Creative Edge CEO Bill Chaaban Creative Edge Creative Edge Nutrition, a Michigan-based nutritional supplements company, has come up with an interesting plan to legally sell pot on a large scale.

The company believes it could generate as much as $5 billion a year at more than 80% profit by selling medical pot in Canada.

Creative Edge launched a Canadian subsidiary, called CEN Biotech, and hopes to grow medical marijuana in that country, up to 1.3 million pounds annually.

"1.3 million pounds equates to about $5 billion a year — you're looking at $8 gram — at 80-87% profit," CEO Bill Chaaban told Business Insider.

That would be a pretty big feat for Creative Edge Nutrition, which is trading for about 9 cents right now. Creative Edge is an "over-the-counter"/Pink Sheets stock, meaning it's a high-risk stock not traded on a stock exchange.

Creative Edge's application to grow pot in Canada hasn't yet been approved, Chaaban acknowledges. And it's competing with several hundred applicants, industry site Marijuana Index reports.

But he shared these details could the company get the nod:

Canada changed its medical marijuana model into something called "super growers" where companies grow pot under strict pharmaceutical regulation and sell it directly to consumers. There will be no dispensaries. As of April 1, people will no longer be allowed to grow their own pot, reports the Vancouver Sun.

Creative Edge plans to sink $12 million into building a facility that can grow a huge amount of pot.

The $12 million is coming from a company called GrowLife that makes marijuana growing equipment and is financing the facility in exchange for a 25% stake, Chaaban says.

Venture capital investment wasn't a good option. VCs willing to invest in pot ventures want to take "upwards of 70%" equity, Chaaban says.

This plan works in part because, Creative Edge, the parent company, is located physically close to Canada in Madison Heights, Mich., a suburb of Detroit. The site for the Canadian facility is in Lakeshore, Ontario, right across the border from Detroit.

CEN Biotech says it could even be possible to sell its pot internationally, to 29 countries that have pharmaceutical trade agreements with Canada and view marijuana as a legal narcotic. Israel is one of the biggest of those markets.

Obviously, the legal marijuana industry is young and full of risk. But here's a look into the reason why this CEO is eager to take on that risk.

Business Insider: Tell me how this idea began.

Bill Chaaban: We started in the nutrition supplement business, launched a brand called Cenergy and over the years acquired some e-commerce sites that sell just about every brand of sports and dietary supplements.

About a year and a half ago, we decided we wanted to get into medical marijuana. I canvassed the regulatory landscape and I found it was too risky for a public company to grow and sell medical marijuana.

Then an opportunity presented itself in Canada.

BI: Can you tell me more about the Canadian marijuana model?

BC: The Canadian medical marijuana program is run by Health Canada which is like Canada's FDA. They are changing their system in Canada to license large super growers to supply the whole market. You grow it and sell it directly to the patient, there would be no dispensaries.

BI: Does that mean that there will only be a few companies supplying all of Canada?

BC: There's no limit on the number of companies they are going to license, however getting a license is very difficult. A lot of cities in Canada don't want commercial growers in their cities and you have to have the local police and fire approval.

Our license, that we applied for, is for import/export and sale of medical marijuana and we applied to grow and sell 1.3 million pounds per calendar year.

BI: Without dispensaries how will this work?

BC: Once you become a licensed producer, you'll be put on the Health Canada website. As of April 1, Canada won't require a card. You go to your health care provider — a physician, a physician's assistant, a nurse practitioner, a dentist — anyone able to prescribe a narcotic — and they write a prescription.

You send the prescription into a licensed producer and you pay the producer directly. It's shipped to your home via courier ... everything is shipped with a secured carrier with chain of custody.

In Colorado, there's a growing industry of "edibles," food and drinks that includes pot. Is that happening in Canada?

No. Not at all. It's basically just the bud, not edibles.

What are your plans to sell marijuana in the U.S. market?

We've hired lobbyists in Michigan to support some bills in Michigan, like Bill 660, which actually reflects the Canadian market slightly, where Michigan is calling for super growth authorities ... also Michigan wants medical marijuana to only be dispensed in a pharmacy.

Those bills have passed and we've already found locations in Michigan and we're in talks with Michigan legislature. We're just waiting for [a change in] federal law.

You mention import/export. What other countries are involved and how?

Under the U.N. convention of control of narcotics, there's 29 countries that view medical marijuana as a narcotic. So every single one of those countries will be a market we're going to try to sell to because we'll be backed by the Canadian government.

[For instance,] Israel and Canada have a free trade agreement and over the last 25 years, Israel and Canada have been supplying each other's populations with medicine.

Health Canada also allows importation. We'll be able to import seeds from any of those countries where growing medical marijuana is allowed: Netherlands, Columbia, Mexico, Israel and other countries.

What costs are involved?

Our investment in our [Canadian growing] facility. It will cost $12 million to build it. And we're keeping a $4 million war chest for operations, lobbying, etc.

Taxes will be remitted to Canada. It can be taxed from 5%-13%, depending on the Province.

We'll be growing the marijuana in a sterile environment, using the standards as if we were manufacturing drugs. Any employee comes to work has their temperature measured. If they are ill, they are not allowed into the facility. People wear scrubs, hair nets, uniformed. You have to have third-party lab testing.

What kind of revenue and profits do you expect to make?

1.3 million pounds equates to about $5 billion a year. You're looking at $8 gram. You're selling by the gram at retail level. Wholesale will be by the pound, but majority of sales will be retail. Profit margin: 80-87 percent profit.

Will it be as lucrative in the U.S. as it will in Canada?

That depends on the model. Obviously, if you are growing at scale, the costs come down. The largest players are going to stand out and be more profitable than the smaller players.

How did you raise the money you needed?



We entered into a collaborative partnership with a company called GrowLife and sold them 25% of our revenue stream. They are funding our operations, providing financing and equipment. They are in the picks and shovels part of the business. They sell lighting and equipment to other growers.

It's very hard to get bank financing and it's hard to get VC financing. You can get it from them, but the problem with VCs is that they are all looking at having way too much equity. They wanted upwards of 70%.