Lessons Learned, Technology Upgrades, Sales Outlook
TORONTO, ON / ACCESSWIRE / September 7, 2023 / CO2 GRO Inc. [(TSXV:GROW)(OTCQB:BLONF)(Frankfurt:4021)] is pleased to provide a detailed Business Development Update for our shareholders, customers, and all stakeholders invested in our incredible journey and growth story.
We recently published our Q2 2023 financial results which included the following highlights: (all figures in C$ unless mentioned otherwise):
Cash on hand as at June 30, 2023 was $430,000. Since that time, we've collected more receivables totaling over $250,000.
In Q3 2023, CO2 GRO received financing for our Pay-for-Use ("PFU") contract with a Canadian greenhouse grower signed in Q2 2023. Financing was arranged with a Canadian financial entity that purchased and leased a portion of the PFU contract for the grower. The grower is responsible for all lease payments. Funds received will be recorded as Q3 2023 revenue. Third-party financing of a portion of our PFU contracts ensures we receive cash up front while maintaining a long-term recurring revenue stream from the grower. CO2 GRO announced two PFU contracts totaling $1.3M in 1H 2023. The first for approximately $500,000 was to a major Canadian greenhouse grower. The second $800,000 PFU contract was with El Salvador-based Hidroexpo, who have now signed a total of $1M in sales contracts.
We expect to end the year with 2023 commercial sales contracts ("Sales") to total between $2M to $2.5M based on current Technology Adaptation Projects ("TAPs" ) due to conclude in Q4 2023. A TAP is the opportunity for a grower to analyze the benefits of the technology and for CO2 GRO to adapt the technology to the grower's unique facility. Typically, a grower will pay for the cost of this project.
Our combined Sales opportunities with growers currently engaged in Technology Adaptation Projects ("TAPs") for 2023 and continuing into 2024 is $18M (only includes the initial order size from our large EU-based customer, otherwise including their total opportunity, the total Sales opportunity with current TAP customers is nearly $145M).
Remarks from CO2 GRO CEO, John Archibald;
"Over the past 24 months, we have made tremendous progress in building our business and are now able to accelerate sales across all our target markets. The intention of this press release is to provide valuable insights into our revenue expansion progress, lessons learned, new developments in optimizing our unique technology and new customer development, as well as our expectations over the next 12 to 18 months. We are encouraged by the progress we have made; our customers are excited by the improvements we have delivered and the results they are seeing; and we look forward to a strong final stretch of the 2023 season and ramping up into 2024.
The nature of the agriculture industry requires patience, and we are thankful to all our stakeholders who have demonstrated that same patience and accommodation, which is now beginning to pay off."
Highlights of Completed Technology Adaptation Projects ("TAPs")
Our goal is to help increase production in fruiting crops by about 2-4 kg/m 2 annually, which represents between 10-30% greater yield depending on a customer's baseline production. We focus on protected agriculture facilities growing pepper, cucumber, tomato, leafy greens, select floriculture and medicinal crops.
Hidroexpo (El Salvador, bell peppers): Hidroexpo has used our technology for three seasons and have seen strong results, which have led to PFU contracts worth a combined $1M. Hidroexpo represents a total Sales opportunity of up to $4M which we expect to realize in the coming years.
Fruit production in the CO2 GRO treated areas over the three seasons were on average 2.15 kg/m 2 greater than control areas (compared to just ambient CO 2 ).
Cucumber Man (Alberta, English cucumbers): The Cucumber Man conducted a TAP in 2022 with strong results. Recently, the greenhouse was sold to a new owner. Discussions with the new owner are yet to begin. However, the project served as a referral and played a key role in convincing our Canadian greenhouse vegetable customer to execute a PFU contract in Q2 2023 worth approximately $500,000.
Fruit production in the CO2 GRO treated area was on average 2.75 kg/m 2 greater than the control area (ambient CO 2 ). In addition, during the second grow cycle, a powdery mildew outbreak was experienced in the control section, but was suppressed in the CO2 GRO section.
