Raising Cannabis Capital 0122: HempTown USA

CBG is sometimes referred to as the 'Stem Cell' of the hemp plant.  HempTown USA believes that CBG's benefits are far greater than CBD and has made a substantial investment to be positioned to supply the demand.  Michael Townsend joins Dan Humiston to talk about their farms in Oregon, Colorado and Kentucky.  He also talks about their PRE-IPO Equity Round and how investors can participate.  

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Dan Humiston:
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Michael Townsend:
Things that carry its anti-microbial antibacterial anti inflammatory. It's very good for skins. We believe it's going to be big in the skin care industry where they use a small amount and the costs won't be as prohibitive. Some people call them style of Cannabis, but they just the first compound that the plant produces. As the plant grows through its growth stage, it synthesizes the EPG into THC or CBD. It's the precursor cannabinoid.

Dan Humiston:
From MJBulls Media, it's the Raising Cannabis Capital show.

Dan Humiston:
I'm Dan Humiston. And on today's show, how this multi-state Hemp company has invested heavily in growing Hemp high in CBG, which could be the next big thing in Hemp.

Dan Humiston:
Today in Raising Cannabis Capital, we are joined by Michael Thompson from Hemp Town, USA. Michael, welcome to the show.

Michael Townsend:
Great. Thanks for having me.

Dan Humiston:
We're really excited to talk to you because since the passing of the 2018 farm bill in the US, Hemp farming has just exploded and it's mostly fueled by the demand for biomass and Hemp extract, which I got to say Hemp Town USA looks perfectly positioned to supply this demand to get started. I thought maybe we would talk about how well your position. Let's jump in and talk about your Hemp farming operation.

Michael Townsend:
Absolutely. So yeah, I just want to mention that we did start in 2018. Crop in 2018, which we've been able to monetize in February, April of this year, approximately 10 million dollars worth of Hemp. We grew hundred 110 acres in Oregon and this year we've expanded that farm for the 2019 season to 500 acres. And we're also planting a novel cannabinoid profile to CBG Cannabis all

Dan Humiston:
Last year you did one hundred and ten acres and this year quadrupling that, bringing it up over 500 acres. I think I read on your website that you're in a couple other states, too. Correct?

Michael Townsend:
Yes. We have a joint venture in Colorado where we're actually farming a thousand acres, of which we have a 50 percent interest. So not 500 to us. And then also we're in Kentucky and in Kentucky, we have 24 farmers that are all Philip Morris, tobacco farmers that wanted to try Hemp farming three states.

Dan Humiston:
And I and I wasn't keeping up with the math, but it's a lot of acres and hundreds is the number we're using.

Michael Townsend:
And now approximately three million plan.

Dan Humiston:
Yeah, I was going to ask just give us an idea of how many pounds will you project to harvest this year?

Michael Townsend:
Yeah. So it's again, it's around that 3 million number. We project about one point two for one point two five pounds per plant and there's sixteen hundred and fifty plants per acre. So that's about 2000 pounds per acre. And then fifteen hundred acres or three million pounds. The CBD dominant biomass is treating in the sort of 30 dollars. Last year we got fifty six dollars for our Oregon biomass, but it was it's very superior biomass and we timed it really, really well this year. We sort of in our model, we've got between 25 and 30 dollars in our financial model for the CBD, which we have 2 million pounds of. And then the CVG sells for a couple of hundred dollars a pound. And there's just not a lot of it around. We actually ended up with 43 percent of the seeds that were produced this year. So we're the dominant player in the United States.

Dan Humiston:
I saw that that you made a really significant investment in CBG. You know, you've talked about it a minute ago, but maybe just expand a little bit further on the different, you know, CBD and CBG IV. Obviously, it's worth more money because it's not grown as much.

Michael Townsend:
It works a little bit better than the CBD. And, you know, on specific things, that anti-microbial antibacterial, anti inflammatory is very good for skins. We believe it's going to be big in the skin care industry where, you know, they use a small amount and the costs won't be as prohibitive. Some people call it the stem cell of this Cannabis because it does look first compound that the plant produces. As the plant grows through its growth stage, it synthesizes the CBG into THC or CBD. It's the precursor cannabinoid.

Dan Humiston:
Wow. I mean, you really made a commitment to this. I think you told me that 25 percent of your plants in the ground right now are living.

Michael Townsend:
Higher than that were 1 1 million other 3 million. And we paid 2 million dollars for those seeds. Those seeds are two dollars each. If you can get them and no one else get them right now, I think as time passes, they'll become more prevalent in the market. And then we also bought Oregon CBD seeds test crop of CVG. So they test in the fields for three years before they commercialize the seed. We bought their test crop as well. So we've got a couple of thousand pounds of CVG, which seems like you've cornered them BBG market.

