James E. Wagner Cultivation, a Canadian licensed cannabis producer based in Ontario with plans to go public in the very near future.

Canada’s cannabis industry could reach C$22.6 billion over the coming years, according to Deloitte, driven by the legalization of adult-use cannabis later this year. While there are over 100 licensed producers, many analysts believe that there could be a shortfall in production as the country’s domestic market and export opportunities continue to grow, which creates numerous opportunities for investors to profit in the space.

James E. Wagner Cultivation is a unique opportunity in the space that is built upon a long family reputation dating back to the 1920s and 1930s in the tobacco industry. Following the original James Wagner’s legacy, the family-owned business became a licensed producer of medical cannabis under Health Canada’s ACMPR program last year.

Rapidly Expanding Operations, Proprietary Aeroponic Grow System

While James E. Wagner Cultivation, or JWC, started as a small family enterprise and maintains that familial feel, the company has much larger ambitions. Since receiving its initial cultivation license in January 2017, the company has grown consistent, high-quality medical cannabis at its 15,000 sq. ft. facility in Kitchener, Ontario using its patent-pending GrowthStorm™ aeroponic growing technology.

The GrowthStorm™ system begins with a cloning process that costs as little as ten cents per cutting with high yields and no contaminants. The plantlets are then inserted into a modular hydroponic growth system based on aeroponic techniques developed at NASA where plant roots hang within an enclosure. Fast and efficient machine-assisted hand-trimming systems along with innovative drying systems round out the process to yield sale-ready products.

In February 2018, the company entered into a lease agreement for a second 345,000 sq. ft. facility in the same city. The company is actively working on a phased expansion of the second facility, which is expected to significantly increase its production rate. Management expects the second facility to be up and running in Q3 of 2018, and to complete the whole facility in Q3 of 2019. JWC believes that, upon completion, the new facility will be the largest aeroponic operation in the world.

In addition to its in-house efforts, the company entered into a strategic partnership with Canopy Growth Corp. and its strategic investment arm, Canopy Rivers Corporation. The partnership provides the company with access to high-quality genetics sourced from around the world, industrial scale cannabis oil infrastructure, and a rigorous quality assurance program, as well as online distribution through CraftGrow and Tweed Main Street.

Near-term Plans to Go Public

James E. Wagner Cultivation entered into a business combination agreement with AIM1 Ventures Inc. in April 2018, which paves the way for JWC to go public in Canada’s TSX Venture exchange. Under the terms of the deal, JWC will complete an over-subscribed brokered private placement financing for $18.5 million in gross proceeds.

Since the industry’s humble beginning, licensed producers have grown to achieve multi-billion dollar valuations. Canopy Growth Corp. is the largest licensed producer with a market capitalization of more than C$7 billion, but there are at least ten companies in the space with market capitalizations of more than C$1 billion. Canada’s legalization of adult-use cannabis later this year could pave the way to even greater valuations over the coming years.

Investors interested in the space may want to consider companies that are preparing to go public since they aren’t already valued at lofty multiples. In particular, investors may want to consider a company’s operating history, financial performance, and proprietary technologies when evaluating opportunities. Established companies with barriers to entry often represent better opportunities than development-stage companies with higher execution risk.

Looking Ahead

James E. Wagner Cultivation represents a compelling investment opportunity in Canada’s burgeoning cannabis industry. With in-house production ramping up next year and agreements in place with Canopy Growth, the company plans to produce upwards of 30,000 kilograms per year in its combined facilities. These products will be sold into Canada’s rapidly growing market as well as in potential export markets around the world. Interested investors are encouraged to keep an eye out as the company plans to go public in the very near future.