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Biome Grow Inc (CNSX:BIO) CEO on Canada’s Hemp Advantage

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Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

Biome Grow Inc (CNSX:BIO) (OTCMKTS:BIOIF) (FRA:6OTA) CEO Khurram Malik is thrilled with the way the company’s products have sold since being commercially released in Canada in January. Malik emphasizes the company’s regulatory knowledge and indicates Biome is interested in expanding to Asian and African markets where the company can leverage its expertise to help craft new laws and regulatory frameworks. Malik discusses Biome’s recent deal with CBD Acres for 20,000 kilograms annually of hemp-grown, high-quality, low-cost CBD extract. The deal allows Biome to export CBD products to international markets. Malik notes that Canada produces some of the lowest-cost hemp in the world and explains the company’s proprietary harvesting methods.

Transcript:

Narrator: Biome Grow, Incorporated is a Canadian-based cannabis company with national and international business interests. Biome owns five subsidiaries, including the Back Home Medical Cannabis Corporation in Newfoundland and Labrador; Great Lakes Cannabis in Ontario; Highland Grow, Inc. in Nova Scotia; Red Sands Craft Cannabis Company in Prince Edward Island; and Weed Virtual Retail, Inc., a company in Ontario which operates a new virtual reality technology platform focused on the medical and recreational cannabis markets.

Biome Grow, Incorporated is headquartered in Toronto and trades on the Canadian Securities Exchange under the ticker symbol BIO.

James West:   Yeah.

Khurram Malik: Are we just talking about Biome? I didn’t know what the topic was when I showed up.

James West:   Well, Biome, obviously, we’ll talk about.

Khurram Malik: Okay.

James West:   Hey, ho, and a ding ding doh, we’re back. What hell. Boy, what are we going to talk about? That’s what we were talking about. Do you know what we’re going to talk about? We’re going to talk about Biome Grow. Khurram Malik joins me right now. He’s the CEO of Biome Grow, trading on the CSE under the symbol BIO. Khurram, welcome back.

Khurram Malik: Thank you, it’s always a pleasure.

James West:   Khurram, you are, besides being the only person I know who actually does talk faster than me when you get going, you’re also the person who I’ve known who’s been all over the cannabis space in Canada since the beginning. So you were formerly acting as one of the few certified, or rather, chartered financial analysts in the space who was able to cover every company, and you did so multiple times on major television networks in the business space. Then you decided to become the CEO of Biome Grow. And just because some of the audience doesn’t know about Biome Grow yet, tell me how that whole process came about, and how did Biome Grow start?

Khurram Malik: Sure. I mean, the thinking was, when we were previously investment backers and consultants in the industry and helped build some of the largest companies in the space today, you know, it took a couple of years of figuring out what worked and didn’t work. So Biome was something that came later; it’s about two years old. And we thought we could build a more efficient cannabis platform than has been built to date. So we started with a blank slate, and we take the best practices that we’ve learned over the years, helping our former clients, and how do you build a more efficient company.

Efficient means raising less money, spending less money, but also getting a better bang for your buck in terms of product going out. So I don’t have to build, for example, millions of square feet of production space; I can still do hundreds of millions of dollars in revenue still, without having to do that.

James West:   Sure.

Khurram Malik: So there’s quite a few aspects to it.

James West:   Okay. And what is the sort of market focus for Biome?

Khurram Malik: Indeed. So we went commercial in Canada in January of this year, after getting our license in Nova Scotia. We’re doing pretty well over there; I think our products last for about two or three days on the shelf and it’s gone, and also Newfoundland, similar situation.

James West:   Oh, great.

Khurram Malik: We are building out some additional expansion of our capacity here in Canada, but what really makes the story interesting is what we’re going to be doing overseas. And sort of dovetailing into what you were previously talking about, CBD, we’re going to be primarily selling a lot of CBD overseas in jurisdictions that are just about to come online with the regulations for cannabis. And in about two years we’ll probably be doing 80 percent of our revenue overseas and maybe 20 percent here in Canada. I mean, I always hark back to the fact that there’s 36 million people in Canada, it’s a small market, and the big guys have been actively participating the sector for a while have got most of that locked down.

So we are coming a little later to the game; we’ve got to be pretty intelligent on how we sort of position ourselves. Atlantic Canada is interesting for us. What we do here, that’s a B trend in Canada, but our real cash flow is going to come from overseas.

James West:   Okay, so especially where overseas do you see the greatest opportunity?

Khurram Malik: Yeah, we like to go where other people are not. So you know, in history, power guys before cannabis were regulatory specialists. So we help influence or write regs in countries that don’t have programs yet. So it’s been many years in the making, but we do like being first in the door.

James West:   So, give us countries.

Khurram Malik: I can’t say countries specifically, but look at Asia and Africa.

James West:   Oh, okay. Interesting. Great. So then, is the supply for your stuff in the Maritimes, does that come from – where does that come from?

