What is like to leave a successful career on Wall Street and become both a
dispensary owner and the CEO of one of the most innovative companies
supporting cannabis cultivators, we are going to find out the answer to that
question in our interview with Derek Peterson CEO of Terra Tech.
What is it like to leave a successful career on Wall Street and become a dispensary owner and the CEO of one of the most innovative companies supporting cannabis cultivators? We're going to find out the answer to that to question in our interview today with Derek Peterson, CEO of Terra Tech. Welcome, Derek.
Derek: Hey, thanks for having us, appreciate it.
Matthew: Derek, can you give us some background on how you got into the cannabis industry?
Derek: Well, it was a little bit by accident and a little bit just out of curiosity. I was working, as everybody seems to know, in finance at the time. And I remember watching one of the first GMV specials. Marijuana, Inc. was the first one that came out, and it started discussing a lot about the emerging market in the United States. It was interesting because it was coupled with a time where I was becoming a bit disenfranchised with working on Wall Street and in traditional financing.
I was thinking about some other opportunities, some other directions in my life. I had always wanted to start a company up, but didn't necessarily have a sector in mind that I thought made sense or was congruent with some of my skill sets, and just started digging deeper.
I had a friend that was entering the business and developed a pretty successful medical marijuana dispensary up in Northern California. And he allowed me a little bit of insight in terms of what his operations, and ramp up, and revenue looked like. And the numbers were very considerable. And I started to kind of look at the industry more as an analyst at that time and saw that it had a lot upside potential to it.
I really just kind of made a collective decision to take a risk and spoke to my wife. She thought I was a little bit crazy at first, and then became supportive to give me an opportunity to give it a shot, and here we are today.
Matthew: Cool. Now can you give a high-level overview of what Terra Tech does?
Derek: Yeah. I always tell people were kind of an agricultural company. As far as our backbone is concerned. We as everybody know, have a produce side called Edible Garden where grow in the Dutch style hydroponic, closed- environment, agricultural, lives in green houses produce. So everything from leafy greens to lettuce, basil, oregano, tarragon, those types of things. And we sell through 1,100 - 1,200 retailers throughout the United States.
So on that principle as well as our experience on the medical cannabis side, privately outside of the company, I've been pretty vocal about. I own a medical marijuana dispensary - a pretty high-volume one up in Northern California, and that's an amazing team up there. So we've taken agricultural backbone and combined it with my medical cannabis team and built out a medical cannabis division to complement the produce cultivation side.
The medical cannabis division has been busy around the country building applications for permits. As a matter of fact, we have just successfully passed the City of Las Vegas' approval for our special use permit for a dispensary location within the City of Las Vegas, and we're waiting state permitting here on November 3rd.
Matthew: Great. Congratulations. That's awesome.
Derek: Thank you. We're got the agricultural company on it's backbone. And again, cannabis is an agricultural product. So we're going to be able to use a lot of our skill sets in running food grade quality facilities, but carrying that over to commercial medical cannabis production as well.
Matthew: So you have a focus on creating produce, but as cannabis becomes legal and you get permits, you're going to shift the focus to that to a larger a piece of the pie does it sound like.
Derek: That's the agenda. I mean, if you look at cannabis cultivation nationally right now, it's extremely fragmented. It happens in small indoor facilities that are huge energy sucks, whether it's the air conditioning, the artificial lighting, those types of things. They're not environmentally friendly. The cost of production is anywhere from $600 to $800 a pound depending on the type of facility that you're running and how well you're running - or how efficiently, I should say that you're running it.
So that coupled with our overall ability to operate a large scale facility, we think positions us for where the industry is morphing into. And that's away from fragmentation and into more sustainable cultivation methods. The more transparent and accountable cultivation methods, because right now some of it's happening in people's basements. Some of it is happening in small warehouses. There's no standard operating procedures. There's no protocols. Sure, some of the product is tested by these labs that are popping up here and there, but there's no overall processes that are regulated from an industry standpoint. And that we think is going to change, and we're going to be pushing to help that change over time.
