VIDEO: James E Wagner Cultivation Corporation (CVE:JWCA) CEO on Best Way to Grow Cannabis

MidasLetter Live
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James E Wagner Cultivation Corporation (CVE:JWCA) (OTCMKTS:JWCAF) CEO Nathan Woodworth discusses receiving building permits for their large scale expansion project at their Kitchener facility. The expansion will facilitate JWC’s planned path to reduce cash cost per gram to below $1.00 through implementation of autonomous robotics and aeroponic production systems. JWC will eventually produce over 30,000 kilograms of cannabis flowers per year once the second facility is fully operational. The CEO also outlines Canopy Rivers Corporation’s significant ownership in JWC and participating in their craft grow program.

Transcript:

James West:    Hey there, welcome back to Midas Letter Live. My guest in this segment is Nathan Woodworth. He’s the CEO of James E. Wagner Cultivation Corporation, trading on the TSX Venture under the symbol JWCA. Nathan, welcome back.

Nathan Woodworth:   Hi James, thanks for having me.

James West:    Nathan, on July 26th, you entered into a collaboration agreement with Conestoga College in Kitchener. Could you elaborate on what exactly is the significance of that for your shareholders?

Nathan Woodworth:   Sure. Conestoga College is a really terrific technology school. They’ve got a lot of innovation going on there, and of course, at JWC we’re very big on innovation as well. So what we’re doing is getting together to look at some feasibility studies first to determine what types of technologies we will be collaborating on developing. And in just a couple of short months we’re hoping to launch into the first of those major projects.

One of the projects on the table, which I’m very excited about, is the implementation of autonomous robotics in our facilities. There are a lot of tasks which happen on a regular basis which can be fully automated using artificial intelligence and other control mechanisms which we’ve been working on developing. With the help of Conestoga College, we hope that that will become a reality in the near future. This is going to help us drive down our cost of production. It’s going to help us streamline and regularize that process in order to deliver the maximum quality at the minimum cost.

James West:    And the target cost is obviously well below $1.00 a gram, we were saying before this segment started. What is it that needs to happen to bring JWC’s production costs below $1.00 a gram?

Nathan Woodworth:   I think with any new business there’s always a period where your non-scaling costs are going to impact the cost of production, and that’s something that’s a reality for us right now. As we implement into our second facility, management fully expects that by the time we’re completed our costs, we’ll be below $1.00. I am working on designs of a brand new facility which, at some point in the future, we will undertake, which removes us from dependence on the grid. And of course, our aeroponic production system means that we use, at its maturity, less than 5 percent of the amount of water that most comparable production facilities use.

So on a facility like the one we’re contemplating, we fully believe the cost of producing cannabis can be below $0.50 a gram, but at JWCII, our second major facility there, we expect to be below $1.00 a gram.

James West:    Interesting. So I recall that one of the advantages to your aeroponic design was the reusability of your growing units, pods you could call them, meant that you build it once and it’s good for five years, whereas for other growers who are not growing hydroponics, the cost is anywhere from $20 to $40 per load.

Nathan Woodworth:   Yes, that’s correct. Substrate can be very expensive. You know, when you consider the costs of disposing of it and the environmental questions that can come up, this becomes quite involved, and not only is it a cost item, but it’s also a labour item. It takes a lot of effort to maintain that kind of system.

You mentioned five years. We have tested our units; we know that they’re good for at least five years. We’ve never broken one. So we don’t know how long they’ll last, it could be 10, 15 years. Beyond that, we simply don’t depreciate anymore, so we haven’t begun to calculate.

James West:    Sure. So how much are you actually outputting right now?

Nathan Woodworth:   Well, at our additional facility we have five flowering rooms, and we are outputting, in the last month I think we did about 50 kilos. Now, we have to sort of slow down because our vault is getting too full and we are arranging for the distribution of product in the coming months. We expect our initial facility to be up over 100 kilos a month in the next month or two.

In our second facility, we’re going to ramp up in groups of eight rooms. By the end of this year, we will be producing hundreds of kilograms a year. We hope and expect an excess of 500 kilograms per month.

James West:    That’s going to be a lot. Where are you going to distribute that?

Nathan Woodworth:   Well of course, we’re part of the craft grow program through Canopy, and that’s, you know, a major outlet for product.

James West:    Canopy is a shareholder?

Nathan Woodworth:   That’s absolutely right. Canopy Rivers owns a significant amount of JWC, and we’re happy to participate in the craft grow program; I think it’s a fantastic opportunity. They’ve got a lot of patients. We’re also interested in addressing the upcoming product call through the OCS; we held back from the very first round, but of course they’re going to repeat that every couple of months as we go forward in order to make sure that they have enough product to fill the quite variable number of stores that they may or may not have, given the recent announcement of the privatization of some of the dispensaries here in Ontario.

James West:    Are you planning a branding strategy that captures and conveys the source of the cannabis as aeroponic in nature?

