JCM has experience in appraising Hemp and Hemp products for the lending community!
Our Company has obtained broad experience in appraising the inventory at each saleable stage of a Hemp converters operation, mostly for Asset Based Lenders, though only a few lenders to date have entertained the idea of lending against this inventory. As such we are going to present an ongoing overview of the industrial Hemp industry – from seed selection to market. At a later date we will discuss the pluses and minuses of financing these enterprises.
Glenn Bandy; Founder of JCM Appraisals was a former Asset Based Lender, consultant, turn-around professional, liquidator and an inventory appraiser for the last 22 years. He has always tried to anticipate new directions for old industries and new businesses that are, or will have a significant impact on the lending community. Hemp and Hemp derived products are such a business area. Understanding Hemp from the: selection of seeds; farming and harvesting; extracting cannabinoids; wholesaling and retailing are important in understanding the entire process.
For the last several months we have submerged ourselves in all facets of the industrial Hemp business. We have joined the US Hemp Association and regularly read posts from the Hemp Roundtable and other websites dealing with Hemp. Through this we have developed an understanding of the sequence and interdependence of planting crops, farming, harvesting biomass, and finally the production of cannabinoids such as CBD, CBG, CBN and CBC that are valued for their supplemental and medicinal properties. To support our knowledge, we have familiarized ourselves with the laws governing both the marijuana and industrial Hemp sectors.
Industrial Hemp vs Marijuana
Most people associate Hemp with “weed” or marijuana. And, though we are also familiar with this area if the business, we have concentrated on industrial Hemp and the products that it produces.
All marijuana comes from hemp, but not all hemp strains produce THC, the active ingredient in marijuana. The various strains of Hemp may produce anywhere from THC free plants to plants with trace THC, to THC forward plants. The variety of cannabis that produces more than 0.3% of THC is categorized as “Marijuana,” or “drug cultivars”.
Cannabis produces more than 100 unique cannabinoids that mimic compounds produced in the human body. These plant-based cannabinoids (phytocannabinoids) can work in place of endogenous cannabinoids when the body experiences a deficiency in its endocannabinoid system. All Hemp produces cannabinoids such as CBD, CBG, CBC and CBN but industrial Hemp, with the production of little THC, produces more of the other cannabinoids. These cannabinoids are valued for their supplemental and medicinal properties. (from: Weed Maps.com/Learn)
We will be uploading a Glossary of Terms in the near future, but for now we will discuss the major terminology necessary to even minimally understand the industry.
Key Terms When Appraising and Liquidating Hemp Businesses:
Simply put, biomass is harvested hemp. Hemp brokers and extractors purchase Hemp Biomass directly from Hemp farmers throughout the United States. In an ideal world, Prior to purchasing a crop, the purchaser tests the potency (% CBD) of the crop yield to ensure the purchased product will have a high enough potency for the buyer’s purposes. On average, buyers target Biomass with at least 10% aggregate CBD potency. Potency is calculated on an aggregate basis because the entire plant (stalk, stems, leaf, buds; each with varying potency) is utilized in crude production.
Terpenes are organic compounds and isomeric hydrocarbons (C10H16) found within Hemp flower excretions. (from: BlueJay.com Website). These aromatic molecules are the primary ingredient in the essential oils produced by many species of plants. Different cannabis cultivars have unique terpene profiles, which determine the aroma and flavor of the flower. Although research is still ongoing, research has shown that terpenes can enhance or alter the psychological and physiological effects of Phytocannabinoids. When whole-plant cannabis is consumed, there is a unique interaction between all of these molecules that appears to have superior medical benefit compared to consuming isolated molecules. (from Kush.com website)
Crude CBD is the extracted concentrate of CBD oil from the raw material (Biomass). There are several methods for Crude CBD oil extraction, with Ethanol and CO2 extraction being the most prevalent within the industry. On average, one kilogram of Crude CBD oil can be extracted from every 22-25 pounds of Biomass (with a 10% potency). Crude CBD oil can be pre-winterized, winterized and winterized/decarboxylated. Pre-Winterized Crude CBD extract is the first end product following extraction and contains extracted cannabinoids, terpenes and plant waxes and lipids.
Winterization involves freezing the resulting contents to further purify the crude extract. The winterized Crude, when frozen, separates the more purified extract from the plant waxes and lipids. Decarboxylation involves heating the winterized Crude extract over a period of time. The heating process removes carbon dioxide and other impurities within the Crude Extract and releases individual cannabinoids within the Crude extract, with the end result being a more chemically pure and higher potency end product.
