February 19, 2019

SugarBud Craft Growers Corp (CVE:SUGR) CEO on Strategic Partnership with Phylos Bioscience Inc

Midas Letter
Midas Letter
SugarBud Craft Growers Corp (CVE:SUGR) CEO on Strategic Partnership with Phylos Bioscience Inc

SugarBud Craft Growers Corp (CVE:SUGR) (OTCMKTS:RLLRF) (FRA:REL) CEO Craig Kolochuk provides an update on the company’s operations. SugarBud completed the construction of its vertical cultivation facility in Stavely, Alberta and Kolochuk hopes the site will be licensed by the end of Q1. SugarBud is now exclusively a cannabis company, after selling its oil and gas holdings earlier this year. Kolochuk is excited about the company’s strategic partnership with Phylos Bioscience Inc, a US-based genetics company. Kolochuk believes genetics is the missing ingredient in cannabis growing and the partnership will create a Genetic Library of SugarBud’s strains. Kolochuk believes SugarBud’s vertical aeroponic growing is both the premium play and will help the company realize considerable cost savings.


Narrator: Sugarbud Craft Growers Corporation is an Alberta-based emerging cannabis company engaged in the development, acquisition, production and distribution of cannabis in Canada. Sugarbud is also a high net-back, cash flow oil and gas company. The oil and gas assets provide additional security to providers of non-dilutive capital.

The company is currently constructing a 29,800 square foot vertical cannabis cultivation facility at Stavely, Alberta. It hopes to receive a cultivation license from Health Canada by the end of Q1, 2019.

Sugarbud Craft Growers Corporation is listed on the TSX Venture under the ticker symbol SUGR.

[stock_chart symbol=”SUGR:TSV” align=”left” range=”1M”]

Benjamin A. Smith: And joining us right now is the CEO of Sugarbud Craft Growers, Mr. Craig Kolochuk. Craig, welcome back to the program.

Craig Kolochuk:    Thanks for having me.

Benjamin A. Smith: Now, can you update investors of any new occurrences with your company since the last time you were on the show, about two months ago?

Craig Kolochuk:    Yeah, absolutely. We’ve had a big last couple weeks here, and lots of press. We completed the construction of our building late January, so that is complete, and we just finished shooting our video here on the weekend, our Health Canada attestation video. So the plan is to submit that to Health Canada over the next week, and we hope to have our cultivation license by the end of first quarter.

So that is a huge foundational piece for us to establish. The next thing is, we sold our oil and gas assets, so now we’re a pure cannabis player. So that was welcomed by the market, and we’re kind of getting message that we were well-financed, didn’t need the cash flow, so they preferred us to be the pure player.

And the last thing we’ve done here recently is signed a strategic relationship with a genetics company out of the States, Phylos Bioscience.

Benjamin A. Smith: Okay, can you explain to viewers how that genetic library gives your company a competitive advantage? You seem to have quite a few strains there, 400 top-tier strains. So is it a matter of picking which ones are going to be the most popular and perhaps getting a consumer focus group, or how does that work?

Craig Kolochuk:    Yeah, no, good question. From our perspective, we think genetics is the most misunderstood ingredient in growing superior cannabis. So we have a huge genetics library, and we need to evaluate it. So what we’re doing is a breeding program with Phylos; it’s a six-month program, and it’s going to give us the ability to dehydrate our strains, let these plants express themselves, and you know, we’re going to measure trichomes, we’re going to measure bud structure, and give us analytics of each plant.

And from there, we’re going to hydrate our library and be ready for full-scale production here end of the year, and we think this is a huge differentiating factor to growing the premium product.

Benjamin A. Smith: Okay. So I know you’re waiting on your Health Canada license for the other portion of your 29,800 square foot facility in Stavely, Alberta, I believe it is. Now, since you’re an aeroponic grower and you’re growing 20 feet up, so you’re growing on levels – my question is whether, because you have such a smaller facility, are you going to realize significant cost savings at having, you know, a 30,000 square foot facility versus, say, a 500,000 open layout greenhouse somewhere else? And, will you put those efficiencies back into, you know, the price and costs of your cannabis?