Nathan Woodworth:   Yes. You know, I think there’s a lot of diversity in strategy out there right now. We are considering strategies which focus on our core value as a company. JWC is a technology company. What we do is new, it’s different. Everything that we do is new and different all the way across the board. So the product that you will be buying will be clearly marked as having come from JWC, because in buying that product, you know that you are participating in a unique technological solution that is giving unique added value to that end product, and offers users something unique within the industry.

James West:    Interesting. So then the second facility is going to be completed when?

Nathan Woodworth:   Well, that is an excellent question. We have a smooth path to scale; we don’t need to complete that facility to be profitable, we don’t need to complete that facility to generate revenue through production. Within the next couple of months, we will be ready to begin growing. We began building just a couple of weeks ago, and it does not take us long to get those new spaces up and going. From there, we will continue to build as we continue to grow more and more product. We expect that sometime in mid to late 2019, we will reach the conclusion of our buildout at that facility and turn our eyes to new projects.

James West:    Interesting. So then, the full buildout of JWC at this point will produce how many kilograms per year?

Nathan Woodworth:   Over 30,000 kilograms per year.

James West:    Okay, and that’s probably about as much as the Tweed arrangement could uptake, given that they’ve got all this other product from all these different partners.

Nathan Woodworth:   Which is why we’re also looking at the recreational market. I think that, you know, there’s a lot of Canadians out there who would be very interested in trying some aeroponically grown cannabis. And we want to make sure that opportunity is extended to everyone.

We are contemplating a number of other partnerships and opportunities which will allow us to easily distribute that much product.

James West:    Okay. And so the 8 flowering rooms per phase, how many phases in total?

Nathan Woodworth:   Well it’s a bit – we call them pods. In total, we should have approximately 136 flowering rooms at that location. My math escapes me at the moment to do the division there, but we’ll be building pods of 8 every four weeks or so in the foreseeable future, until the completion of approximately 136 of those rooms at our new location.

James West:    Sure. And have you been finding that all of your expectations in terms of the advantages to growing aeroponically that you were articulating early on before you actually got going, are you finding that all those things are coming true? Or are there some adjustments being made along the way, or are you under-overwhelmed by how great aeroponics as a strategy is?

Nathan Woodworth:   Since we originally began using aeroponics about eight years ago, we haven’t looked back. It is the best way to grow cannabis. Cannabis is a crop that requires a high degree of finesse and fine-tuning; really, there isn’t such a thing as doing too much to control the conditions of growth, and aeroponics allows you to take that to its utmost extent.

That said, we are constantly in the process of refinement. These are new technologies. You know, the cannabis industry really hasn’t had the advantage of decades of development that many other agricultural industries have. So we have to cram all of that development into a very short period of time. So we’re always looking at ways to improve and refine; that said, we’re already head and shoulders above traditional technologies in the space.

James West:    Sure. You were saying that you’ve been growing aeroponically for eight years, so you were producing cannabis for yourself as an MMAR patient using aeroponics?

Nathan Woodworth:   We had a collective of patients and growers that reached quite a large number of members in the Waterloo region. I began growing for myself as a medicine, and that’s how I got into this, but we quickly expanded, because I knew other people in my life who needed medicine, and they were having the same basic problems that I think affect a lot of growers in the space: which is that when you leave so many variables on the board, it’s difficult to make sure that you’re producing a top quality product again and again, which is where we began to study cannabis. And we used to say that our mantra was ‘repeatability and reproducibility, just like in the lab’.

And we needed a process that we could repeat every time so that we could reproduce the end product, every time. And it wasn’t until we got to aeroponics that we finally stumbled on the perfection or near-perfection of that equation. I do like to say that perfection is a mirage; we strive for it, we move toward it always, but never achieve it, which is our philosophy at JWC.

James West:    [laughter] You’re perfect, I’m perfect, it’s perfect.

Nathan Woodworth:   [laughter]

James West:    That’s great. So now, remind me again: is the aeroponic process that you employ, does that result in an organic product?

Nathan Woodworth:   We believe that it can be used to produce an organic product, however, there is an absence of understanding, I think, in exactly what constitutes organic nutrition for a plant. And it can be difficult to control the nutrition of a plant to the same extent that we do using our main line of nutrients that we employ. We calculate our nutritional programs down to the tenth decimal point in many places, and that type of atomic level control is simply not available in a wide variety of organic nutrients.

We are looking at collaborations with a couple of different producers of organic nutrients in order to give us that same level of control, but until I can guarantee our patients that they will be experiencing the same degree of quality each and every time they buy product from us, or our consumers, it’s something that we have not yet begun to do.

James West:    Interesting. All right, Nathan, we’re going to leave it there for now. That’s a great update. We’ll come back to you in due course, of course, and have another conversation. Thanks for coming in.

Nathan Woodworth:   Thanks very much for having me, James.

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