James E. Wagner Cultivation Could Excel with its Aeroponics Cannabis Growth

James E. Wagner Cultivation Corporation (TSXV:JWCA) has also entered into strategic partnerships with Canopy Growth Corporation (TSX:WEED) (NYSE:CGC) and Canopy Rivers Corporation (TSXV:RIV)

SmallCapPower | October 3, 2018: James E. Wagner Cultivation Corporation (TSXV:JWCA) is a licensed producer of medical cannabis under the Access to Cannabis for Medical Purposes Regulations (ACMPR), operating out of a 14,904 square foot facility in Kitchener, Ontario. James E. Wagner Cultivation produces cannabis through aeroponic technology, which was originally designed by Richard Stoner in the 1980s and further researched by NASA.

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JWCA’s proprietary methodology, GrowthStorm, is used in its current facility in Ontario, targeted to produce 1.5 million grams annually in seven grow rooms. The Company estimates 28.5 million grams of production in its second facility under development, a 345,000 square foot retrofit, which is anticipated to be completed in the second quarter of 2019. Once the second facility is up and running, James E. Wagner Cultivation believes it could be the largest aeroponics cultivator of any crop in the world.

In the future, as part of its long-term business goal, JWCA will be establishing licensing agreements for its technology and infrastructure to existing licensed producers. James E. Wagner Cultivation is managed as a family business and run by a family with generations of cannabis and agricultural cultivation experience since before Prohibition. When it comes to contemporary regulations, the family has been cultivating cannabis since 2008, when CEO Nathan Woodworth received a cultivation license under the Medical Marijuana Access Regulations (MMAR).

James E. Wagner Cultivation currently trades at a market capitalization of C$96.4 million on the TSXV with a price-to-book multiple of 3.92x. The Company has been carving a niche for itself in the cannabis industry through its aeroponics technology.

Investment Thesis

  • Aeroponics cultivation of cannabis
  • Strategic partnerships with other players

Aeroponic Cultivation of Cannabis

James E. Wagner Cultivation has developed a proprietary cultivation method – GrowthStorm – in 2017 that uses aeroponics to develop high-quality, cost-effective crops. GrowthStorm has four steps, which include the following: cloning (which reduces the risk for contamination); growing on the production platform; trimming and drying; and analytics and automation.

When placed in the aeroponic production platform, the plant roots remain suspended within the enclosure in a controlled room. In such an environment, the Company has set up consistent growing conditions, as they have the capability to control the climate, lighting and the provision of a balanced mix of air and water to the root zone, as well as targeted nutrient administration. Also, the controlled environment provides the opportunity for conducting accurate pharmaceutical-grade controls.

For trimming and drying, the Company has also designed a machine-based system that takes the plant from its initial cutting state and turns it into finished medicine in an efficient manner. James E. Wagner Cultivation also uses a cutting-edge drying system with separate individually-controlled chambers.

In addition to that, James E. Wagner Cultivation also makes use of the Pantheon software platform that performs automated collection and monitoring, while also producing real-time analytics. Using this system, the Company can observe nutrient levels and conduct real-time tracking of production progress.

GrowthStorm methodology results in a higher potency product that allows for uninterrupted harvesting not controlled by seasons, encouraging greater yields, and its controlled environments reduces the risk of exposure to insects and diseases. Apart from this, GrowthStorm requires less manual labour than other operations, thus reducing its costs further. The entire process has been designed to be scalable, allowing for rapid expansion across JWCA’s planned facilities.

Strategic partnerships with other players

James E. Wagner Cultivation’s revenue model is based on developing strategic relationships for wholesale and retail distribution of its products as well as licensing agreements for the GrowthStorm technology and infrastructure. The Company has entered into strategic relationships with other players in the same industry to expand the reach of its brand.

James E. Wagner Cultivation has entered into a strategic partnership with Canopy Growth Corporation (TSX:WEED) (NYSE:CGC), the second largest publicly-traded cannabis producer, and with its investment-focused subsidiary, Canopy Rivers Corporation (TSXV:RIV). Through this partnership, the Company has access to a world-wide database of high-quality genetics, industrial-scale oil extraction infrastructure, as well as an established product quality assurance process. The Company also has access to CraftGrow, an online store dedicated to providing shipments to partners quickly, as well as the Tweed Main Street online marketplace, which hosts Canopy’s operational, distribution, marketing and sales infrastructure.

Additionally, James E. Wagner Cultivation has entered into a research study with PRICE Industries. As part of this association, the companies are working together to evaluate PRICE’s GRW horticultural environments from the perspective of nutrient uptake and its role in optimizing growth potential and harvest yield. PRICE’s GRW is the only horticultural environmental control unit in the industry that can provide independent humidity and temperature control for optimal growing conditions, driving quality and experience.

Outlook and Valuation        

In terms of valuation, James E. Wagner Cultivation currently trades at a market capitalization of C$96.4 million on the TSXV with a price-to-book multiple of 3.92x. Catalysts for its stock price include licensing of its innovative cultivation technology, revenue growth acceleration following its first sales under the ACMPR during its fiscal third-quarter 2018, as well as inclusion of their product on Canopy Growth’s Craft Grow store shelves, and plans to build out its patient roster during Q4.

Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.

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