VIDEO: James E Wagner Cultivation Corporation (CVE:JWCA) CEO on Aeroponic Edge

James E Wagner Cultivation Corporation (CVE:JWCA), commonly abbreviated to JWC, CEO Nathan Woodworth discusses the company’s unique cultivation method known as ‘aeroponics’.  The company are able to achieve impressive yields and quality, all without having to use pesticides.  Nathan talks about their value proposition as well as their involvement with Canopy Rivers, the investment branch of Canopy Growth Corp (TSE:WEED) (NYSE:CGC) (FRA:11L1)


James West:  Hey! Welcome to Midas Letter Live. My guest in this segment is Nathan Woodworth. He is the CEO of James E. Wagner Cultivation Corporation which we affectionately refer to as JWC for short.

Nathan, thanks for joining me today.

Nathan Woodworth: Hi James, thanks very much for having me.

James West:  So, you had an auspicious debut on the TSX Venture last week, saw a little downwards pressure on your stock, always happens when it starts to trade but I wanted to talk today about the main differentiators in JWC’s approach to cultivating cannabis relative to the entire universe of other cultivators. So, tell me what is the main difference in your approach?

[stock_chart symbol=”JWCA:TSV” align=”left” range=”5D”]

Nathan Woodworth: Well we’re a technology company in addition to being a licensed producer of medicinal cannabis. The technology at its core focuses on a technique called aeroponics. Aeroponics is a type of advanced hydroponic cultivation. Rather than suspend the roots in a substrate like rock wool or peat moss or put them in water. We hang the roots in an enclosure in the air. We then mist that root mass with a proprietary nutrient solution. This helps maintain the optimize health of the plant.

James West:  Right, okay so aeroponics is originally developed by NASA?

Nathan Woodworth: Well originally it was developed by a researcher named Richard Stoner in the 1980’s. NASA picked up the technology for a couple of key reasons. Obviously when you’re doing research into plants in space it cost money to transport anything into space. When you stop to consider it, this is true here on Earth as well. Every bit of material that we use costs money. Aeroponics is very advantageous because there are no substrate materials used at all. There’s very little cost in transporting the requirements for the growth of the plant system into space and of course the same reflects in our facilities here on Earth.

In the nineties NASA did a lot of research using aeroponics. They were looking at studying the root morphology of the plants. They wanted to see how roots grow in zero gravity and how that compares to how they grow on Earth and so they used aeroponics to do this because they could maintain an ongoing visual record of the root mass. Today NASA still uses aeroponics on the international space station. Right now, they’re doing a study to look at the long-term effects of radiation on food crop. Again, they’re doing this in an aeroponic style because of the economic requirement of growing plants in space.

James West:  Interesting. What is the net benefit of aeroponics in terms of yield and quality?

Nathan Woodworth: In essence, we maximize both because what we’re looking at is a complex system in the plant. It’s a system which has many and various requirements in input and by optimizing the health of total system we are optimize the output of that system. So, our plants when we grow a strain which has been grown in other environments we expect to see an increase between 2% and 4 % in total cannabinoid count which is the collective percentage of all the cannabinoids present in the plant.

We also expect to optimize over the course a four to six-month period toward the maximal yield, not necessarily of the weight of the plant but the maximal yield of the cannabinoids per square foot. This is a measure of the true efficacy of our productive system because it’s the measure of the medicinal load that we can deliver to our patients on a per square foot basis.

James West:  Okay, do you have an idea to what your actual cannabinoid output per square foot is?

Nathan Woodworth: Yes. You know in terms of total percentages which is how we’re calculating it today, we’re looking at a yield of approximately 22% to 25% on a basis of approximately 50 grams per square foot of canopy per iteration. We expect to do that between five and a half to six times a year, which gives us at an optimize rate of 22% to 25% cannabinoid count approximately a little in excess of 300 grams per square foot per year.

Now some of our strains will yield more at a lower percentage. our maximal yielding strain actually yields at about 66 grams per square foot and we can do that a little over 6 times a year. We’re pushing well north of 350 grams per square foot on that strain but, that percentage is considerably lower weighing in at about 13% total cannabinoid count, primarily CBDs.

James West:  Interesting. Is there a benefit to medical standardization or the ability to deliver a medically standardized product as a result of aeroponics cultivation?

Nathan Woodworth: Both in aeroponics cultivation and in the technology that we’ve developed specifically; the growth storm production system, yes, absolutely.

