Atlas Growers Ltd CEO Sheldon Croome has inked a deal with Namaste Technologies Inc (CNSX:N) (OTCMKTS:NXTTF) (FRA:M5BQ) to supply medical cannabis. They are fully vertically integrated in that they will grow and process their products. One of their investors is the Alberta Treasury Branch, which is essentially an endorsement by the local government. They are based in the Edmonton Alberta area which has competitive electrical power costs as well as potential tax credit advantages.

TRANSRIPT:

James West: Sheldon, thank you for joining me today.

Sheldon Croome: Thanks, James.

James West: Sheldon, let’s talk a bit about Atlas Growers. What are you doing now, and what are you going to do in the immediate future, to enter the ACMPR grower space?

Sheldon Croome: So we’re currently in construction of a 38,000 square foot facility.

James West: Your first one?

Sheldon Croome: That’s our first one. We’ve purpose-built it to cultivate cannabis; it can essentially produce 5,000 kilos per annum out of the gate, and we expect fully functional, we can do about 9,000 kilos. We’ve also got access to 160 acres of property, so our next expansion is actually a 350,000-square-foot facility to start construction in 2019.

James West: Purpose-built greenhouse again?

Sheldon Croome: Purpose-built indoor cultivation facility, actually.

James West: Okay. So you’re not using the natural sunlight, of which there’s probably not a great deal in Edmonton?

Sheldon Croome: Not in the winter, the day cycle is quite small, so yeah, we decided to go indoor. It also gives us the best control over the environment, I suppose.

James West: Sure. You’ve inked a couple of interesting deals lately, one with Namaste Vapes. So tell me how that came about.

Sheldon Croome: Absolutely. So he – well, Sean Dollinger, the CEO of Namaste – had approached us about an investment. He was interested in investing and also wanted to work something out where we could guarantee some supply. So we decided it was a good move and a good fit for Atlas, so we decided to sign a deal with him to supply up to 1,000 kilos per annum.

James West: Okay. So if I was to ask you, what’s your main competitive differentiator from all of the existing ACMPR growers, how would you respond to that?

Sheldon Croome: Our strategy is a little different than most of them. We decided to take more of a biotech and biomedical stance, so we are going to still service the recreational market, but we’re not necessarily focused as much on recreational. We figure the demand, at least, with our first facility, keeping that primarily medical will be able to suffice for us to be pretty much at capacity with the medical.

But yeah, I mean opening up the expansion, we would be going into, obviously, recreational. But yeah, I mean, for us it’s really about quality control, adhering to the highest standards of cultivation…it’s truly a state-of-the-art lab that we’ve built. We have full vertical integration, from cultivation all the way through lab testing and extraction. We’ve got some good strategic partnerships that we’re setting up with a couple of other ACMPR-licensees in Canada as well, and some other international relationships that we’re setting up, which I think will give us a good global reach and a good way for us to distribute our products to a wide variety of customers.

James West: Okay. I saw that the Alberta Treasury Branch has made an investment in your company, and that strikes me as significant because that’s essentially a provincial-government-affiliated financial institution who has now decided to wade into the sector, and I understand that you have a number of facilities being built in the Edmonton area. I’m curious as to what the attraction is to Edmonton and Alberta considering the shorter, you know, daylight availability in the wintertime, the extreme temperatures in the wintertime. How are you going to compete with, say, companies that are perhaps like in Colombia or California when all of this global competition comes live?

Sheldon Croome: Absolutely. I’m not as concerned about the US for the time being, because until that Federal legalization happens, at least they’re still, you know, not quite able to distribute internationally. But when it comes down to it, Edmonton, or Alberta in general, is a good hub due to cheap electricity, which makes the indoor cultivation a little bit more affordable.

James West: How many cents per kilowatt hour.

Sheldon Croome: It’s $0.08, currently.

James West: Eight cents?

Sheldon Croome: Yeah, it’s about that, I mean, it fluctuates a little but, but – so it’s relatively reasonable. There’s also just, I mean, there’s good tax incentives as well that the government’s got out there for advancing agriculture. There’s different –

James West: Subsidies?

Sheldon Croome: There’s subsidies and tax credits. I mean, you have to apply, obviously, but I know, for instance, one of our competitors was able to line up a pretty solid tax credit, I think recently. We’ve also been looking – well, we’ve already been working on and pursuing several tax credits and subsidies. But yeah, with the Alberta Treasury Branch, that financing deal was quite monumental for us just because they’ve been approached by about a hundred different companies that wanted to do this. I’ve been working with them since September 2016 to line this all up, and they decided to go with us because, in their words, we were head over heels more prepared than the rest of them.

James West: Okay. So then in the immediate term, what are the milestones that you’re going to achieve that should be demonstrative to investors that you’re going to actually perform?

Sheldon Croome: So the milestones that we’re really looking at right now is, can we obviously cultivate a good crop? That’s probably the biggest thing that will differentiate us from some of our competitors, at least in speaking to – we’ve done several surveys through the Canadian cannabis consumers, and essentially we’ve found that some of them are maybe not as satisfied with what they’re purchasing at the moment. I think that’s changing quite quickly, because they’re obviously learning, they’re getting better genetics and whatnot. But one of the biggest complaints we got was that they just weren’t getting the quality they wanted.

For us, that was an important factor when we created a relationship with Jim Hole from Hole’s Greenhouses. He has cultivated thousands of different, I think he said about 1,500 different types of plants, actually, and cannabis is a plant, and plants – it’s really just science in the end. So if you know the science and you can achieve the science properly, then you should be able to achieve the highest standard of cannabis, and that’s really what we’re striving for. So that really is the next milestone for us, is, you know, cultivate a very healthy and well-developed crop with proper phytochemical production.

James West: Okay. What’s your go-public strategy?

Sheldon Croome: So go-public strategy, we’re currently working through that right now. We’ve got three different underwriters that are essentially bidding on us right now, or they’re pitching us to see. We’ll decide which one we’re going to go with. But we are looking at basically summer of 2018 to go public. So we’re going to wait probably about another five or six months.

James West: So, imminently.

Sheldon Croome: Yeah, pretty much. The wheels are turning.

James West: Sure. Okay, we’re going to leave it there for now, Sheldon, that’s a great overview. We’ll come back to you in a quarter’s time or two and see how you’re making out. Thanks for coming in today.

Sheldon Croome: Thanks, James.