Halo Labs Inc (NEO:HALO) Global Cannabis Extraction Strategy and Timeline
Halo Labs Inc (NEO:HALO) (OTCMKTS:AGEEF) (FRA:A9KN) is a company focused on extraction, creating quality cannabis oils and concentrates. CEO Kiran Sidhu shares their intention to expand globally with an African (Lesotho) production and extraction strategy, with European distribution potential. This is part of a long-term strategy to have the ability to compete directly with countries like India and China that traditionally have low-cost production and manufacturing abilities. Mr. Sidhu shares his timeline for their strategy and looks ahead to profitability. He also shares his thoughts on the global cannabis demand including the often overlooked African interest in cannabis.
JAMES WEST: Kiran Sidhu joins me now. He’s the CEO of Halo Labs. Kiran, welcome.
KIRAN SIDHU: Thanks for having me.
JAMES WEST: Great to see you in London: big excitement going on with this Cannabis Europa event. Tell me about how Halo Labs is approaching the new market in the United Kingdom.
KIRAN SIDHU: In terms of the United Kingdom and Europe, our strategy is a little different from others, and you know, being an oil and concentrate producer and having a very large bulk business, in particular in California, we believe that the way that we’re going to address Europe is actually through Lesotho in Africa.
JAMES WEST: Okay, so Lesotho is the kingdom surrounded by South Africa, and you’ve made a partnership with them?
KIRAN SIDHU: Correct. So we’ve done a little bit more than that, where the largest license in Lesotho is held by Bophelo Biosciences. And what we’ve done is, we’ve entered into a letter of intent to acquire 100 percent of Bophelo. So we are fully committed to the African strategy. So we will have, over the next year, five hectares of cultivation, and we’ll have 100,000, hopefully 100,000 square foot extraction facility in order to provide bulk biomass and bulk distillate to the European manufacturers.
JAMES WEST: And so how much production do you anticipate from five hectares?
KIRAN SIDHU: Oh, it will be – but keep in mind that, and again, what happened in the United States, and what I think will happen in Canada, will also happen in Europe, where now the United States, over 60 to 65 percent of all cannabis consumed, be it in an edible form or a topical form, is consumed in an oil and concentrate.
So the biomass ratio is somewhere between 12 to 1, so on five hectares, we’ll probably be producing around, in tonnage, probably about 10 tonnes a year, but that would only entail making less than a tonne of oil.
JAMES WEST: Right. So is that a footprint that you envision expanding?
KIRAN SIDHU: Yes, yes. And as we announced in Oregon, where we’re putting up now a CBD facility, we’ll be putting up also CBD production, we’ll be putting up specific hemp production, because our license allows us to go up to 200 hectares.
JAMES WEST: Wow, that’s great.
KIRAN SIDHU: And I don’t – I have, you know, we as a company sort of literally scoured the earth on Google maps and tried to come up with where’s an ideal place where you have favourable regulatory environment and favourable labour, favourable sun and soil, and Lesotho, to us, is ideal. And our, the company we’re in, is excellent. Aphria is there, Supreme is there, Canopy is there…so as far as publicly traded Canadian companies, we’re the fourth, but we find ourselves in excellent company.
JAMES WEST: Sure. Do the laws in the United Kingdom and separately, Europe, permit the importation of CBD and THC in concentrated extracted format?
KIRAN SIDHU: That’s a little bit more of a complicated question. So for those countries like Germany, like Denmark, like Holland right now, Bedrocan also is putting a very large facility in Lesotho. Those countries allow it, provided that the raw biomass is grown under good agricultural practices by their definition, and the oil is made under European Good Manufacturing Practice. And the understanding that we have is that the highest standards are the European standards.
So with those standards, when Canada permits imports, Australia we know is permitting imports, you can actually go into those markets as well.
JAMES WEST: Okay, fantastic. So then, what about, will you use Lesotho feedstock to supply any of your US operations?
KIRAN SIDHU: We can’t do that, because the US is ring-fenced, right?
JAMES WEST: Right.
KIRAN SIDHU: Right? Every state within the US is ring fenced.
JAMES WEST: Right.
KIRAN SIDHU: But inevitably, as we saw just recently, the House of Representatives has passed a bill last night, and things may be turning in the US. But again, that’s what’s so beautiful about Lesotho, because we can produce high quality at a low cost that, be it the Chinese, be it the Indians, be it whoever else comes in, we’ll be able to compete with them toe-to-toe.
JAMES WEST: Interesting. Do you think that there will be resistance to using imported CBD and THC feedstock to governments that are seeking to capture the economic opportunity?
KIRAN SIDHU: Again, very well poised, because Lesotho is a poor country. And so they have treaties under OCED and under UN auspices that permit them tariff exemptions. So for instance, in the US, textiles that are imported from Lesotho are exempt from tariffs that we keep hearing about in the US. So that was another reason that Lesotho was very favourable to us, because if tariffs do come down, they will be harder to implement against a country like Lesotho that, by nature, has that OCED protection.
JAMES WEST: Sure. At what point in the timeline do you envision generating revenue from your operations in Lesotho?
KIRAN SIDHU: We are hoping as early as Q2 of next year. Remember, we’re in the southern hemisphere, so the cycle is different; so the prime summer cycle, we’re using greenhouses. The prime summer cycle starts in November, so we’re hoping to put our first crop in the ground in November. And in terms of what we call offtake or demand, at this conference, I mean, there’s so many people who are in desperate need of biomass to make medicinal oil in Europe, that there’s no lack of demand. It’s an execution, not opportunity, and what we’ve proven in Oregon, what we’ve proven in Nevada, and what we’ve definitely proven in California, is that we can execute, we can execute quickly, and Lesotho to us is no different.
We’ve had a team on the ground for six months now, and we’re highly confident that we’ll have our first crop out by Q2 of next year.
JAMES WEST: Okay, then, so in terms of what’s happening right now in the United Kingdom in this early stage of medical cannabis legalization, do you see the medical market moving forward fast enough that it’s going to be able to uptake all of your biomass that you can produce?
KIRAN SIDHU: Well, not the United Kingdom, because the United Kingdom is lagging. But as I emphasized before, Germany, Holland, Italy, France, Malta, these are jurisdictions where now it’s becoming more prevalent. Now Greece is coming on strong.
So the prediction is that by 2023, and I think it was Prohibitions Partners report, that European demand will exceed North American demand. And the other thing that people don’t understand is Africa: it has significant demand. So New Frontier Data published reports last week on the African demand, and a lot of people, with the exception of Aurora, have forgotten the fact that South Africa has 60 million people. They have a culture that’s predisposed to cannabis, and they just decriminalized cannabis. And when I was in Johannesburg recently, and Capetown, consumption cafes are popping up in the collective model of California in the early days.
JAMES WEST: Wow. So that’s a huge, huge market.
KIRAN SIDHU: It’s a huge opportunity, and Lesotho is part of that common trade zone.
JAMES WEST: Interesting. So how is this affecting your outlook on your revenue going out the next 12, 24 months?
KIRAN SIDHU: In, I would say that this year we still hold firm to our 48 million number, with positive EBITDA hopefully by the fourth quarter. I always get asked by investors, How are you doing? Because our growth is at 300 percent quarter-over-quarter, you know, year-over-year. And you know, they keep asking to me, Are we going to sustain it? I’m not going to comment on the quarters; all I’m going to say is that going into Q3, at the end of June, our numbers are right where we expect them to be internally.
JAMES WEST: Okay, great. Let’s leave it there, Kiran; we’ll come back to you soon. Thanks for joining me again.
KIRAN SIDHU: Thanks, thanks for having me again.
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