Maple Leaf Green World Inc (CVE:MGW)(OTCMKTS:MGWFF)(FRA:4HV) has a different approach to participating in the exploding cannabis industry: its going to grow in both the United States and Canada. CEO Raymond Lai joins us to explain.
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Transcript: (Edited for clarity)
James West: Raymond, thank you so much for joining us today.
Raymond Lai: You’re welcome, James.
James West: Raymond, why don’t we start with an overview of exactly what the business of Maple Leaf Green World is?
Raymond Lai: Sure. Right now we have three MJ projects on the go: one is in Canada, located in Telkwa, BC, and we are in stage 5, or the final stage of the new ACMPR application process.
James West: Okay, what is Stage 5, just for the audience’s information?
Raymond Lai: It’s the final stage of the ACMPR application process. According to the ACMPR regulations, the Minister must, after examining the information and documents required under section 33 [ACMPR Application Guidelines] and after all of the security clearances required by section 34 [Security Clearance Stage] have been granted under section 112, issue to the applicant a producer’s license.
James West: Okay. So that’s in Canada.
Raymond Lai: Yeah. And also we have a project in southern California. We have bought a parcel of land of 20 acres, but right now, we have only built one set, or two greenhouses, one for flowering, one for propagation.
James West: Okay.
Raymond Lai: That one is already in production for two harvests now.
James West: Oh, okay. So you’re producing and harvesting in California?
Raymond Lai: Yeah, right. It’s set up as a joint venture with a non-profit organization, under the present legislation. So whatever the joint venture/non-profit organization produces, they’ll pay us back in the form of leasing fee and consulting fee and a bonus. And for the first two harvests, they have produced 300 pounds, which is roughly around $400,000 US dollars in revenue. So we expect that in one year that we’ll produce close to $1 million CDN revenue from 1 flowering greenhouse.
James West: $1 million CDN total, or $1 million CDN for Maple Leaf Green World?
Raymond Lai: A million in total Revenue. The net profit portion will be channeled back to us in the way as consulting fee, leasing fee and bonus. And that roughly about 70 percent.
James West: I see. 70 percent of the net profit.
Raymond Lai: No, 70 percent of the revenue is the net profit.
James West: Oh, okay. And then you split that 50/50, or do you bill it according to 50 percent of the net revenue, or how do you determine how much the consulting fee is?
Raymond Lai: Oh, it’s a set fee we set up, but then anything above that we can treat it as bonus.
James West: Ah, I see. Okay.
Raymond Lai: So we’re keeping 100 percent of the net profit. But this is just a temporary set-up under the present regulation; they have a licensing scheme coming up, which will be set up in 2017. Under the licensing scheme, we can apply for a license to operate the facility under our control, so we don’t need to have this joint venture arrangement anymore, okay?
James West: Okay.
Raymond Lai: Also we are setting up an operation in Las Vegas, Nevada. We’re buying a license for a 33,500 square feet indoor growing. And we paid 500,000 for the license, which is quite a bit under the market value. And right now we are in the process of finding a location that’s suitable for the MJ production in the city of Henderson, which is about 15 minutes’ drive from Las Vegas.
James West: Okay. So in the State of Nevada, is marijuana legal for recreational purposes or medical purposes or both?
Raymond Lai: Both. Both California and Nevada are legalized for medical; they just passed the referendum that recreational will become legal effective January 1st, 2018.
James West: Okay.
Raymond Lai: We want to position ourselves ready for the big demand.
James West: Right. Okay, so it sounds like you’ve essentially got a foothold in those three jurisdictions, and you’ve got some minor production in California, but it sounds like you’re really getting ready to gear up to larger production?
Raymond Lai: You betcha, yeah. In 2017, that’s what we’re planning for. In Canada, we expect we’ll get the license in 2017. In California, we’re going to expand to build 9 more greenhouses in that 20 acres of land that we have, and each greenhouse would give us 1 million revenue, right, so 10 will give us 10 million.
And in Las Vegas, once we get the land, we will do the construction, we expect to go into production in the 1stquarter of 2018
James West: So what quantity, what kind of production will you get out of the Las Vegas operation?
Raymond Lai: The full license of 33,500 square fee will give us about 5,000 pounds of products annually, and that’s about $10 million USD revenue.