CBD Distillation is the process of converting CBD Crude extract into a more refined end product. Distillate is purified on the molecular level to yield a highly potent concentrate. The converter has the ability to produce full spectrum oil, broad spectrum oil, specific cannabinoid distillate and CBD distillate. Full spectrum distillate oil contains both THC and CBD. Broad Spectrum Oil contains all primary CBD cannabinoids including CBD, CBN, CBG and CBDA; however, broad spectrum CBD contains no THC. Cannabinoid specific CBD oil, as its name implies, contains only a specific cannabinoid (CBD, CBN, CBG or CBDA).
CBD isolate is the final and most molecularly pure end product of the refinement process. The converter has the ability to produce traditional, water soluble or nano-encapsulated cannabinoid specific isolate. Isolate is processed to the point where any remaining minor cannabinoids, terpenes, flavonoids or remaining plant matter is removed, leaving a 99% pure potent CBD product.
Process by which the cannabis plant is stripped of essential oils and trichomes using ethyl or isopropyl alcohol. Once the extra plant material is filtered out and the remaining alcohol is evaporated, sticky hash oil remains.
The second most commonly used cannabinoid found in the cannabis plant. CBD is an antagonist to THC and is nonpsychoactive as it blocks the formation of 11-OH-THC and mitigates the psychoactive effects of THC. CBD has become popular for its therapeutic effects in autism, epilepsy, and nerve problems.
Chemicals that influence cell receptors in the brain and body and can change how those cells behave.
CB1 receptors mediate physical and psychoactive effects while CB2 receptors regulate inflammation and immune response throughout the immune and peripheral nervous systems including the gut, spleen, liver, heart, kidneys, bones, blood vessels, lymph cells, endocrine glands, and reproductive organs.
The amount of all cannabinoids in the plant.
Comes from the Cannabis sativa plant and contains only a minimal amount of THC.
Genus of flowered plants indigenous to Central Asia and the Indian subcontinent. Also known as marijuana, ganja, pot, bud, and Mary Jane.
Refers to any material created by refining cannabis flowers, such as hash, dry sieve, and hash oils. Concentrates or extracts have much higher potency.
Plant stain that results from the process of crossbreeding and genetic stabilization to express desired traits.
The process by which, when exposed to heat, tetrahydrocannabinolic acid (THCA) is converted to THC and cannabichromenic acid (CBCA) is converted to CBC.
products that are orally consumed. These products can contain THC, CBD, or a combination of both. Common edible products include cookies, brownies, candies, gummies, chocolates, beverages, or homemade goods.
A group of receptors that make up a very complex regulatory system throughout the human brain, body, and central and peripheral nervous systems. ECS creates and maintains our body’s internal stability (homeostasis) by adjusting the flow of neurotransmitters and regulating bodily functions, including appetite, sleep, emotion, and movement.
The different processes by which cannabinoids within the plant can be extracted for use. These processes include alcohol extraction, butane hash oil extraction, etc.
The plant of the genus Cannabis or any part of the plant, whether growing or not, with a delta-9-tetrahydrocannabinol concentration that does not exceed 0.3% on a dry weight basis of any part of the plant of the genus Cannabis.
Indoor growing has not been around as long as outdoor growing but has gained in popularity. Indoor growing allows complete control of the environment. Indoor growing can lead to smaller yields due to lack of sunlight, but the resulting yield might contain higher levels of THC. Outdoor farming requires specific environmental climates and conditions. Current markets note that indoor cannabis is deemed of higher quality compared to cannabis grown outside. Each method carries its own environmental concerns.
To compound, blend, extract, infuse, or otherwise make or prepare a cannabis product.
A slang term for the dried flowers, leaves, stems, and seeds of the cannabis plant.
To harvest, dry, cure, trim and separate parts of the marijuana plant by manual or mechanical means.
Everything that happens to an individual cannabis plant from seed and cultivation, through growth, harvest, and preparation of cannabis-infused products, if any, to final sale of finished products.
Variety of cannabis plants that have a characteristic(s) that might be used to express a specific desired effect. For example: Cannabis sativa is high in THC and is reported to enhance creativity, be a stimulant, and fight depression, headaches, and nausea. Cannabis indica is a mix of THC/CBD and is reported to be relaxing and pain reducing. Cannabis ruderalis is high in CBD.
The most common cannabinoid found within the cannabis plant. THC accounts for most of the psychoactive effects as the 11-OH-THC metabolite, formed after first pass metabolism, is 4 times more psychoactive than THC.
A liquid form of cannabis that is made from glycerin or alcohol. Tinctures are usually distributed in an eyedropper under the tongue to provide fast absorption to the body, leading to quicker effects than edibles and inhalation.
products such as lotions, balms, and oils that are used for pain relief.