VRCI Verde Science Inc (CE)

Most of the U.S. lacks strong corporate players in the cultivation and distribution of medical marijuana. In short, the industry is largely mom and pop type organizations many of which are run by folks who were either users or suppliers or both prior to legalization. The key to success will be the delivery of high quality consistent potency products, month after month, year after year. Companies that can withstand ever-increasing market volatility will capture sustainable market share. Market share gains will come from buyouts of marginally profitable competitors but more importantly from product branding. Branding requires proper quality control and on-time delivery that only a sophisticated well-run organization can accomplish.

Verde Science (OTCQB:VRCI) does not want to own dispensaries, because that would be quite limiting to the scale of their business. Rather Verde wants to be a service provider to the dispensaries. Verde will provide capital for expansion and operation. This business aspect is huge, because the dispensaries have no access to the capital markets through banks or otherwise. Also many of the dispensaries do not have the ability to grow their own high quality product and thus outsource this to someone else who makes a large profit selling marijuana to them. In this case they have no control over product quality. Verde has state-of-the-art in growth technology, aeroponics, which will save the dispensaries tremendous amounts of money and provide them with in house quality control, which the Company will help them to ensure. In exchange for their capital and consulting services, the dispensaries will share a large percentage of their increased profits with Verde in the form of a monthly management fee and a royalty on all product sales.

Recent analysis on the American marijuana marketplace by ArcView Angel Investors forecast a 64-per-cent surge in the legal U.S. cannabis market to $2.34-billion in 2014. It also estimates that the five-year national market could grow to $10.2-billion amid rising demand and potentially new state markets. This type of market growth will create tremendous opportunities as well as a load of competition from largely under-qualified participants. Los Angeles County, where Verde is initially operating, is the largest medical marijuana market in the world.

Companies and individuals looking for success have to embrace the fact that investing in Medical Marijuana isn't about getting bigger; it's about getting smarter. The cultivation of the medical marijuana market is in flux. To thrive, successful, long-lived cultivators will need to be nimble, well organized and highly compliant on the legal and regulatory fronts. As well, investors and companies need to understand that this growth will not come cheaply and that the perceived fast, easy road to riches will prove difficult to navigate for many market entrants.

"Unlike most of our peers, we believe our meticulous, measured and diligent business strategy will resonate with Medical Marijuana clients and investors," states Harp Sangha Chairman and CEO of Verde Science (OTCQB:VRCI) in an exclusive interview with Financial Press. " The Company is deploying an integrated model that the Company believes will be a game changer initially in North America."

Verde is not reinventing the wheel. The Company has assembled a highly experienced team that will deploy state-of-the-art technology and a superior growing methodology to enter and take meaningful market share for themselves in jurisdictions where they can own a growing facility (Canada): By being a technology provider to assist clients (i.e. dispensary owners) in LA County, which is likely to be followed by other states. Verde is not simply a hands-off technology provider. It will provide the funding to construct the grow facility, design the facility, supervise construction, and assist with selection of varieties of marijuana to grow while maintaining oversight to insure high quality, consistent results. Should any one of these crucial steps be missing, the dispensaries would have at least temporary mishaps or missteps and that could translate into lost revenue and lost customers.

Over the remainder of the year, the company will initiate a commercial rollout of its technology with clients as well as proprietary operations in Canada. With consistent, highly efficient production of clean (no pesticides, no mold, no insect infestation) environmentally friendly (recycled water) product, LA County will soon be introduced to what the Company refers to as the "Tesla" of medical marijuana growing equipment, aeroponics. By moving away from soil or water as a medium, a plant's roots are free to grow larger, stronger and faster. Many plant diseases that flourish in soil do not exist in the absence of a medium for them to grow, virtually eliminating the risk of crop failure. These combined factors result in greater product yield as well as higher and more consistent quality. While aeroponics cultivation has higher upfront costs, the high quality, consistent crop yield significantly makes for a short payback period.

Sangha notes; "Verde will use no pesticides. Our plan is to be a prime mover in this space and to be the first to the market with a pure medical grade product, the cleanest and most environmentally friendly in North America. We are confident that through aeroponics, we can assist our customers to grow the highest quality, highest potency product while routinely doubling traditional yields. Once the upfront costs are recouped we will have substantially higher margins than the competition. In the end the company with the best product and lowest cost wins: Period."

The single biggest mistake that one can make is underestimating the difficulty of operating in this market in a safe, profitable and sustainable way. Transitioning from being a "hobby grower" to an industrial scale cultivator is a costly endeavor requiring million of dollars in upfront capital. While the capital is an important hurdle that many will never overcome, the larger hurdle is where to find the expertise needed to utilize the capital wisely. Verde has this expertise and plans on guarding their secrets.

How hard could it be to start a profitable medical marijuana operation? A new entrepreneur in the space only needs to worry about rent, labor, power, materials and distribution. If that is the sole focus, funding will always be a major concern. A single failed crop could spell financial ruin, or at the very least destroy all previous investments in branding. The business has become more expensive and logistically complex than ever before. 

Just wait until the FDA gets involved in the approval process.

Many of the changes happening in the industry are and increasingly will be government mandated. Reliable access to funding will ensure staying power. As a publicly listed company with strong financial backers, Verde stands out in this crucial respect. 

Sangha continues: "Verde Science plans to join forces and work in partnership with established players that have embraced an all-encompassing, integrated technology driven approach to medical marijuana with plans to become the leader in providing services to the cannabis industry. At the current trading price of just $0.08 Verde is trading at a ridiculous discount to its peers in the industry. Many players with far less tangible businesses sport market caps 10 times that of Verde. This imbalance will obviously be rectified by the market sooner rather than later."

VerdeScience trades at $0.08 with a market cap of $8.5 million.

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CONTACT: Harp Sangha, Chairman / CEO
         Tel: 1-858-210-0236
         Email: harpsangha@shaw.ca