EU-based large customer (North Africa greenhouse, cherry tomatoes): The customer has conducted a TAP for two seasons and is beginning a third and final season of the project (September 2023-June 2024). The customer indicated that their initial order would be in the range of $1.5M to $3M, and therefore wanted a 3 rd season of production data as per their internal "R&D-to-commercial implementation protocol". This customer represents a total Sales opportunity of up to $130M, which we expect to realize over time with order sizes ramping up year-over-year.
Given the opportunity with this customer and the intention of the customer to commercially implement our technology, CO2 GRO has invested in providing its new sophisticated control system ("Control System") and lessons learned, including plant conditioning advisory, to the customer. We fully expect the production results in this 3 rd season to exceed the customer's expectations and provide them with the confidence to transition from R&D phase to an initial commercial project of up to $3M in Q2 2024.
Fruit production in the CO2 GRO treated areas over the two seasons averaged 1.7 kg/m 2 greater than the control area (ambient CO 2 ), including 3-times greater category 1 fruit (3% of total vs 1%) and 37.5% more category 2 fruit (33% of total vs 24%). Category 1 is the highest-grade fruit that fetches the highest price, followed by category 2, and so on.
Colombia rose customer (Colombia, roses): This customer opportunity was developed in partnership with one of the largest industrial gas companies in the world. The TAP has been operating for nearly 18-months and has consistently resulted in higher production. We expect to conclude the TAP by December 2023 and enter into discussions for a sales contract in Q1 2024. The customer represents a total Sales opportunity of up to $1.5M.
Rose stem production in the CO2 GRO treated areas over the past 18-months has averaged 25% more than the control area (ambient CO 2 ), including more production of higher-grade stems and over 75% reduction in powdery mildew.
Key Lessons Learned
The most important lesson learned about increasing production while employing CO 2 enrichment using our technology is that plants are complex organisms which need to have their environmental conditions considered while balancing other plant conditioning practices. This enables the plant to direct resources towards producing more fruit or other parts of the plant that our customers monetize.
Control System: We have developed a sophisticated control system that applies our aqueous CO 2 enrichment to plants in the most optimal environmental conditions in real-time, given that these conditions are in constant change in a commercial greenhouse.
Plant Conditioning: Plant conditioning, including nutrient balance and other production techniques while using our technology also determines how the plant utilizes its resources towards more production that growers can sell; for example, more fruit vs. more leaves Our work with experts in these areas has helped our customers understand that they may need to adjust some of their practices to the new condition of CO 2 enriched plants. Thanks to our customers' willingness to learn and adapt, and our team's increasing technical proficiency, we have begun to see more consistent results.
Chain-Link Optimizer: Given the above lessons learned, and the nature of our technology requiring all parts of the process working in-sync, we have developed the concept of the "Chain - Link Optimizer" where we view our technology as a chain with several links that must be secured in order to realize consistent results. This concept helps us set the stage for successful project execution while providing a troubleshooting process to quickly identify weak links and strengthen those to optimize results.
2023-2024 TAPs and Anticipated Sales
Given the implementation of lessons learned over the past two years, our new Control System, plant conditioning advisory, and the introduction of the Chain-Link Optimizer concept, we are confident that adopting our technology will result in more consistent increases in production for all our projects. We have seen with past successful projects that when growers see the results, they are keen to commercially deploy our technology.
Mexico pepper customer: Upon analyzing the results of the TAP in the 2022 season and learning the key lessons above, our continued project in 2023 has realized more consistent results since integrating the Control System and plant conditioning advisory. The TAP will conclude in December 2023 with PFU contract discussions in Q1 2024. This customer represents a total Sales opportunity of up to $1.5M.
To date in 2023, fruit production in the CO2 GRO treated area is resulting in an average of 10% more than the control area (ambient CO 2 ). These results are promising, and we look forward to enhancing the fruit production in the last 3 months of the season with the implemented additional adjustments.
Mexico tomato customer: Upon analyzing the results of the TAP during the 2022/23 season and learning key lessons, we have implemented our Control System and plant conditioning advisory from the beginning of the new 2023/24 season, which began in August 2023. Based on the results seen elsewhere, we have implemented our lessons learned and are confident of similar improvements and possible revenue generation. This TAP will conclude in June 2024 with PFU contract discussions slated for Q2/Q3 2024. This customer also represents a total Sales opportunity of up to $1.5M.