Khurram Malik: Well, it’s currently being produced in our licensed facility in Nova Scotia. We have a few more under construction in the other provinces in Atlantic Canada, plus one in Ontario, but that would be primarily THC-based products. And then we’ve got a supply agreement with a related party called CBD Acres that we announced a few weeks ago, which, you know, there’s some related – you know, we’re also founders in for example, so there’s some common founders and ownership between the two, and CBD Acres will be supplying Biome with an enormous amount of biomass, already in concentrated form, that’ll allow us to ship our product ultimately overseas.

There’s a lot of proprietary technology; it’s a hemp company that produces CBD. Nine thousand acres in Ontario, and increasing beyond that – that’s more biomass than any LP in Canada can produce today. We can do for cents per gram. And the point for that is, we’re going to countries where they want affordable medicine, and you can’t do that with cannabis products based on Canadian regulations. So we produce some of the expensive cannabis in the world because we’re forced to. But with hemp, the way the Hemp Act works and the way it dovetails into the Cannabis Act when you take the flower and you turn it into something, we can produce some of the lowest cost points anywhere in the world.

So for example, you set up a hemp farm in Africa, it won’t be much cheaper than setting it up here if you know what you’re doing. So that’s actually an interesting new development which didn’t exist in the cannabis space until now.

James West:   Okay. Interesting you bring up CBDs, because that’s been very thematic around here for the last couple weeks, because there is a such a sort of a gold rush going on, if you will, that so many companies are piling into the space. They’re going to be the biggest, they’re going to be the best, that we’ve started to really research it. So I want to ask you, because you’re experienced in this – so I’ve got two CBD products here, I’m not going to identify them, I’m just going to put them on this thing, and I want you to basically tell me what you think of each product in terms of, so the interesting thing with these products is, they are – oops, I just sprayed that on my computer, but, oh well, this will be nice and slippery.

Khurram Malik: Make your computer go faster.

James West:   Yeah. So, okay, so here they are. They’re both 48 to 50 milligrams per millilitre of CBD, and one is, how would you describe them?

Khurram Malik: One’s clear, one looks like it’s a little less water soluble, to some degree. So that’s one thing. Could you probably know if they’re isolates or full-spectrum?

James West:   They’re both full-spectrum.

Khurram Malik: They’re all full-spectrum. Okay, well this one seems like it’s a little more advanced in terms of what I can do. Typically, if it’s a water-soluble solution, it’ll absorb in your body a lot quicker, and it avoids certain parts of the liver pathways to get into your system, so that’s intriguing. The other one looks like it’s more of an older-school version of how you sort of, you know, combine cannabinoids with a liquid to get into your body.

James West:   Sure. Interesting. So I mean, do you consume CBD?

Khurram Malik: Yes, I do.

James West:   Okay, which of these would you prefer?

Khurram Malik: The clear one.

James West:   [laughter] Okay, now here’s the interesting thing: the company that produced this CBD has a market cap of 2.7 billion. The company that produces this CBD has a market cap of 175 million.

Khurram Malik: Okay.

James West:   And this one’s private, this one’s public. So that one’s up for debate.

Khurram Malik: Yeah, but you can also – that’s perfectly in line with how the entire sector’s working right now, right? If you look at the largest companies in the space and look at the product reviews on their products, the smaller guys or the black market have higher quality product.

James West:   Right.

Khurram Malik: Right? So these guys will figure it out eventually, but I’m assuming these guys are more focused on CBD and tinctures and oils and extractions, and these guys are probably more flower-focused right now and everything else. They’ll get around to it eventually, but that’s sort of how the broader space and theme is currently focusing, as well.

James West:   Sure. Well this is interesting. So I had an investment in this company, which I sold because it was a double, and I took all that money and put it into this company, because this one’s not public yet, and it’s about to, it’s going to go public. So, interesting. So now, in terms of your CBD partner, now, which of that kind of oil would you seek to produce?

Khurram Malik: It’ll be more like this; it’ll be more about 100 milligrams per millilitre as well, because we target certain diseases. So for example, MacGregor disease, epilepsy, you need a higher dose in there, even if it’s for children three to four years old. So it’ll be higher; it’ll also have an oil, which probably a chia seed oil, which is easier on the stomach lining than other what other people currently we have on the market. It was interesting; it’ll be produced with a nano-lipid extraction process, which is very specifically for hemp flower as opposed to, you know, because there’s a lower concentration of CBD in hemp, right, so it’s easier to process the biomass.

James West:   Right. So what is the average concentration of CBD in hemp, in terms of percentage?

Khurram Malik: In Canada?

James West:   Yeah.

Khurram Malik: Canada’s interesting. So you have to register a hemp variety with the authorities at the Federal level; I think they’re – don’t quote me on this, but I think there are 50, roughly, registered varieties of hemp currently, and not a single one of them is over 3 percent right now.

James West:   Really?

Khurram Malik: So what’s going to be happening this year, including with CBD Acres, our related party, they’re going to be registering 15 percent, your 22 percents, and your 23 percents. We just don’t know right now how well they’ll grow outside in a Canadian climate. The 2 percent varieties are well, sort of versed, and there’s a track record how to grow. So that’s what most people are growing this year. So next year, where you get the higher varieties, we’ll see what happens, but you know, the best right now are those tiny percentages.