And we do that on the food production. You don't get into a retailer like Wal-Mart without being GFSI certified. And that's the food traceability standard that you have to have employed in your facility. And we think medical cannabis deserves those same set of protocols. If not more so than produce, because everybody is eating produce, but the people that consuming this medicine generally have compromised immune systems. So the standards in these facilities should be a lot higher than what we're experience in food grad facilities. And I think right now, you're seeing that they're far less than what you're seeing from a food production standpoint.
Matthew: Excellent points, I agree. Circling back to your Las Vegas licenses, what will those entitle you to do exactly? Run a dispensary? Do you also get to cultivate or is there vertical integration? How does that work?
Derek: They've broken them up into three different categories in Nevada. So whether you're applying to Reno, or Clark County, of the City of Las Vegas, they've broken them up into cultivation permits, extraction, and production permits, which would be things like extracts, concentrates and edibles, and then dispensary permits. So we've applied for each of the permits throughout the state for a plethora of different options from, again, production, cultivation to dispensaries. At the end of the day, we're thrilled to have been able to move forward in the City of Las Vegas because we absolutely love that location as far as dispensaries are concerned. It's very close to residential, but it's in more of an industrial area away from say a neighbors backyard, but it's close to the strip.
The beauty of Nevada, they've enacted a law that's a lot different than any other state. They utilize multi-state reciprocity. They understand a lot of people travel into the state for whatever reason to the tune of close to 30 to 40 million people a year. So if you have a medical cannabis card from New Jersey or California or Colorado, and you're traveling to Vegas there's a verification process that takes place, but you can buy medical cannabis in the state if you're a patient outside. That's the biggest opportunity and that's why we've applied for dispensaries, cultivation, as well as production to be able to be fully integrated within the state.
Matthew: Can you tell us a little bit about your new research and extraction lab in Oakland?
Derek: Yeah. We've put a lot of capital, a lot of time, and a lot of energy building up what we consider is probably one of the best production extraction facilities in the state of California right now. It's almost the same story as we were just discussing about the agricultural side where a lot of the cultivation is happening in basements and garages. It's the same thing with extractions.
A lot of people are doing very dangerous butane extraction at their homes in these tiny warehouses in California. If you've read the news, you've read that there's been a lot of explosions and house fires, and those things that are taking place. So if we wanted to build a premier lab facility out that was based upon a super critical CO2 extraction machine utilizing equipment that doesn't leave dangerous solvents and residual toxins in these extracts, which a lot of people with compromised immune systems are utilizing. And we wanted to do so in a lab-type of environment with clean floors, clean walls, full ventilation, emergency eye wash stations, all these things that you don't see again in people that are trying to do these things in these home facilities.
So again, it was raising the bar to the next level. We've been able to push out a product that we feel is probably one of the top tier products that we've seen being offered in the state. And again, we run a dispensary there. We serve about 900 to 1,000 patients a day. Which means we have a lot of patient vendors. So we see a lot of product. We buy a lot of product and reimburse a lot of our patients for there products and their developments. We're in that shuffle. We're producing versus what we've seen on a daily basis, and because we're utilizing the standards that we're utilizing, we've been able to push out a top tier product.
Now we've through - we've been going through a testing and formulating and R&D phase for the last couple of months. And we're kind of arranging the product line up that we're going to be offering to patients throughout California that are part of the collective that we're associated with. And I think maybe we're 30 days off from having that full line up selected and being able to move on or graduate from the R&D phase at this point.
Matthew: I've heard that you're creating a CBD supplement. Can you tell us what that is and why you're excited about it?
Derek: Yeah. We teamed up with Energetics or NRTI to do that. And they're actually the ones that have a need for the supplement. We don't have expertise in that. Where we come into the picture is they've been hunting around for CBD, like everybody is these days. It's a hard thing to come by. And not only is it a hard thing to come by, it's a hard thing to come by domestically. There's a lot of people that are bringing CDE in from China, from Europe, and places like that.
And if you've read the news lately you've heard that there's been a handful of providers out there where they found toxins - ethyl toxins, heavy metals, and other residual solvents and those types of things left in there. And as I said before, these things are extremely harmful for people that have compromised immune systems. So to have somebody in a lab grade facility be able to produce CBD extracts locally is a huge benefit. So that's our integration and that's our responsibility to NRT's development of this product is to bring to them and offer them a locally produced CBD Extract they can count on.