Craig Kolochuk:    Yeah, absolutely. We think the enclosed building is the only way to go, and we think vertical grow is the wave of the future. And to add to that, we think aeroponics is the premium play in growing cannabis.

So our flowering rooms are just under 18,000 square feet, but our canopy for our 8 individual grow rooms is over 30,000 square feet, and we have the ability to grow four layers; our ceiling heights are 28 feet, so it’s custom-designed, and as far as we know, we’re one of the few purpose-built vertical facilities here in Canada.

We believe once the fundamentals kick in, that this market is going to be such that the parameters are going to be how much revenue you’re getting per square foot. So we think we can knock it out of the park and be that top quartile, being able to grow up and use our floor utilization. I think we’re over 200 percent versus roughly 60, 70 percent for traditional growing methodologies.

Ed Milewski:  Craig, Ed Milewski here. There aren’t many companies in your space, but do you collaborate with others, and discuss techniques, procedures, technical stuff just to see if you’re going in the same direction? Or are you sort of looking at this by yourself?

Craig Kolochuk:    No, we definitely do not profess that we know, you know, this vertical growing is new to Canada. If anything, we’ve really leaned on our US counterparts. We’ve been down to Oregon a couple times, we’ve been down to California a few times, where you know, they’re five-plus years ahead of us. They have more finite spaces that they can work with, more restrictions on canopy, especially in California. So they have been going up for, like I said, for years.

So we’re leaning on their expertise. We are collaborating with some local growers here in Alberta, and most recently have kind of reached out to some Ontario growers as well, but yeah, I think we’re not working in isolation, and we’re open to, you know, everyone seems to have an opinion on how to grow good cannabis. But we have tapped into the US intelligence, for the most part.

Benjamin A. Smith: Does Sugarbud have any supply agreements, Craig? Or, and if not, are there any supply agreements in the future upcoming in the next quarter or two?

Craig Kolochuk:    Well, we are just in the process of looking at that. We have had some conversations with AGLC; right now they would like us to have our cultivation license first, but we’re looking at getting vetted by them. With us being on the verge of getting our cultivation license, what’s really changed here since kind of post-legalization is the ability to export. And some of our competitors have been tying up these sales contracts in Europe, more specifically Germany, Spain, Denmark, and so, from what we’ve heard, the pricing is phenomenal. They’re getting roughly $8 CAD per gram, and the appetite is huge. The market is untapped. This is primarily just for, or solely for medical.

But the beauty is, it takes, here in Canada, it takes a while to get your sales license, but once we have our cultivation license, once we start growing, we can be cash flow positive way quicker than we thought. So we currently don’t have any place, but that is on the hit list.

Benjamin A. Smith: And any plans for a GMP facility in Europe? I’m assuming you’re distributing your cannabis to Europe right now to the EU, and distributor perhaps is taking a cut, or perhaps that’s not what’s happening here?

Craig Kolochuk:    This is something that’s ongoing as far as evaluation goes. Some of our competitors have, you know, the approvals in place, so we can sell it to them and, you know, they can sell on our behalf. But we’re currently evaluating all our options, selling throughout Europe and across the globe, for that matter.

Ed Milewski:  Craig, another question, here. What about your cash position? How are you doing in that respect?

Craig Kolochuk:    We’re cashed up. We have roughly $3 million in cash in the bank, no debt. We’re closing our oil and gas sale here April 1st, so that’s going to bring in another $1.5 million. So Phase 1 for us is fully funded; we’re only going to equip the first two rooms, and work towards getting our sales license, and as you guys are probably aware, the technology is always changing, so we didn’t want to overly commit to our lights and our HVAC.

So we’re scaling up our current grow system, and we’ll be equipping the rooms over the next six to eight months. Basically, we want to be full-scale production for January 2020.

Benjamin A. Smith: Great update, Craig! Thanks a lot for joining us on the program. We will be following your story.

Ed Milewski:  Thanks, Craig.

Craig Kolochuk:    Right on, guys. Thanks for your time.

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