US leafy green customers: We have two leafy green TAPs starting September 2023 with estimated completion in June 2024 with PFU contract discussions expected to start in Q3 2024. These customers represent a combined Sales opportunity of $4.5M.
Ontario TAPs: We have two TAPs in Ontario, Canada, with a cucumber grower and pepper grower that are running in 2023. While results have been promising, both growers are expected to continue their projects in 2024 with a view towards commercial expansion for the 2025 season. These growers represent a combined Sales opportunity of $2.5M and would serve as a strong reference point for the Ontario and Canadian greenhouse vegetable market, which represent total Sales opportunities of over $200M.
Colombia TAPs: In addition to our rose customer, we have several TAPs in Colombia with growers of medicinal products. Their projects will begin in Q4 2023 and completed by Q3 2024. They will be followed by commercial sales contract discussions. These customers represent combined Sales opportunities of $500k.
2024 new TAPs: Our business development efforts have resulted in potential projects with growers who have reviewed our results and expressed serious interest in our TAPs for the 2024 season. We expect the number of TAPs to grow significantly, thus offering CO2 GRO a larger opportunity for Sales through 2024 and into 2025.
Canada (primarily Ontario and BC tomato, pepper, cucumber growers): additional TAPs with total Sales opportunity of $10M.
US (leafy greens, tomato, pepper, cucumber growers): additional TAPs with total Sales opportunity of $20M.
Central America (pepper and tomato growers): thanks to our success with Hidroexpo and their generous referrals, we expect to add TAPs in 2024 with total Sales opportunity of $15M.
Mexico (tomato and pepper growers): based on the promising results of our first two TAPs in the Mexican market, we expect to add TAPs in 2024 with total Sales opportunity of $10M.
Additionally, we expect TAPs with tomato growers in Europe in 2024 who have total Sales opportunity of $10M.
Our Sales in 1H 2023 totaled $1.3M which brings our total cumulative Sales since inception to over $2M.
Our combined Sales opportunities with growers currently engaged in TAPs for 2023 and continuing into 2024 is $18M (only includes the initial order size from our large EU-based customer).
We expect new 2024 TAPs with those who have shown serious interest, and this represents a combined Sales opportunity of $65M.
Our total combined Sales opportunities with both serious customers and those whom we would describe as strong leads is approximately $330M.
Given all identified opportunities and our new PFU model, CO2 GRO expects Sales to rapidly increase through 2024 by transitioning a significant portion of the $18M of current TAP customers to commercial customers, and a significant portion of the $65M of 2024 TAP customers to commercial customers in 2025.
Why are we confident about these expectations?
Our technology is now enhanced with our new Control System, plant conditioning advisory and Chain-Link Optimizer concept.
We are recording consistent results throughout all our TAPs due to the implementation of these lessons learned.
Our new PFU commercial model is being widely accepted by growers.
In conclusion, Aaron Archibald, Vice-President Sales adds;
"Our business fundamentals are the strongest they have ever been. We have learned valuable lessons working with our customers and industry peers. CO2 GRO is now able to deliver consistent results to all our current and new projects going forward. Customer feedback on our PFU model is very positive. To use an analogy: the rocket ship has been tested, modifications made, and we're now ready to launch this business where the sky is no limit!"
The company will continue to update all stakeholders on a regular basis on the status of our business plan and opportunities, while advancing its unique technology globally.
Visit www.co2gro.ca for more information on CO2 GRO Inc.
About CO2 GRO Inc. CO2 GRO Inc.
CO2 GRO Inc. is a precision ag-tech, clean-tech company with a focus on People, the Planet and Prosperity. Our vision is to become one of the leading companies enhancing global food production from protected agriculture. By helping our customers sustainably increase yield and profitability, we could help feed up to half a billion people worldwide while reducing our customers' ecological footprint.