They know where it's sourced from because, again, this a company that makes a vitamin line for Martha Stewart. They can't risk having an issue with the core substances. And they put a lot of effort and energy and built a tremendous advisory board around this product. So they're making sure that what the put in there is a top tier product, and we're able to kind of provide that for them through or extraction facility in Northern California.
Matthew: In an interview, you recently said, "I'm ready for states of New Jersey to go from zero to 100 miles per hour." Is New Jersey closer to zero or 100 right now?
Derek: Well, they're at 10 miles per hour right now, but that's a huge byproduct of the governor. So if Christi makes a decision to run for president, which means he has to step down from his governor seat, I think you see a huge acceleration in Jersey, because you have bipartisan support there. You have a legislative body there in general that supports legalization and broadening of the medical program as well. So I think without Christi there you see a ramp up. If he doesn't make a presidential run, then I think it's a 50/50 at this point. Then I think he has a couple years left or so on his term, and it's going to take that amount of time, I think, before we see an explanation in that state. As I said, it's under 10 miles. They could ramp up to 100, but it's really going to be a decision or byproduct of who's at the helm in the state.
Matthew: Now there are some huge pharmaceutical companies in New Jersey. Do you think - I mean, this is conjecture and opinion. But do you feel like that's the reason why he's preventing cannabis from coming into New Jersey?
Derek: I haven't heard anything to that degree. I just think he's opened the medical program there as far as he's willing to open up the medical program. So he's done just enough to - in his opinion, to appease the population. He's unwilling. He's been verbal about his unwillingness to expand it any further. I haven't heard of any correlation or relationship or any concern with the lobbying efforts, and we're heavily ingrained in lobbying in the state through the biotech or pharmaceutical firms that are there.
Matthew: Now you bring up lobbying, and that's a good point. Do you feel like cannabis business owners are getting more savvy at lobbying? How would you grade them overall? Now I know it's different from state to state, but how have you seen lobbying efforts mature for the cannabis industry?
Derek: Well, it's become a necessity. Unfortunately, so. Early entry in competition is really starting to come into play here, and we saw that in Nevada. We saw some huge families with long-standing connections to the state apply for these particular permits and lobbying was an absolute necessity.
Lobbying to make sure that your voice is heard and then prior to developments of amendments getting in there to teach legislative - that's the most import piece of the puzzle is making sure that legislative bodies put out rules and regulations and build their programs that are very conducive to entrepreneurism. And what we spend a lot of time doing is making sure that we discuss with local governments that are going through this process, listen, it's okay to develop a program that's economically and entrepreneurially friendly because if you do, you're going to invite capital infusions into the program. You're going to have people that will come and they'll spend a lot of money building out there facilities. They'll bring in the best products, and ultimately, who benefits from that - the patient.
The patient gets a better product at the end of the day because they've created an environment where people can come and they make money. They can make a profit. Which is okay. It's a great business because you can actually do something that helps patients and needy people that have health issues and ailments that aren't being serviced by other prescription drugs, and also guess what, make money off of it at the same time.
States that haven't done a good job, and Jersey's a decent example of that. They haven't created an economically friendly environment. Because of that we've seen a program that's been a relative non-starter there. And who's suffered because of that? Ultimately, the patient. So a lot of the lobbying efforts start as these legislative bodies are going through the adaption and adoption process with these programs. And then obviously, when you're competing for the programs whether it's RFP response or some sort of another application effort, lobbying is an absolute necessity to go through that. So it's just been a byproduct of the maturation of the industry.
Matthew: I'm glad you're out there lobbying versus Monsanto. It's a good thing you're lobbying.
Derek: Well, they may not be far behind. It's hard to say.
Matthew: So what's the thing that excites you the most about the cannabis industry right now other than - I mean, that's huge that you got the Nevada or Las Vegas application in, and you got the approval. I mean, that's monstrous. But what else do you see on the horizon, where you're saying this is really interesting, and I want to learn more about it?