James West: Okay. So potentially you’re looking at a $22 million a year in 2017?
Raymond Lai: No. We probably will get $5 to $10 million from California in 2017. But in 2018, when Canada and Nevada operation get into full production too, we should get around Cdn$35 million in revenue.
James West: Okay. So how much money does Maple Leaf Green World have on the balance sheet now, and how much debt do you have, and how much are you planning to raise to accomplish all of your 2017 goals?
Raymond Lai: Right now, we have close to about $800,000 cash on hand, and we expect to raise $5 million from private placement ourselves, and we already have a commitment of $4 million. So $5 million CDN should be enough for us to do the construction in Las Vegas plus the renovation in Canada. California’s expansion can be funded from the revenue they generate.
James West: So the private placement, the $5 million raise you’re doing, at what price are you doing it?
Raymond Lai: We are planning, we haven’t announced it, to do it at $0.70 with a 1:1 warrants at $1.00
James West: Okay, interesting. So it’s a nice incremental raise up from your last raise. What did you do your last raise at, and how much did you raise?
Raymond Lai: $0.10.
James West: Oh wow.
Raymond Lai: We raised 550,000, and with a warrant at $0.15. We had a lot of people exercised the warrants.
James West: I’m sure.
Raymond Lai: …plus options.
James West: Yeah, that’s great. Okay, so is your plan to then expand in all three jurisdictions as you attract more capital and earn more money, or are you planning to expand into other US jurisdictions globally? What’s the broader plan for Maple Leaf Green World going forward?
Raymond Lai: Our ultimate goal is to produce oil, cannabis oil, because we do believe that oil is the way to go, especially for medical purposes.
James West: Yes, okay, so as an ingredient?
Raymond Lai: Yeah, well, in oil form. Not in the pot form.
James West: I see. So do you see yourself positioning yourself more for the recreational market yet to come, or are you looking to just focus on the medical aspect right now in Canada?
Raymond Lai: Let me put it this way: I want to focus on medical side, but when recreational becomes legal, I don’t mind providing high-quality, contamination-free product for recreational too, right? But I do believe that the medical side has more potential, not only in North America, it’s around the world, too.
James West: Sure.
Raymond Lai: And that’s how we are distinguished ourselves from the other MJ companies, we are not just a Canada or US MJ company; we are a North American MJ company, the locality of our projects are right at the strategically location. In Canada, we are in BC, so it’s close to the port of Vancouver for exportation to Asia, an untouched ground for medical marijuana. In USA, California is the biggest state. Their population is equal to Canada. Just for the medical side, they have over a million patients right now, compared to over 100,000 in Canada.
And for Las Vegas, of course, it is a tourist centre, so there will be a lot of tourists coming in to try out marijuana for medical or recreational.
James West: Right. Well, they get there and they want to do it for recreational purposes, but before they leave, they need it for medicinal purposes.
Raymond Lai: Exactly.
James West: Okay, well that’s an interesting strategy. So when you say globally exporting, what other export destinations do you envision exporting to in the next five years, say?
Raymond Lai: In Europe and South America, couple countries have already legalized recreational or medical, but the only area of the world hasn’t touched it is Asia.
James West: And you think that might be a possibility?
Raymond Lai: Oh yeah. Recreational may be a tough sell; medical, yes. Because I’m Chinese origin; even 3,000 years ago, we were already using marijuana for medical purposes. Only thing is at that time, we could not segregate between CBD or THC, so it had too serious side effects and stopped people doing more research into the potential medical uses of marijuana. Now is different, the technology is able to separate them, and it is proven the CBD can cure so many different types of diseases and illnesses.
James West: Sure. So is the Chinese government having an active discussion about the potential uses of medical marijuana right now?
Raymond Lai: I don’t know, but at least not in the public, and I don’t want to speculate or elaborate any more on that right now.
James West: I see. But I guess as a Chinese national, you’re in a better position to be ready to serve that market should it become an active opportunity.
Raymond Lai: That’s right.
James West: Okay, Raymond, tell you what: that’s a great first interview. Let’s leave it there for now. I will come back to you in a quarter’s time and we’ll see how you’ve progressed. Thank you for your time today.
Raymond Lai: Thank you, James. Nice talking to you.
James West: You too.
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