About 300 million MT of fruit and vegetables are grown annually from about 5 million hectares of protected vegetable facilities globally. (6 kg/m2/year of average production). A 30% yield increase using our technology could add up to 100 million MT of fruits and vegetables per year. The US CDC (Centers for Disease Control and Prevention) recommends annual fruit and vegetable consumption of up to 200 kg per year per adult.
Our Target Market: The estimated 800 billion square foot global protected grower market comprised of 600 billion square feet of fruits & vegetables (Cuesta Roble 2019), an estimated 100 billion square feet of floriculture and another estimated 100 billion square feet of protected crops such as medicinal plants, tree seedlings and other non-food varieties.
Our Technology : CO2 Delivery Solutions™ enriches plants with CO 2 by misting an aqueous CO 2 solution directly onto plants grown in greenhouses and other protected grow facilities globally.
Value Proposition : Approximately 99% of protected grow facilities globally cannot add CO 2 by atmospheric gassing, missing out on up to 30% increased yield potential. CO2 GRO's technology enables all protected growers regardless of facility or location to enrich their plants with CO 2 to realize up to 30% yield increases. In addition, our technology suppresses the growth of micro-pathogens such as E.coli and powdery mildew, leading to healthier crops. Growers currently employing CO 2 gassing can save up to 90% of CO 2 gas used, reducing their ecological footprint and production costs. The technology's use could therefore result in a potential doubling of gross profits.
Patent Protection: CO2 GRO's CO2 Delivery Solutions™ technology is protected by a suite of patents and patents pending.
Business Model : Our technology is sold to growers based on the cultivation area installed at prices that provide a high return on their investment and high margins for our shareholders.
Global Expansion : CO2 GRO's management is rapidly expanding its international marketing partner relationships into Mexico, Spain, the EU, the UK, South Africa, the Middle East, Southeast Asia and Latin America as well as in its US and Canadian base.
Environmental Social and Governance ESG : CO2 GRO is committed to good Environmental, Social and Governance (ESG) policies and practices. We are an equal opportunity employer of choice and opportunity.
This press release contains statements which constitute "forward‐looking information" within the meaning of applicable securities laws, including statements regarding the plans, intentions, beliefs and current expectations of the Company with respect to future business activities. Forward‐ looking information is often identified by the words "may," "would," "could," "should," "will," "intend," "plan," "anticipate," "believe," "estimate," "expect" or similar expressions and include information regarding: statements regarding the future direction of the Company; the ability of the Company to successfully achieve its business and financial objectives; plans for expansion and the ability of the Company to obtain, develop and foster its business relationships; and expectations for other economic, business, and/or competitive factors. Investors are cautioned that forward‐looking information is not based on historical facts but instead reflect the Company's management's expectations, estimates or projections concerning the business of the Company's future results or events based on the opinions, assumptions and estimates that management considered reasonable at the date the statements are made. Such assumptions include but are not limited to: general business and economic conditions; the Company's ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company's ability to attract and retain skilled staff; market competition; the products and technology offered by the Company's competitors; and that good relationships with business partners will be maintained. Although the Company believes that the expectations reflected in such forward‐looking information are reasonable, such information involves risks and uncertainties, and undue reliance should not be placed on such information, as unknown or unpredictable factors could have material adverse effects on future results, performance or achievements. Among the key factors that could cause actual results to differ materially from those projected in the forward‐looking information are the following: changes in general economic, business and political conditions, including changes in the financial markets; in particular, in the ability of the Company to raise debt and equity capital in the amounts and at the costs that it expects; adverse changes in applicable laws or adverse changes in the application or enforcement of current laws; the biotechnology industry and the greenhouse growers market are highly competitive, and technical advances in the industry will impact the success of the Company, and other risks described in the Company's filings that are available at www.sedar.com . Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward‐looking information prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Although the Company has attempted to identify important risks, uncertainties and factors which could cause actual results to differ materially, there may be others that cause results not to be as anticipated, estimated or intended. The Company does not intend, and does not assume any obligation, to update this forward‐looking information except as otherwise required by applicable law.
Soumik Roy, Director of Marketing, Communications, and Investor Relations