ames West: Tyler, thanks for joining me today.
Tyler Robson: Appreciate it. Thanks for having me.
James West: Tyler, Valens Grow: what’s the main differentiator against Valens Grow versus the other ACMPR growers in the country?
Tyler Robson: Well, the fact that we’re not a grower changes everything for us. We’re a processor. We actually answer to the Controlled Substances Act, and we have a toll processing license. So licensed producers are limited to oil and flower; we’re much, much different.
James West: Okay. So toll processor, what exactly is that?
Tyler Robson: At the end of the day, the best way to explain it is bulk processing. We can buy product from any ACMPR cultivator or any LP, take it, process it, extract it, turn it into a refined product, and then resell it under that.
James West: Hmm. So you buy from other ACMPR grower, turn out a product and resell it?
Tyler Robson: Exactly. Sometimes we buy, and sometimes they gift it, and now we actually do a fee for service and give them back a finished product.
James West: I see. So it’s total, complete toll milling model, much like mining toll milling?
Tyler Robson: That’s exactly what it’s built after, yeah.
James West: Okay, so why is your finished product different from other ACMPR growers who do their own extraction?
Tyler Robson: Our infrastructure, our team over at Valens is superior to anybody else out there, I truly believe. The fact that we have a process in-house that actually is the first solvent-less extraction process, which leaves us a clear, translucent oil – if you look at some of our competitors, at the end of the day, it’s left with an orange-ish amber colour; ours is translucent, so it’s a much cleaner product, which we’ve truly perfected the process of extraction.
James West: So are you creating a raw ingredient for the creation of other sort of cannabis-based products, or is this a product that is designed for consumption by medical patients?
Tyler Robson: We’re doing both. Essentially right now we are making medical products for all the other ACMPR consumers or all the ACMPR growers, but at the end of the day, when you look to the future of the industry, edibles and tinctures, all those products are coming online. At the end of the day, the grassroots of that product will be oil, and we will be the leading company in that sector.
James West: Mm-hmm. So I see that you announced an arrangement with Canopy Growth Corp, or rather, Tweed Main Street, to provide product to that outlet?
Tyler Robson: Absolutely, yeah. We were very happy to do that agreement with Canopy; it basically helps us both, at the end of the day. It gives us an outlet for our distribution network, so the Canopy stores, or Tweed Main Street, will carry Valens products, and at the end of the day, it diversifies their platforms. So they have more products to offer their consumer base.
James West: Sure. So how do the economics work? What kind of money do you make for every kilogram of oil produced?
Tyler Robson: Well, when we extract it, we make about $12,500 per kilogram. It is the high margin area which we wanted to go after from Day One. Right now, we have the ability to extract 1,000 kilograms a month.
James West: And so you just closed on a $12.5 million financing, what’s that going to do for that capacity?
Tyler Robson: Extraction, and then ancillary products like that. So it’s much more than just an extraction machine; you need a decarboxillation oven, you need winterization products, you need ethanol; basically, it’s an all-in-house extraction process to take a whole bulk product and refine products at the end of the day.
James West: Sure. So you can produce 1,000 kilograms per year now?
Tyler Robson: Correct, yeah.
James West: And after you’ve invested the 12.5 million in infrastructure buildout, how much can you produce a year?
Tyler Robson: We’ll be extracting 10,000 a month right out of the gate. We’ve ordered other extraction machines, which come early April/end of March, so our capacity will be 10,000 kilograms by second quarter.
James West: So, in the most simplest terms, on the back of a napkin, your top line revenue is 10,000 kilograms times 12,500 per kilogram, once all this equipment is installed?
Tyler Robson: Yeah, absolutely it is, and the big kicker for us is, we’re not actually producing the product; all we’re doing is refining for other LPs.
James West: So zero crop risk.
Tyler Robson: Exactly. We’re not at a risk at the end of the day, and a lot of things too: we can help other LPs, because not only if it doesn’t pass Health Canada’s requirements for flower, we can actually extract or remove those pathogens or pesticides from it, and actually sell a clean, finished product. So not only can we process everything for them, we can actually help them in a lot of scenarios.
James West: So what happens if all of the LPs that you would rely on for raw materials decide that they want to keep it and sell it themselves? Have you got no business?
Tyler Robson: No, we actually have business too. We have the lab, the fully functioning Supra THC Services, which was named a centre of excellence by Thermo Fisher; that is already cash-positive, we’re having revenue. But at the end of the day, we will get to cultivation. We will be going after our own footprint once our LP license shows up, which will be in the near future, but right now, the demand for processing is extraordinary. We’ll be busy enough doing…
James West: How many other ACMPR-licensed facilities are there out there with a toll processing license?
