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December 10, 2018 Issue |
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CEOCFO MAGAZINE |
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Michael Jennings, Director and CEO, and Leigh Hughes, Executive Chairman and Director of Next Green Wave discuss their Seed to Sale Model for both Premium Recreational and Medical Cannabis Products targeting Wholesalers and Retailers in California the largest US Market |
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Director & CEO
Executive Chairman & Director
Next Green Wave (CSE: NGW)
Interview conducted by:
CEOCFO: Mr. Hughes, you have been a marketing communications professional for 15+ years. What lead you to become involved in the cannabis industry and particularly Next Green Wave?
Mr. Hughes:
I’ve been in the investment industry for 8 years and held board level
position for over a decade. I got into this industry purely through the
content that was being shared across the globe in how CBD potentially helped
mitigate some of the symptoms of CTE (Chronic Traumatic Encephalopathy) or
TBI (Traumatic Brain Injury). This would potentially provide a route for
athletes post their careers to be treated. They may have had multiple
concussions over a number of years. Therefore, my interest was heightened a
lot more. Through that I became involved in a cannabis company, doing good
revenues and that have activated a number of CBD product lines in the US.
Because of this, I was immersed in the industry on the corporate side. I
then got involved in another company being Next Green Wave. The Co-founder
and director, Paul Chow is a really good friend of mine; I have known him
for a number of years. He asked if I would get involved in the company, and
I thought it would be an interesting company to be a part of. We then sought
to raise the majority of the money. We raised $13 of the $21 million
primarily through contacts of mine in Australia and also in North America.
My involvement with public companies in Australia and background in
marketing and communications were a natural progression into the
international markets, particularly Canada and the United States and that is
what lead me to Next Green Wave. CEOCFO: Mr. Jenning, you have been in the cannabis industry for 20 years. What lead you into what has become such a vibrant and growing industry? Was it some foresight? Mr. Jennings: For me, the cannabis industry is a legacy. I am a third-generation citrus farmer and cannabis grower in California, so this is something that has been in my blood from the beginning and something I always had a passion for. Aside from that, it is something that I have been doing for a living for over twenty years. So it is not just something that is ingrained in me through my bloodline, it is something that I have actively participated in throughout my entire adult life. In my mind the question of foresight and why I am doing this is that I have known since the beginning, which was the mid-nineties, especially after California passed Proposition 215 in 1996, that there would be a day the industry was going to be legal, licensed and regulated. For my education I received a Doctorate in philosophy. I have owned many other businesses and lived a full life but a huge part of me has been cannabis, this has been more of intuition and knowing this was going to happen.
CEOCFO: What attracted you to Next Green Wave? Mr. Jennings: It was the summer of 2016 when the State of California started codifying their regulations for medical marijuana and I was looking for a place to get started. At the same time the City of Coalinga indicated it was going to be passing a similar law that would run parallel to state law so that’s where I chose to start. In the summer of 2016 I went out and bought the first piece of land, applied for and received four licenses from the City of Coalinga, and founded the company Next Green Wave. I went all-in with my life savings to buy the land, get the licenses, develop the first the investor deck and the business model. I was looking for funding in the winter of 2016, spring of 2017 when I met Paul Chow and we started to put together what would ultimately be our executive team and started refining the deck. So for me this was something that I was all-in on from the beginning and I was fortunate enough to meet Paul and have him bring together his experience in the capital markets, take me up to Canada and put together the team that really enabled Next Green Wave to take the next steps.
CEOCFO: Why is being seed to sale important for Next Green Wave? Mr. Jennings: I've always seen the California market as having verticals just like any other industry. From the time I started growing in the mid 90's it was apparent to me the market was divided into the distinct verticals of nursery production, flower production, oil production, edible production, retail and distribution. Even though it was quasi illegal at that point, it was still apparent to me that it was divided into different verticals such as nursery, flower production, oil production, edibles and distribution. Those have always been distinct verticals in the industry to me. So it was kind of the natural evolution when I went and got all the licenses that those were the licenses that I immediately acquired because that fit my vision of the cannabis puzzle. That was always how I saw the industry, so it was a natural growth to go to that seed to sale model, and seeing what the industry meant, where the revenue drivers were and what were the foundational verticals of the industry. That is why that seed to sale model has been baked into this from day one.