James West:   Right. I’m growing a high-CBD strain called Dance Hall.

Khurram Malik: Nice.

James West:   Yeah [laughter]

Khurram Malik: What’s the THC content?

James West:   It’s 19 percent. Up to 19 percent CBD. I won’t know exactly what it ends up yielding until I harvest it and test it, of course, but I’m very curious to see.

The whole CBD craze now, it seems like, has caused a complete bifurcation of the cannabis market, because it is now two industries, really; it’s the CBD market and it’s the THC market.

Khurram Malik: I agree.

James West:   And they do come together at some points in the pharmaceutical value chain, but in the current evolution of the markets, it’s like, so CBD has now taken off and is more broadly embraced than THC, which still suffers from restrictions due to its psychotropic nature.

Khurram Malik: Exactly, and we’ve been looking at that for a while, now. So when we go to a foreign jurisdiction, let’s say Asia, where societies are a little more conservative than they are in the Western world, we sort of go in there and say, Okay, right: you either convince a government to write regs for medical cannabis, or you know, go in there and hopefully tinker and make a more rationale based on our Canadian learnings. So the way we do it is, Stage 1 is let’s launch a medical program targeting diseases that only CBD treats, because it’s easier to convince clinicians and doctors and regulators. It’s non-psychoactive; well, it’s largely non-psychoactive. That’s an easy way to go.

Step 2: THC-based meds. And then Step 3, maybe recreational, way down the line at some point. So yeah, that’s a philosophy we sort of embrace for quite some time.

What’s interesting here is, our two companies, Biome and CBD Acres, we have kept them separate for that reason. The fundamentals of a hemp company and the fundamentals of an indoor cannabis company are dramatically different, right? So it didn’t make sense to put them in one; maybe one day, down the road. But Biome is the commercialization arm for medical products for CBD Acres overseas, whereas CBD Acres will make functional foods and other sort of recreational products here in Canada.

James West:   Sure. How do you see your revenues scaling over the next 12, 24, 36 months?

Khurram Malik: Let me put it this way: we signed a supply deal with CBD Acres for about 20,000 kilograms of CBD concentrate. That’s concentrate; that’s the equivalent of 180,000 kilograms of dried flower; it’s the largest supply deal in the history of this planet.

James West:   Really?

Khurram Malik: When it comes to cannabis. That’s 180,000 kilograms, and we’re going to need quite a bit of that for our Asian and African and potentially South American customers.

James West:   Sure. Okay, so how do you deal with – how do you extract that?

Khurram Malik: That’s the key thing, right? So it’s one thing to grow hemp, and you know, we’re talking hundreds of acres of hemp fields, right? So then there’s a whole other aspect if you’ve got to figure out how to cultivate it all. Then once you cultivate it, how do you dry it? And once you dry it, how do you extract it? Once you extract it, what do you do with it? Because it’s huge volumes, right?

James West:   Right.

Khurram Malik: And if you look at the extraction bottleneck on the cannabis side in Canada, those people haven’t figured out how to extract yet properly, right? So building that value chain in CBD Acres, where you know, all those different aspects are figured out – I’m find another company in North America that has all those aspects figured out.

So if you look at the US, the US has no expertise in drying hemp, with the exception of some pilot programs in Kentucky. So it’ll take a while to figure out that side of it, the upstream part of it. They can be the extraction side, because that’s, you know, they’re going to need the extraction of cannabis for a while.

In Canada, it’s the other way around. We know how to grow hemp; we’re one of the largest hemp growers in the world for decades, now, probably Number Two after China. But we suck at extraction, and we suck at downstream processing and edibles and all those sorts of products. So that’s where our sort of issue is. So those are the two different constraints. So in CBD Acres, they’ve got all that figured out with technology and know-how and proprietary sort of elements, so we’re pretty confident that they’ll be able to supply us, Biome, with some very high quality finished products, whether they’re tinctures, pills, you know, creams of various kinds, and all that.

James West:   And where does CBD Acres produce their hemp?

Khurram Malik: Here in Ontario, actually. So it’s actually a very capital-efficient business model, which investors like, and some don’t, because we don’t own the farmland there. We rent it from other farmers, large farmers in Ontario. We show them how to grow, we give them the seeds, and we come and harvest using our proprietary, you know, harvesters, which have to be very uniquely made. If you take a regular combine and you run it through a hemp field, it’ll break down in two minutes; it’s a tough plant, right?

James West:   Right.

Khurram Malik: So it’s a specially designed combine that just slices the flower off, makes sure it never hits the ground, so it remains organic, and it’s dried in a very proprietary way, otherwise you can waste weeks drying this stuff; we do it in two days.

James West:   Cool. Well, that’s going to be quite the thing; I imagine you’re going to take a lot of video footage of this stuff being harvested this year?

Khurram Malik: Oh yeah, all the time.

James West:   Okay, great. Well, Khurram, let’s leave it there for now. That’s a great update on the company; we’ll come back to you soon enough and keep following the story. Thanks for joining me.

Khurram Malik: Thanks very much, no problem.

Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

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