Hempco Food and Fibre Inc. (TSXV: HEMP) CEO Charles Holmes talks about why he did a deal with Aurora Cannabis Inc. (TSX: ACB)
Vasudha Sharma | August 18, 2017 | SmallCapPower: Canada’s second-largest medical marijuana producer, Aurora Cannabis Inc. (TSX: ACB), has an option to acquire a 19.9% stake in one of the world’s largest manufacturers of industrial hemp food products, Hempco Food and Fibre Inc. (TSXV: HEMP), for $3.2 million.
Hempco caters to the “Superfood” market with its product line of Hemp protein powders, seeds, nutraceuticals and also hemp fibres. Aurora’s investment into Hempco gives it access to the rapidly-growing health supplements market. But more importantly, the cannabis grower is keen on acquiring a steady supply of Hempco’s raw material that presently goes unused.
Hemp leaves and flowers, or ‘chaff’, is illegal to harvest at this time, but with legislation changes will be available for extraction of the high-in-demand Cannabidiol, or CBD compounds, which has the therapeutic effects of cannabis without the intoxication, or ‘high’, associated with THC prevalent cannabis. In anticipation of regulations being eased in the future to allow for extraction of CBD from hemp, Aurora Cannabis wants to secure its supply chain in advance, in line with its ambitious growth targets.
While for Hempco, CEO Charles Holmes reveals to SmallCap Power, this investment helps it tide over a cash crunch. “The benefit to Hempco shareholders from this investment with Aurora is two-fold. Obviously, the funding is the larger part. But also the management expertise to help us evolve,” says Mr. Holmes who is considered a pioneer in the hemp seed food industry.
According to Mr. Holmes, Hempco will continue to remain a functional food company even as it will support Aurora’s expansion into hemp-drawn Cannabinoids.
“Hempco is not intent upon going into cannabis,” clarifies Mr. Holmes. “Hempco is intent upon processing industrial hemp plants for what we call bio-active ingredients or derivatives such as CBDs or CBGs or CBNs or terpenes. These vital plant-sterols are important nutraceuticals. And any way that we can adapt ourselves with that, is the plan,” he says.
CBD (Cannabidiol) is the main non-psychoactive cannabinoid in cannabis with multiple medical uses. CBD is recommended in the treatment of children and the elderly. CBG (Cannabigerol) is another non-psychoactive cannabinoid that blocks the psychoactive effects of THC (Tetrahydrocannabinol), the most abundant cannabinoid in marijuana. CBG has analgesic, antibacterial, anti-epileptic, anti-inflammatory and neurogenic effects. CBN (Cannabinol) is a mildly psychoactive cannabinoid that has anti-insomnia, anti-proliferative, appetite stimulant, and bone stimulant effects.
Charles Holmes says that the synergies of this partnership are in sync with where the medical marijuana industry is headed. “Both industries, cannabis and industrial hemp realize that CBD is going to be a very important factor in the next cycle of the hemp industry and in general around the world, and which would bring about more medicinal products. It’s not just about smoking pot anymore. Now it’s about active ingredients or helping people overcome disease symptoms. So the commonality is that turf of producing high-quality functional foods for us. And for them more medicinal products for our customers,” states Mr. Holmes.
As part of this stake sale, Aurora Cannabis has been given the option to further buyout majority shares of Hempco. If it does exercise this option, it will raise Aurora’s total holding in Hempco to 50.1%. What does this mean for Charles Holmes, the man behind the rise of Hempco Food and Fibre? It was after all his personal pursuit for holistic health that led him to discover Hempco 17 years ago. And ever since, Mr. Holmes’ breakthrough innovations have transformed the family-run business into the world’s premier hemp seed food company. Assuring his shareholders, Charles Holmes says he will continue at Hempco, albeit in a new role.
“I will focus mostly as the Chief Visionary Officer,” says Mr. Holmes. “I would be focused more on leading in R&D and the company vision as chairman of the board while delegating his 17 years of information and know how to his team. And for the next six months, I will be focused on our new facility `equipment installation, strategic partners and R&D on new products innovation… our specialty!” he disclosed.
Hempco’s many ground-breaking processing and product ‘firsts’ include their hemp protein powder, non-dairy products like hemp milk and ice cream, and even Hemphuel, a biodiesel lubricant.
Hempco’s motto, “Hemp is the seed of possibility” is in fact reflected in how CEO Charles Holmes feels about their partnership with Aurora Cannabis. “We feel much stronger and comfortable having a big brother like Aurora with us now and knowing that they are on the same page to achieve the same goals and greater than what we have achieved here at Hempco. We are excited to be partners with them. And I believe they are truly interested and intent upon supporting the industrial hemp industry to grow as one of Canada’s finest industry. So I see a great opportunity for both companies. Together we are not just two companies now, we are a larger vision now with a larger potential. And I think the shareholders should be very pleased.”
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