It is widely accepted that when recreational cannabis sales commence in January, California will rank as the largest legal marijuana economy in the U.S., with a projected value of US$7 billion.

It explains why shares of Nutritional High International Inc. (CSE: C.EATOTCQB: SPLIFForum) rallied strongly on news that the company is ready to acquire a leading Cannabis distributor in California.

In two trading sessions following the announcement on November 7, 2017, the shares jumped to 22 cents from 13.5 cents, rewarding investors with an impressive gain of 63%.

The market was reacting to news that Nutritional High has signed a letter of intent to acquire a 100% interest in Calyx Brands Inc., in a move to accelerate sales and establish its brand in California.

Nutritional High’s product strategy is centred on cannabis extracts and cannabis-infused products, which command substantially higher prices than the dried flower.

In keeping with this high margin strategy, Nutritional owns several edible and oil extract product lines, including its own FLI brand. The company also has exclusive rights to sell certain Jimi Hendrix-branded products.

Nutritional High already has active operations in the U.S., including a facility in Colorado that is manufacturing bulk oil extracts and a dispensary in Illinois. It is also in the advanced stages of establishing operations in Oregon, Washington and California (more about those later).

However, the expansion into California is a key step, one that the market has clearly recognized.

Home to a large population of sophisticated cannabis consumers, it represents a tremendous opportunity for Nutritional High to broaden the reach of its premium branded marijuana oils and infused products.

Calyx is a leading distributor of cannabis products throughout California and is conditionally approved for a Distributor and Transporter Permit issued by the City of Oakland. Through its distribution operation, Calyx serves as a link between producers and retailers in California’s burgeoning medical cannabis market and will be able to transition quickly to serve the needs of the adult use cannabis market.

Calyx also operates a digital platform which gathers strategic data on brand performance at the retail level and serves as a reporting system, providing real-time insight into how brands can better help meet the needs of dispensaries in their target area.

“In acquiring Calyx, we will work with their team to build their product offering and distribution channels as California adopts recreational adult use cannabis in the New Year,’’ said Nutritional High Chief Executive Officer Jim Frazier. The company expects to be in a position to launch FLI branded products in California in early 2018, once the California Department of Public Health begins granting marijuana licenses.

News of the Calyx deal comes just weeks after the company said it has acquired property in northern California where it intends to extract cannabis oil and manufacture cannabis infused products. The company said the property is a 9,000-square foot industrial building that was chosen because it meets all requirements for licensing set by California State and local regulatory authorities.

The property acquisition is conditional on Nutritional High successfully securing all required municipal licensing for marijuana oil extraction and edible manufacturing.

On November 1, Nutritional High said it has submitted a conditional use permit application (CUP) with the City of Sacramento, Community Planning Department. This is in keeping with plans to acquire the manufacturing facility and to establish Sacramento as the company’s base in California.

Would-be manufacturers are required to submit the CUP application in order pre-qualify the property for a re-zoning order that would permit municipal authorities to house a cannabis business.

The second step in the process is the submission of a business operating permit BOP to the City of Sacramento Police Department, together with LiveScan fingerprinting for the principals of the applicant.

Following the submission of the CUP and BOP applications with the City of Sacramento, the company intends to apply for a manufacturing license with the California Department of Public Health. Such licenses are expected to be available for submission in the New Year.

“As our Sacramento facility comes on-line in 2018, we expect Calyx to provide a strategic platform which will afford us the ability to come in on day one and move FLI branded products through an established sales channel with a broad reach into dispensaries up and down the California coast,’’ said Frazier.

Nutritional High was the first U.S. focused marijuana company to successfully complete an IPO in Canada. The company has raised more than $12 million to fund its cannabis operations.

In Oregon, the company has just acquired a property in the City of LaPine in Deschutes County, and is currently in the process of finalizing the bids from the contractors.

Nutritional High said recently it has entered into a lease agreement with an option to purchase a 7,000-square foot industrial building in Bellingham, Washington, where the company has partnered with Mt. Baker Greeneries LLC to penetrate the Washington medical and adult use cannabis market.

The building has excellent space and infrastructure to house significant integrated grow/extraction/marijuana infused products (MIPs). Key features include a cannabis cultivation and extraction operation which is currently occupied by Mt. Baker Greeneries.

Over the next six months, the company expects to have Mt. Baker Greeneries commence production of FLI branded products, including live resin using the company’s state-of-the art extraction and infusion techniques.