Tyler Robson: Zero. We’re the first ones to achieve that status in Canada right now.
James West: So you’re the only one who can toll process for others?
Tyler Robson: Correct.
James West: And you have a dealer’s license as well?
Tyler Robson: Yeah, so we have two dealer’s licenses. The first dealer’s license was Supra THC, the analytical testing service; the second one is Valens Agritech, where we’re doing all the extraction.
James West: Okay, and how many other dealers’ licenses are there out there?
Tyler Robson: There’s about 20. Most of them are more scientific-based than we currently are. We do attribute a lot of R&D to that company, but we’re actually making a dealer’s license profitable at the same time.
James West: Okay. What are the range of products that you can use your product to be a raw material for?
Tyler Robson: At the end of the day, depending on the THC content, we can do everything. Health Canada has parameters of what we’re legally allowed to have in consumable products, but we’ll be looking at bath bombs, lozenges, gums, topical creams, tinctures, everything you can think of under the sun, once Health Canada permits it. The big thing too is edibles. Edibles aren’t coming online yet right away with legalization; in time, they will absolutely be there, and we truly believe we will be one of the first movers, having the ability to compound molecules under our current dealer’s license.
James West: Wow. And so how important is the recreational legislation to you guys?
Tyler Robson: It’s huge. At the end of the day, it’s huge for the entire industry. It brings a tremendous amount of focus on the sector and kind of what we’re doing. Right now, it’s strictly medicinal; a lot of people are consuming the product, whether they’re getting it from the black market or an LP system. The further we get to legalization, I think it’s going to bring a tremendous amount of credibility. Everything is going to be tested, everything is going to be produced ethically, so I’m really looking forward to the recreational market.
James West: Right. And so how tough is it to get a toll processing license?
Tyler Robson: It’s tough. Everyone knows Health Canada’s requirements are very stringent and time-consuming. The first time we applied was September 1, 2014, and we just got the processing license on December 21st of 2017. So about 38 months, start to finish, from –
James West: 38 months to get one license, and it’s the only one in the country?
Tyler Robson: Right now, yes. Absolutely.
James West: Well, that’s very impressive. Tyler, we’re going to leave it there for now; thanks so much for your time today.
Tyler Robson: I appreciate it, thank you.
Tyler Robson: Appreciate it. Thanks for having me.
James West: Tyler, Valens Grow: what’s the main differentiator against Valens Grow versus the other ACMPR growers in the country?
Tyler Robson: Well, the fact that we’re not a grower changes everything for us. We’re a processor. We actually answer to the Controlled Substances Act, and we have a toll processing license. So licensed producers are limited to oil and flower; we’re much, much different.
James West: Okay. So toll processor, what exactly is that?
Tyler Robson: At the end of the day, the best way to explain it is bulk processing. We can buy product from any ACMPR cultivator or any LP, take it, process it, extract it, turn it into a refined product, and then resell it under that.
James West: Hmm. So you buy from other ACMPR grower, turn out a product and resell it?
Tyler Robson: Exactly. Sometimes we buy, and sometimes they gift it, and now we actually do a fee for service and give them back a finished product.
James West: I see. So it’s total, complete toll milling model, much like mining toll milling?
Tyler Robson: That’s exactly what it’s built after, yeah.
James West: Okay, so why is your finished product different from other ACMPR growers who do their own extraction?
Tyler Robson: Our infrastructure, our team over at Valens is superior to anybody else out there, I truly believe. The fact that we have a process in-house that actually is the first solvent-less extraction process, which leaves us a clear, translucent oil – if you look at some of our competitors, at the end of the day, it’s left with an orange-ish amber colour; ours is translucent, so it’s a much cleaner product, which we’ve truly perfected the process of extraction.
James West: So are you creating a raw ingredient for the creation of other sort of cannabis-based products, or is this a product that is designed for consumption by medical patients?
Tyler Robson: We’re doing both. Essentially right now we are making medical products for all the other ACMPR consumers or all the ACMPR growers, but at the end of the day, when you look to the future of the industry, edibles and tinctures, all those products are coming online. At the end of the day, the grassroots of that product will be oil, and we will be the leading company in that sector.
James West: Mm-hmm. So I see that you announced an arrangement with Canopy Growth Corp, or rather, Tweed Main Street, to provide product to that outlet?
Tyler Robson: Absolutely, yeah. We were very happy to do that agreement with Canopy; it basically helps us both, at the end of the day. It gives us an outlet for our distribution network, so the Canopy stores, or Tweed Main Street, will carry Valens products, and at the end of the day, it diversifies their platforms. So they have more products to offer their consumer base.