Derek: Well, I've seen more progress in the industry from say a legalization standpoint in the last 12 months than we've seen in the last 12 years. And a lot of that is just due to the momentum that's taking place. Through this legislation and these votes coming up, whether it's Oregon, or D.C., Alaska, or Florida, we're starting to get to that range where we're over 50 percent of the states are going to have some level of decriminalization or legalization. That's where we really where we start to see the snowball effect that takes place. The momentum to begin to accelerate again for some reclassification or federal adjustment.
I don't think it's too far away if we continue this momentum on a state-by- state level. Florida right now is what excites us more than anything else, and then too there is about 50/50, it's a coin flip at this point in terms of whether or not it passes. Florida is an extremely pivotal state not only due to it's size, but it's demographic. It has some of the harshest drug laws historically. And for them to go from that to broadening out to have some sort of legalized medical program, is revolutionary.
So successes like that are what excite us, because it's extremely important for the industry as a whole to be able to graduate to the next level. So we certainly see the protectionists out there - the empty drug legalization protectionists out there trying to stop these initiatives from coming forward by using smear tactics and campaigns, and making people think it's going to be anarchy in the residential communities if these businesses come to town.
And we've seen from Colorado and California and Oregon and Washington, and places like that it's just not true. We're actually seeing the opposite effect. We're seeing crime go down. We're seeing school systems get funded. We're seeing jobs created. We've seeing economies and areas of cities become revitalized. It's the exact opposite of what's being perpetrated out there by the anti-groups. So that's what excites us more than anything is watching these initiatives and these amendments go through and the battles that are ensuing. We get involved when and were we can.
Matthew: Great. You know you have kind of an interesting mindset as far as understanding cannabis yield and other produce yield. Can you just give us a picture of when you think about growing something like growing oregano or basil versus a cannabis plant? In your mind, how do you compare and contrast those two in terms of yield, how to grow? I know it's more stringent for the food it sounds like, but what else can you tell us? What else do you think about when you compare and contrast produce and cannabis like that?
Derek: I'd love to tell you I'm an expert in that area. I have a hard enough time keeping my office plants alive. But our Dutch farming partners have been doing this for generations. And my team on the cannabis side are cannabis top winners and they've been producing some of the top tier product consistently, year over year over year.
Controlling the environment regardless of whether you're growing basil or cannabis or what have you is the biggest factor. Controlling humidity levels, controlling you temperature levels, avoiding the fluctuations, introducing the correct nutrient blends at the correct times, those are the things that are most important despite what you're growing, regardless again, whether it's cannabis or basil.
Cannabis because it flowers and you take it not only from a vegetative state, taking it to a flowering state requires a lot more time, effort, and energy. But if you're talking about yield - an economic yield, in one acre of greenhouse, we're growing basil that estimates between 800,000 and one 1.1 million depending on current market rates. To look at cannabis in that same footprint at a wholesale price, you're looking at anywhere from $15 to $20 million dollars depending again on market rates of what demographic you happen to be in.
So the economics are extremely viable when you're talking about cannabis cultivation in doors. But the beauty of growing cannabis in a greenhouse using mother natures sunlight combined with technology - we always like to say it's technology and nature in perfect harmony, using these controlled environment systems but utilizing sunlight and not using artificial lighting, you're dropping your cost of production from $600 to $800 a pound down the $60 to $80 a pound, which is a huge saving that can be passed on to patients ultimately.
Matthew: Wow. That is massive. Derek, as we close how can people learn more about Terra Tech?
Derek: They can log on to our website. They can read about us. We've been covered by a tremendous amount of media over the last few years. There's a significant amount of information online if you just Google our name and read the different stories about where we started, where we're at today, what our current plans are.
We try to be pretty consistent to put out core product dates so people understand all the irons we have in the fire and the progress points. We just put one out this morning, which was an update on what's going on in the city of Las Vegas. And we'll have another one next week, because November 3rd, which is Monday, is when we find out if we get the industry permits for Nevada, if we can begin operations there. So online's a good store for information. Again, we try to update shareholders and interested investors at any opportunity that we get.
Matthew: Great. Thanks so much, Derek, for coming on CannaInsider. We really appreciate it.
Derek: Thanks for having us. Anytime.