Being able to optimize the system means we know we’re going to achieve the maximum yield and the maximum quality of product every time we grow that product. The total system is designed to standardize that material. For instance, cannabis is usually what they call an [00:05:15] plant, it grows like a Christmas tree. If you measure the very top bud of that plant versus the bottom branches of that plant, you’ll notice a significant disparity in the total amount of cannabinoid in that product. Now, this isn’t advantageous to the end user. A person who gets medicinal product want a standardized dose per bud and so we train our plants into an non-[00:05:37] format which is a fancy way of saying, we use a screen of green technique. That way we optimize our production per bud and per square foot rather than producing asymmetrically distributed medicine across the plant.

James West:  Okay. So, then what sort of benefit does that deliver to the economics of the enterprise as total?

Nathan Woodworth: Well we have a lower cost of input in our production system. By avoiding substrates, by minimizing the amount of nutrients we require for our plants; our overhead costs are reduced. We also try and limit the points of interaction for our growers with the plants.

The point of the growth storm system is to convert an organic element into a component of a mechanical system. By doing so everything moves like clockwork which means there’s less individual care required from our growers to our plants. Instead they manage the total system. We attempt to keep costs down across the board which helps us deliver some of the best product in the industry for an average price of a little below $8.50 a gram. We also offer discounts on volume because we want our patients to not only use our product but use as much of it as they need to to treat their conditions.

James West:  Sure. You say $8.50 a gram, that’s your average selling price?

Nathan Woodworth: I believe so, yes.

James West:  Okay.

Nathan Woodworth: Yes, not our cost of production. (Laughter)

James West:  Do you an idea of what your cost of production is at this point?

Nathan Woodworth: At this point it’s around $2.50 a gram. That’s out of our pilot facility which has taken a lot of development to get there and of course at that scale, there’s a lot of additional overhead. Management firmly believes that we’ll be pushing down to a $1.00 a gram by the time we’re at full scale production at our second large scale facility, a 345 000 square foot expansion in the [00:07:26] building or the old [00:07:27] building in Kitchener. It’s now a JWC building.

James West:  Okay, interesting. Okay, you describe yourself as a technology company; should investors read into that, that there’s a potential or an imminent revenue stream coming from some kind of technology relationship bending of licenses?

Nathan Woodworth: Absolutely. We’re actively pursuing a variety of strategies in this regard. We firmly believe that the growth storm system which is patent pending on a number of key technologies is the best system for cultivating cannabis in the world. Eventually I believe these technologies we develop will play a larger role in agriculture in general. I think the future of JWC definitely holds a lot of opportunities in terms of licensing these technologies, creating technologies for home use and developing a suite of secondary innovations which a number of them will hopefully be deployed this year to begin to make a larger impact on the market in general.

James West:  Interesting. So then is JWC more or less positioned as primarily a medical product provider or more so for the recreational market or equally both?

Nathan Woodworth: I think we’re going to let the chips fall where they may on that one James.

James West:  (Laughter) Okay.

Nathan Woodworth: In the end, I am a medical patient and I have been for well over a decade. It’s vitally important to me to maintain a relationship with our patients that gives them the impression and the understanding that JWC is considered about their health. I’m never going to abandon the patients who sign up with us.

With that said, the recreational market is very important as well and at our new facility we’re going to produce a lot of very high quality cannabis. I think everyone in Canada deserves the opportunity to try that product. I’m excited to be involved in the recreational market. Where those percentages end up, how much of our product is dedicated to one market or the other depends on demand and supply and a number of factors; which at the current point in the market’s developments simply haven’t been defined.

James West:  How are you going to market your product? Are you for example, do you have patients now? Are you selling medical cannabis on your website? Do you have relationships with any other vendors?

Nathan Woodworth: We have a number of patients already signed up and buy9ing product. We’re registering new patients all the time. I think patients in Canada are excited about the concept of aeroponic cannabis and so we have no shortage of people on our waiting list. We hope to get to all of you very soon. There’s an ever increasing demand in that regard. We are also looking to begin selling our product through Canopy’s craft grow outlet. We have a great relationship with them and we’re very excited to be a part of it. We’re just working out some of the final details and we hope in the weeks and months to come, that that product will be available there as well.

James West:  Sure. Canopy Rivers the investment arm of Canopy Growth made an investment into JWC if I’m not mistaken?

Nathan Woodworth: Absolutely. We are one of their first investments and one of their largest to date.

James West:  Interesting. What percentage of the company do they have>

Nathan Woodworth: I believe at this point its 14.6%. I probably should of stopped at 14 just for fear of being inaccurate through too much inaccuracy.

James West:  Right so then I guess that puts you in a sort of favored positon in terms of access of the Tweed Main Street outlet as a sales venue?

Nathan Woodworth: They’re excited to have our product. We’re excited to be a part of it. Certainly, it’s a relationship we’re definitely going to pursue.

James West:  Alright Nathan, let’s leave it there for now. We’ll come back to you shortly and see how you’re making out. Thanks for joining us today.

Nathan Woodworth: Terrific. Thanks a lot James.

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