James West: Sure. So how do the economics work? What kind of money do you make for every kilogram of oil produced?
Tyler Robson: Well, when we extract it, we make about $12,500 per kilogram. It is the high margin area which we wanted to go after from Day One. Right now, we have the ability to extract 1,000 kilograms a month.
James West: And so you just closed on a $12.5 million financing, what’s that going to do for that capacity?
Tyler Robson: Extraction, and then ancillary products like that. So it’s much more than just an extraction machine; you need a decarboxillation oven, you need winterization products, you need ethanol; basically, it’s an all-in-house extraction process to take a whole bulk product and refine products at the end of the day.
James West: Sure. So you can produce 1,000 kilograms per year now?
Tyler Robson: Correct, yeah.
James West: And after you’ve invested the 12.5 million in infrastructure buildout, how much can you produce a year?
Tyler Robson: We’ll be extracting 10,000 a month right out of the gate. We’ve ordered other extraction machines, which come early April/end of March, so our capacity will be 10,000 kilograms by second quarter.
James West: So, in the most simplest terms, on the back of a napkin, your top line revenue is 10,000 kilograms times 12,500 per kilogram, once all this equipment is installed?
Tyler Robson: Yeah, absolutely it is, and the big kicker for us is, we’re not actually producing the product; all we’re doing is refining for other LPs.
James West: So zero crop risk.
Tyler Robson: Exactly. We’re not at a risk at the end of the day, and a lot of things too: we can help other LPs, because not only if it doesn’t pass Health Canada’s requirements for flower, we can actually extract or remove those pathogens or pesticides from it, and actually sell a clean, finished product. So not only can we process everything for them, we can actually help them in a lot of scenarios.
James West: So what happens if all of the LPs that you would rely on for raw materials decide that they want to keep it and sell it themselves? Have you got no business?
Tyler Robson: No, we actually have business too. We have the lab, the fully functioning Supra THC Services, which was named a centre of excellence by Thermo Fisher; that is already cash-positive, we’re having revenue. But at the end of the day, we will get to cultivation. We will be going after our own footprint once our LP license shows up, which will be in the near future, but right now, the demand for processing is extraordinary. We’ll be busy enough doing…
James West: How many other ACMPR-licensed facilities are there out there with a toll processing license?
Tyler Robson: Zero. We’re the first ones to achieve that status in Canada right now.
James West: So you’re the only one who can toll process for others?
Tyler Robson: Correct.
James West: And you have a dealer’s license as well?
Tyler Robson: Yeah, so we have two dealer’s licenses. The first dealer’s license was Supra THC, the analytical testing service; the second one is Valens Agritech, where we’re doing all the extraction.
James West: Okay, and how many other dealers’ licenses are there out there?
Tyler Robson: There’s about 20. Most of them are more scientific-based than we currently are. We do attribute a lot of R&D to that company, but we’re actually making a dealer’s license profitable at the same time.
James West: Okay. What are the range of products that you can use your product to be a raw material for?
Tyler Robson: At the end of the day, depending on the THC content, we can do everything. Health Canada has parameters of what we’re legally allowed to have in consumable products, but we’ll be looking at bath bombs, lozenges, gums, topical creams, tinctures, everything you can think of under the sun, once Health Canada permits it. The big thing too is edibles. Edibles aren’t coming online yet right away with legalization; in time, they will absolutely be there, and we truly believe we will be one of the first movers, having the ability to compound molecules under our current dealer’s license.
James West: Wow. And so how important is the recreational legislation to you guys?
Tyler Robson: It’s huge. At the end of the day, it’s huge for the entire industry. It brings a tremendous amount of focus on the sector and kind of what we’re doing. Right now, it’s strictly medicinal; a lot of people are consuming the product, whether they’re getting it from the black market or an LP system. The further we get to legalization, I think it’s going to bring a tremendous amount of credibility. Everything is going to be tested, everything is going to be produced ethically, so I’m really looking forward to the recreational market.
James West: Right. And so how tough is it to get a toll processing license?
Tyler Robson: It’s tough. Everyone knows Health Canada’s requirements are very stringent and time-consuming. The first time we applied was September 1, 2014, and we just got the processing license on December 21st of 2017. So about 38 months, start to finish, from –
James West: 38 months to get one license, and it’s the only one in the country?
Tyler Robson: Right now, yes. Absolutely.
James West: Well, that’s very impressive. Tyler, we’re going to leave it there for now; thanks so much for your time today.
Tyler Robson: I appreciate it, thank you.
