Summation:
Overall, I was very, very impressed with the Coalinga facility. It is a case study in efficient use of the square footage available. Every square inch is being utilized. There is a clear and obviously efficient progression from propagation through growth and harvest and processing.
But I do see a problem. It is a good problem to have, but from an investor's standpoint, it is a problem none-the-less.
Capacity.
It appears to me that the company is currently operating at maximum capacity. There is simply no spare room anywhere in the current facility and I doubt the frequency of harvest can be manipulated further. So aside from transitioning into more lucrative products, I can't see much increase in sales without expansion.
Yes firing-up the extraction facility will generate additional income, but we can never forget that the engine which drives everything is growing cannabis and unless that capacity can be increased, sales will remain pretty much at their current levels.
It will be interesting to see how Mike intends to facilitate expansion.
The company owns considerable real-estate immediately adjacent to the current grow facility and the wisdom of an indoor grow is evident. Expansion into similar structures is incredibly expensive however and brings us right back to the oft discussed dilemma. How to fund such expansion.
Dilution?
Borrowing?
Cash-On-Hand?
As investors we all have our opinions of which of those or what combination of those is best for the company. I know I sure do. But the simple fact is; if the company wants to grow significantly, they have to expand.
Thanks again to Mike for allowing me to tour the facility. Overall I left the campus much more informed than I was when I arrived.........and unshaken in my confidence in the future of NGW.
