Last week, our own Mark Dankel took a long look under the bedsheets at a company called Indoor Harvest, a US firm that is dabbling in vertical farming, and has geared itself to the weed market in an effort to get happy financials while the tech is still being proven out.
That prompted a call from a company called Arcturus Growthstar Technologies (AGS.C), which is also in the cannabis space, but says they have a very different model that they think will work nicely in the burgeoning dot.bong world and beyond.
Talking to the guys behind the deal, I asked what the difference was between the aeroponic systems and what Arcturus is working with, and was sent the following:
Both Indoor Harvest and Aerofarms use aeroponic systems, meaning that they spray droplets of water infused with nutrients directly on to the root ball of the plant. Early in our research and development phase, we built a similar system and had some success, but there were challenges. The aeroponics systems tend to be fragile when compared with our current system, which uses organic soil. The fragile nature of [aeroponics] can lead to wide variability in crop quality, and these systems tend to break down more frequently as they have more potential failure points. Delivering the water and nutrients in a consistent manner to the plant requires more precision than the flood and drain approach in wide use. There are some advantages to the aeroponic system but overall our approach results in a more resilient operating system, healthier plants and fewer operating problems.
So let’s look at that system.
In layman’s terms, it’s basic organic farming, under a roof, using LED lighting, in systems that stack on top of one another. This allows yields of up to ten times more per square foot than traditional methods of greenhouse agriculture, and potentially 100x that of traditional outdoor agriculture. In a world where food is coming from further and further afield, being able to grow a lot of food, organically, downtown is going to be a big deal.
AGT are using proprietary vertical farming tech developed by TerraSphere, for which they owe 10% royalties once they recover the acquisition cost, and they’re at the permitting stage or beyond on four projects in the Eastern US right now, each worth over $3 million if completed. US government programs to encourage such projects are in effect.
Now, I’ve dipped my toe into the vertical farming thing once before, with the woeful Affinor Growers (AFI.C), which is now three years on since they told me they’d grow the best strawberries in the world, only to still not have delivered one to my office.
I, on the other hand, am rolling in strawberries grown on my porch that my cat sits on regularly and I often forget to water. So, 1-0 to me.
Affinor’s head honcho worked for TerraSphere previously, and did not part on happy terms. But TerraSphere has clearly moved on and AGT is a big part of that going forward.
Devil’s advocate time: Vertical farming obviously makes sense, but so does vertical parking and vertical funeral plots and vertical driving ranges, and only the vertical driving ranges have taken off to this point.
Same goes in aeroponics, though AGT sees the industry starting to mature.
You are correct that Aerofarms is well ahead of Indoor Harvest. Aerofarms was founded by Ed Harwood, a Cornell University professor who struggled to commercialize the technology. They brought in a CEO who was able to fund a deal in NJ with Goldman and Pru Securities. It is a very large farm and seems to be progressing well.
That said, a lettuce plant grown in an aeroponic system may have a shorter shelf life and not be as hardy as a plant grown in our system using organic soil. We can apply for and receive organic certification for our farms, but I don’t think an aeroponic farm can do the same.
So what makes AGT worth a longer look?
Well, they’re also into vertical integration, for starters. The company has several divisions.
The Company’s LEDCanada.com website, which caters to all Canadian consumers as well as B2B customers via Contractor and Re-Seller login areas, attracts thousands of customers per month. The Company also owns and operates COBGrowlights.com, which caters to both large and small greenhouses and indoor cultivation individuals. The Company’s Growthstar brand of LED lights have been top rated for almost 5 years and its newest COB and MCOB (Chip on Board and Multiple Chips on Board) technologies are proving to be game changers in the world of “LED Grow Lights” with 50% reduction in power use and many other benefits.
‘Top rated for almost five years’ tells you that this is a company where the risk levels have been mitigated by their continued existence over time. They’re not just deciding to get into the game, nor are they bleeding cash while they pivot uncontrollably.
They made themselves some great LED lights, so they started reselling them, and they’re actually selling.
In addition, they’re looking to roll up existing ag plays that could benefit from their tech, and bring them economies of scale.
We believe that our organic growing method will provide an important advantage in both the produce and cannabis markets. The same consumer who shops at Whole Foods for locally grown organic produce will seek out a high quality organic producer when buying cannabis. We are well positioned with our projects in Rhode Island, Baltimore and Mexico to enter the market with our community-based development model.
And, finally, all of the above is based on traditional agriculture business. The potential on the cannabis side is gigantic, as more and more US states head to legalization.
Now I’m going to blow your hair back. Are you ready? Got a chair handy?
AGT has a market cap of $1.28 million.
One single vert farm approved and operating triples the current value of the entire company.
Jesus Christ on a pogo stick, you have to love it when a company comes along that just drips undervalued. Right now, AGT gets punished because it’s early. That’s where you get your value.
If you think AGT can get one farm up, this is a gimme. If you think vertical farming will only mature with every passing year and every polar bear stranded on a melting ice floe, this is a gimme. If you think it makes more sense to get better yield out of early stage weed crop facilities rather than expanding said facilities by hundreds of thousands of feet, this is a gimme.
I have three companies in the weed space now that I think are a buy. This is one. The other two I’m keeping close to my chest.. for now.
— Chris Parry