CEOCFO: You use premium seeds. How does that separate you from other growers? Mr. Jennings: At the end of the day you have to understand that cannabis is an agricultural product. It is a living plant and just like any other product whether it is tomatoes, corn or soy, hybridization has been the cornerstone of creating more hardy, vigorous and fruitful versions of these crops. That is something that we have done to improve our critical crops for thousands of years. As such, as a cultivator in the mid to late 1990’s, beginning the process of creating new genetics through hybridization was a necessary step to break away from the type of monoculture that cannabis was becoming. To me this evolution is just part of what we do as humans: to interact with the plant world through the natural human desire to improve them and create new varieties.
CEOCFO: You are producing both recreational and medicinal cannabis. Why the decision to be involved with both? Do you have a large enough organization to handle both? Mr. Jennings: Absolutely. In reality, the way we categorize medical and recreational cannabis from a production standpoint they are the same. So all of the cannabis products that we produce will be able to be sold into both markets without any fundamental changes from an organizational or production standpoint.
CEOCFO: Are you focused on one above the other? Mr. Jennings: In the constricts of the California market, it is going to be a blend of medical and recreational. Therefore, as a company, we want to be able to reach the entire market and the only way to be able to do that in the context of California was have medical and recreational product line. On a deeper level I think the true revenue drivers, as with most of the other legal markets where there is a dual market of recreational and medical, recreational is the primary revenue driver. For me, I have a passion in me about what the cannabis plant can actually do on a medicinal level and that is something that has not been explored in any meaningful way because the scheduling on the federal level in the United States. We have never in the United States, been able to truly research the potential of the cannabis plant in the medical context. Now we are reaching a point where here in the near future, I think that is going to open up and we are going to be able to really commit the proper resources to exploring what those benefits of cannabis can be, and that is why we want to be in the medical market; it is not necessarily the revenue driver, it is really about that enabling us to be a part of the group of people that really discover what the medical cannabis can be.
CEOCFO: What is involved in developing and bringing medicinal cannabis to the market? Is R&D a major area for you? Are you involved with integration with other natural products such as cannabis with turmeric? Are you developing products for specific disease states such as arthritis or neurological disorders or cancer? Mr. Jennings: On a basic level, it is one and the same because our standard operation procedures, our cultivation packages, our technique, and our facility design are all of the standard to produce both medical and recreational products. On the operational level there is not any difference between medical and recreational. The only difference is what the ultimate use of that product is going to be. So for example on a basic level, you can have topical cream that you apply as a local anesthetic, you can have it extremely high-potency for medical use and then you can also use that same oil that was used to make that cream, you can use that oil and fill a vapor cartridge and that can be sold into the recreational market.
CEOCFO: Are you just producing flower? Mr. Jennings: At this point our focus is producing flowers and streamlining and perfecting that process in our first facility. We have the licensing to produce any consumer products but at this point we really want to focus on ramping our core operations. In our first facility we will produce nursery products, seeds and clones, and flowers.
CEOCFO: Who are you selling to? Mr. Jennings: Our seed to sale model goes to the retail level, but the final piece of the integration is the retail outlets. The reason we are not going retail is that is the final vertical. We will attack that after we fully ramp all our other verticals, because I have own dispensaries in the California space. It is essentially low-margin, high-labor model. So it is intensive from the managerial standpoint. For our core operation we feel that is the last piece of the puzzle. So in the initial stages of our operation we will be targeting wholesalers and retailers directly through our NGW distribution license.
CEOCFO: Are you the member of management tasked with setting up the distribution channels? Mr. Jennings: Absolutely. I have been not only breeding and cultivating in this space but I have also been selling my own product and other products, distributing in the California space, for a long time. During that time I have developed relationships with some of the top dispensaries and some of the largest distribution networks, so the groundwork has already been established for us to access the market once we have products.
