• Optima to Use Safe Low-Cost Extraction Technology
  • Human Endocannabinoid System Drives Medicinal CBD and THC
  • New Oil Refining Technology Cuts Hemp Extraction Costs

The COVID-19 pandemic has forced radical changes in businesses globally except for lockdown beneficiaries like Zoom Video, Netflix and Amazon. Optima Process Systems, Inc., an ESG tech startup, has adjusted too. By applying one of its low-cost technologies to the burgeoning hemp processing industry, Optima can reduce operating costs and quickly generate its first revenues and profits. Optima identifies new sustainable process technologies and applies those to nascent and growing markets. Its veteran team has identified several novel technologies and markets that embrace both UN Sustainable Development Goals and have compelling economics.

Disruptive Mini-Refinery Technology:

Optima is completing its due diligence on a new safe low-cost process technology that converts hemp crude oil into CBD, CBN, CBG and/or THC Free distillate. Hemp crude oil is a byproduct of the conventional ethanol-based hemp extraction process which is used by 70% of the industry. Following the re-legalization of hemp farming with the Agriculture Improvement Act of 2018, a nationwide surplus of hemp has led to declining prices across the value chain including hemp crude. Hemp crude, a molasses-like liquid, costs about $150 per kg while high end processed products like CBD, Isolate and T-Free distillate sell in the $500/kg and $2,500/kg range. Optima’s process does not use flammable solvents and is safer than existing processes. A recent fiery explosion in Los Angeles that has injured 11 firefighters highlights the hazard and risks of solvent-based processes. Optima believes its new low-cost process will operate for under $100/kg and can generate profits within a few months.

In this screen grab from video provided by Sean Muira, flames from an explosion are seen Saturday, May 16, 2020, in Los Angeles. (Sean Miura via AP) Source: BBC and AP

The hemp processing business involves many of the same scientific principles and process technologies used in the oil refining industry over the last 165 years. Optima’s team of engineers, consultants and investment bankers come largely from the oil business. Consequently, Optima’s team and the mini-refinery designer himself, bring decades of oil refining experience in processing and structuring bankable transactions in an industry renowned for dodgy counterparties.

Post COVID-19 Business Strategy:

Optima’s hemp processing business prospects are compelling. For example, there is 1,000,000 mg of CBD in a kilogram of CBD. One kilogram of CBD could produce 667 one-ounce tinctures of 1500 mg CBD. The gross revenue of 667 units sold at $99.99/unit could generate $66,693 per kilogram. Pictured below is a typical one-ounce tincture selling for $99.99/unit.

Above: Natural Full Spectrum CBD Oil from Life Lead Medical.

In addition to the enormous medicinal opportunity, multiple high margin businesses, like direct sales of tinctures, balms, and gummies, could be built on top of the hemp processing business.

What is Hemp?

Hemp – also called industrial hemp – refers to the non-intoxicating (less than 0.3% THC) varieties of Cannabis sativa L. Both hemp and marijuana come from the same cannabis species, but are genetically distinct and are further distinguished by use, chemical makeup, and cultivation methods. Hemp has a long agricultural and industrial history as a source of strong natural fiber for rope, paper and clothing. Following its de facto US prohibition, since the 1937 Marijuana Tax Act, hemp saw a rebirth with the December 20, 2018 Agriculture bill which re-legalized hemp for farmers who saw it as a potential high value product to replace their shrinking tobacco business.

What is CBD?

CBD is the nonintoxicating cousin of THC. THC, or delta-nine tetrahydrocannabinol, is the active intoxicating ingredient in marijuana. Unfortunately, THC conjures up negative images that diminish institutional investors’ perceptions of the medical potential of cannabis derivatives like CBD, CBG, CBN and THC. That dubious image, however, is an opportunity for clear-eyed investors and operators in the hemp market. In the last forty years, a growing body of clinical evidence has identified a range important medical benefits which can be derived from cannabinoid products. Underpinning this potential is the identification of the human body’s endocannabinoid system and how it interacts with cannabinoids. “The mammalian brain has receptor sites that respond to compounds found in cannabis. These receptors, named cannabinoid receptors, turned out to be the most abundant type of neurotransmitter receptor in the brain”, explains researcher Melissa Moore of Labroots.

In June 2018, the FDA approved Epidiolex, the first prescription drug to contain CBD. In addition to cannabinoid based pharmaceutical validations, there is a long history of cannabinoids use in China, the Middle East as well as Greek and Roman Empires suggesting a range of therapeutic benefits. According to Healthline:

CBD is used to help with other various conditions, such as:

THC is used to help with conditions such as:

In the documentary film on Dr. Raphael Mechoulan’s scientific research on cannabinoids, there is evidence that cannabinoids can, not only, help patients with the unpleasant side effects of chemotherapy, but also with treating cancer itself.

Optima sees CBD and cannabinoid processing as an attractive market with meaningful growth potential. Sophisticated processors of medical grade cannabinoid products should enjoy significant pharmaceutical demand, an important business goal for Optima.

ESG-Environment, Social and Governance:

ESG is an important profile characteristic for startups as responsible investing now commands $20 trillion in assets under management and continues to grow. Optima embraces ESG goals.

Environmental:

Hemp offers some impressive and surprising environmental benefits. Hemp is excellent at removing toxic elements from soil through phytoremediation. Phytotech planted hemp around the Chernobyl nuclear disaster and significantly reduced soil toxicity. Hemp was used to remove plutonium contamination from soil in Colorado near the Rocky Flat National Munitions Plant which processed plutonium for munitions. It has similarly been used in Pennsylvania to cull toxic elements left by Bethlehem Steel.

Hemp also removes 1.5 times the carbon from the atmosphere that timber does which makes it a valuable plant in reducing carbon emissions in the environment.

Hemp derived cannabinoids underpin growing research and medicinal applications beyond the popular calming CBD tinctures, pain relieving balms and veterinary products. Many of the cannabidiol research goals are in modern diseases and conditions like cancer, anxiety, and PTSD.

Social:

Through Optima’s commitment to UN Sustainable Development Goals, Optima’s process solutions can help less developed countries (“LDCs”) grow economically and help their indigenous and poor populations. The development of hemp in LDCs can spawn multiple local businesses, reverse the scourge of globalism–the downside of global corporations and opportunistic governments.

Governance:

Optima seeks to promote good governance standards. Its team comes from corporations and professions which embrace frameworks like the CFA Code of Ethics and Standards of Practice. Its President has been a shareholder activist.

Conclusion:

Optima is focusing on versatile ESG processing technologies that can turn biomass into green diesel or bio-ethanol and convert hemp into CBD. These technologies can also reduce toxic emissions from fossil fuels by removing contaminants. Ironically, Optima’s evaluation of mini-refinery technology provided a convenient transition into the rapidly growing hemp processing industry, just as oil prices collapsed.

The company is focused on its final investment decision (“FID”) and the execution of its hemp processing business in South Carolina. Optima is hiring an experienced hemp extractor from Denver, Colorado to manage the South Carolina plant and implement good manufacturing processes (“GMP”) and ISO compliance.

Optima looks to bring innovative process technology and clear-eyed management experience to the hemp industry which offers compelling medical and environmental attributes.