of quality and accuracy in which Zoetic judges itself.

Feminised seeds

Zoetic has also launched a new website, www.zoeticorganics.com, from which it will advertise and sell its feminised hemp seeds.  This does not alter the Company's strategy of dealing directly with brokers and large growers, but it provides a "shop window" from which to advertise the Company's range.  Discussions are now underway with potential buyers and seed brokers in both the US and Europe.  The market for hemp seeds is relatively undeveloped and there is considerable price differentiation not only between countries but, to an extent, between US states.  The management team are focusing on ensuring that sales can be directed to locations where the price is highest.

Developing Zoetic's profile in the US

In its announcement on 5 February 2020, Zoetic stated that is was examining different options to boost the Company's profile in the US.  As part of that initiative, Zoetic is pleased to announce that it has been selected to appear on "Behind the Scenes with Laurence Fishburne".  This is an award-winning programme that highlights new stories and innovative concepts through short-form documentary presentation.  It is an educational show that, in the case of the episode featuring Zoetic, will seek to address some of the stigma surrounding the CBD industry and explain more about the hemp plant.

The programme is shown on US public television channels throughout the country in five-minute slots over a 12 month period and the producers estimate that total reach in that period may be in the range of 40 to 60 million homes.  In addition to the documentary, Behind the Scenes will produce a one-minute educational commercial segment which will air around 400 times on networks such as CNBC, CNN, CNN Headline News and Fox Business Network and is estimated to reach around 84 million homes.

Filming is scheduled to take place at Zoetic's Debeque facility in May and the programme should commence showing in the summer of this year.

Further details on "Behind the Scenes with Laurence Fishburne", including examples of previous programmes, can be found at www.behindthesceneslf.com. 

Commenting, Nick Tulloch, Chief Executive of Zoetic, said:

"During the past month, we have made good progress on finalising our first major contract to distribute Chill products in the US.  The majority of the necessary agreements and logistics are in place and, once we complete testing of the outsourced manufacturing of our chew pouches, we are in a position to proceed.

"Over in the UK, with the announcement by the FSA of new rules for ingestible CBD products, our decision to manufacture our products with CBD isolate, rather than full or broad-spectrum CBD, may place us at an advantage to many of our competitors in the UK as retailers and customers increasingly focus on the deadline for a novel food authorisation application.

"We have also made the first steps towards selling our feminised hemp seeds, marking the culmination of several months of planning and development.

"Overall this has been another month of excellent progress as we build Zoetic into a company capable of generating revenue on a number of fronts.  Securing our appearance on "Behind the Scenes" represents a publicity opportunity in the US that we could not have conceived of previously and the timing, coming on the back of our opportunities with our retail products and feminised seeds, is ideal."

**ENDS**

Enquiries

Zoetic International plc   [phone]

Nick Tulloch

Allenby Capital Limited (Financial Adviser and Broker)                                        [phone]

Nick Harriss

Nicholas Malins Smith

Nick Naylor

IFC Advisory Ltd (Financial PR and IR)                                                                       [phone]

Tim Metcalfe

Graham Herring

Florence Chandler

Further re FSA application process

A novel food authorisation application for a CBD food made before 31 December 2020 will need to be submitted to the European Commission (although it is recommended that applications are also sent to the FSA). From 1 January 2021, any application for a novel food authorisation for the UK will need to be submitted to the FSA.

The application must include:

· details of the ingredients and production process;

· the composition of the food and stability data;

· history of use, proposed uses, use levels and anticipated intake;

· details of absorption, distribution, metabolism and excretion;

· nutritional information;

· toxicological and clinical data; and

· allergenicity.

Once received, the appropriate authority will either validate the application or reject it on the basis that the application does not contain all the necessary elements. Once validated, the application is assessed for risk.

Prior to April 2021, existing CBD food products may be sold given that they are safe, correctly labelled, and do not contain any substances classified as drugs. 

In addition to the new rules in respect of making a novel food authorisation application, the FSA also issued further safety advice including recommending that vulnerable groups (such as pregnant or breast feeding mothers and people on medication) should not consume CBD products and healthy adults should consume no more than 70mg/day.

 

END

 

 

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