CEOCFO: What sets your recreational products apart from others on the market? Mr. Jennings: On the recreational market, our entire focus and platform is premium produces, so if you look at the recreational market as a pyramid, we are focusing on the top 10% of the market. We want to be a craft producer of premium and manicured top-quality flowers and oils. That is our main goal.
CEOCFO: Would you tell us about your growing and production facilities? Is it close to completion or completed at this point in time? Mr. Jennings: Absolutely. We are over 90% complete with our Phase 1 facilities which is a 35 thousand square ft. indoor garden operation that will include 14 flowering rooms, three vegetative rooms, one mother room, one clone room, and all of the other necessary support facilities and equipment. That facility just in the flowering space alone, holds 700 1,000 watt high pressure sodium lighting fixtures and over 400 tons of HVAC. I designed the building from the ground up based on a high-quality, high-volume, high yield premium production model.
CEOCFO: Are your growing operations going to exclusively be in California or are you considering other locations? Mr. Jennings: In Coalinga we have over 15.5 acres of buildable land. Coalinga is in central California between Los Angeles and San Francisco, off of the Interstate 5 freeway. Our ultimate footprint in Coalinga will be 370,000 sq. ft. Our footprint capacity in Coalinga is going to be 370,000 square feet. We are looking at having those build-outs completed by the end of 2020. Once we have reached capacity in California we will begin to explore the available opportunities in other emerging market jurisdictions like Australia, Europe, the Caribbean and Central and South America.
CEOCFO: Are you funded for your current objectives? Will you be reaching out to the investment community or for partnerships? Mr. Jennings: At this point we are fully funded to complete Phase 1 and we have sufficient funds to ramp operations and get to revenue. Now the goal is we want to minimize dilution, we want to be prudent with from a fiduciary perspective to our investors, and we feel that the best way to do that is to get to revenue as fast as possible in Phase 1, ramp as quickly as possible, get to market as quickly as possible and get to the point where we can start expanding based on our internal revenue generation. That is the goal and the plan. We are fully funded to finish our Phase 1 facility and we have enough runway to get us to revenue so we are looking very strong.
Mr. Hughes: The majority of outreach for potential investors have really come from the experience of the guys that have the corporate and public experience that are involved in the industry and the business. Myself having an IR/PR, as well as marketing and communications company for 13 years, there are ways and channels in which you can organically get buyers, but there are also those paid channels as well, so you have to have a blend. Paul Chow, our Co-founder has had 20 years of experience in running or being involved in companies that are on the CSE and TSX here in Canada. A lot of those are buyers and investors have come through his reputable channels here in North America. Therefore, it is kind of internal and also external channels that we know work. The cannabis industry from the public side is still immature and new, however you can look at the trends that are used by mature cannabis companies, all the way to early stage public companies like Next Green Wave, and it is not figure out which one work and which ones do not. There are also restrictions around investments with cross-border issues and legislation across the provinces in Canada and also the United States, where some states are very rigid.
CEOCFO: Why will Next Green Wave be the company to watch? Mr. Jennings: I think the easiest way to put this is in three categories. Where we are, who we are, and what we are doing. Where we are is in the premium cannabis market on the planet. If you combine all the other legal cannabis markets on the globe, California is still bigger. If you are going to choose a place to start your cannabis company, California is the place. Who we are is my experience and ability in the cannabis space, my track record and what I have done, you combine that grassroots cannabis knowledge and experience with the high level ability of our team in Canada, with access to capital, those three pillars are the recipe for success. We talked about being in the right place of California, who we are, grassroots cannabis, high-level executive capacity. The third is what we are doing, and I have created a vertically integrated business model in all the proper verticals. We have all of the IP and SOPs and ability to grow premium products. That is it.
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“Next Green Wave is laser focused on becoming the number 1 consumer product
goods company in Cannabis in California”
Next Green Wave
Contact: Leigh Hughes
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