Dan Humiston:
I hear insane numbers for the margin like as high as 80 percent margins. Just give us an idea, a realistic idea of what are even higher.

Michael Townsend:
You know, we thought it cost us only about five dollars a pound to do well with the CBG at six dollars a pound. We have to spend the extra dollar for about six dollars a pound retail. We had close to 200 dollars a pound, so that's 95 percent margins. So over cost of goods sold. I mean, obviously we have overhead, et cetera, et cetera, but very high margin products. And now that. And then on the CBD is also north of 50 percent margins. And then so we blend it down. We have more CBD. So overall, our margins are coming in around 75 percent people together.

Dan Humiston:
Wow. That's so good. You just finished around, you know, this continue with your hot streak. Yeah. You hope to raise 18 million. You pass that like partway through, you out oversubscribed. You actually took in twenty four million dollars in that round.

Michael Townsend:
24 million Canadian dollars. That's right. On our series. A round. Yeah, we're very happy with that. But we have been deploying capital quickly in order to be a low cost producer which we want to be in that low quartile cost producer. We've spent a lot of money on mechanized and millions and millions of dollars have gone into infrastructure. To reduce labour costs. Get our costs down so we can do the low cost producer and supply some of these big brands. The reason we think you haven't seen the big brands come into the CBD space yet is it just hasn't gotten down to that price where they can afford to put it into a can of whatever it is.

Dan Humiston:
I want to take a quick break to think all of our Raising Cannabis Capital listeners and to remind you that you can support the show by subscribing to MJ Bell's premium. It's only four dollars and ninety nine cents per month and you gain access to all previous Raising Cannabis Capital episodes as well as all other MJ bills produced podcast and exclusive content, including companies, investor pitch decks, good MJBulls.com and enter promo code raising to get your first month free.

Dan Humiston:
So back to the raising capital, I mean, I heard everybody give a sign when I told them that you'd close that round, but everyone's gonna be excited to hear that you've opened up another round.

Michael Townsend:
Yeah, that first round was a convertible debenture, which is typical in the series A and then we just decided we wanted to do an equity raise. We needed a bit more money. We had a very good acquisition recently. We bought a company called Kirkman Group and they're neutral cuticles. They have been in business for 70 years. They have 400 skews. They have a GMP GMP facility, 25000 square feet. They have FDA pharmaceutical manufacturing license, the big platform for us to blend and formulate CBD CBD products. Plus, they're already doing six million a year in revenue. And we think with our skills at marketing and with their products alone, we can get them up to 10 9 year in revenue. So we needed to raise some more capital being raised right now in dollars 70 US. It puts the valuation of the company at about 125 million US. We're raising about 15 million dollars. You asked at that level and we've been in New York last week. We're in New York again this week, Toronto the following week. It's been good. We're taking lots of meetings and everyone wants to talk to us as well.

Dan Humiston:
I'm not surprised, especially given the margins and the position that you guys have found yourself in. All of this is tied into potential IPO in Q4 this year at the game plan.

Michael Townsend:
Yes. A week we're gonna have to make a decision here probably in the next 45 days. There's there's people backed up in Canada categories our lead that they prefer to see us go to the big board, TSX IPO, get it done faster, get out in front of some of the other groups that may be thinking about an IPO and then uplift on the Nasdaq in the new year. And then there's there's other groups we're talking to. We already have a couple of US banks. So we're working with and they would prefer to see it on Nasdaq. We've spoken to Nasdaq now that has cleared us as far as Hemp goes. Now that it's federally legal. So if we elected to do a Nasdaq IPO, we would probably get a better valuation and probably get more liquidity, but it would take another three months, another quarter. We'll make that decision in the next 45 days. I think it's you know, the money will decide ultimately if we have a bank foreclosing. There's a hundred million dollars here going public on the TSX, we'll say up there.

Dan Humiston:
Yeah, it definitely will influence investors decision right now with this round that you're in the middle of right now.

Michael Townsend:
So, yeah, we're definitely on the fast track to an IPO. We're we're we're doing you know, we've had the auditors engaged, the audit underway. We're full steam ahead toward an IPO.

Dan Humiston:
Well, you're full speed ahead on a lot of different things. We've been speaking with Michael Townsend from Hemp Town, USA. I have all of his information on the people's website, including if investors are interested, we can get all that information on our Web site. Michael, thanks for being on the show. Exciting stuff.

Michael Townsend:
Yeah, I really appreciate your time. And we look forward to talking to any of your listeners.

Dan Humiston:
Good luck with this. Thanks for listening to Raising Cannabis Capital to learn more about today's guests or to become a guest. Visit our Web site at MJBulls.com. Today's show is produced by MJBulls Media Media with original music produced in part by Jamie Humiston. I'm Dan Humiston and you've been listening to the Raising Cannabis Capital podcast.

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