Because vape pens are so convenient and discreet consumers love them, but cannabis and CBD companies are struggling to keep up with demand for vape pens. To help businesses streamline their workflow and eliminate bottlenecks a resourceful entrepreneur created a machine that can fill 100 vape pen cartridges in under 1 minute.
– Transitioning from a traditional degree in finance and investments
– How vape pen manufacturers are struggling with the wave of demand
– The specifics of how The Shark filling machine works
– Automating workflow after the vape pen cartridges are filled
– A look ahead at robotics and automation
– Mark’s days a face-painting Boston Red Sox fan
– A book that has had a big impact on his life
As was the case in the great gold rush to the American West, it was the merchants that sold the picks and shovels to prospectors that often made the most profit. Today, I'm going to highlight a pick and shovel company called Convectium that has developed a machine that automates the process of filling cannabis or hemp oil vape pen cartridges, Mark Adams, the CEO of Convectium, and I'm pleased to welcome to the show today. Mark, welcome to Cannainsider.
Mark: Thank you very much for having me. We're excited about being here.
Matthew: Give us a sense of geography. Where are you in the world today?
Mark: So our physical offices are in Rancho Santa Monica, California, which is in Orange County, about an hour south of Los Angeles LAX. And we have other offices. We have sales reps in all the legalized states today, and we also have offices. We have three offices in China where some of our production is done in Shenzhen, China. So we're pretty spread throughout the US and in China right now.
Matthew: Shenzhen has undergone a tremendous transformation in the last decade or two. Have you witnessed some of that?
Mark: Yeah, it's amazing to me. We started going over there. I joined the company about a little over a year and three months ago. And my first trip over there, it's developed so much in only a year. And what they do there is they actually build a city and then move the people in after. So there's a whole city built with large buildings and hotels, everything and they start to migrate the city. And so you'll see that city blossom more and more over the next three to four years.
Matthew: That's an interesting way of doing it.
Matthew: Tell us, what is Convectium at a high level?
Mark: So at a high level, we're a workflow automation company in the CBD hemp oil, and obviously the main part of it is a marijuana space. What we do is we automate solutions and workflow, so people can actually use machines to do things that they've been doing by hand today. And we have various products that allow you to do that. We also now just entered the vape pen industry with our own customized pen that I'll talk about a little further into the interview.
Matthew: Okay. Can you tell us a little bit about your background and journey and the impetus to start Convectium?
Mark: Sure. I kind of go through these two ways. I joined a year and three months ago. I'll walk through how Danny started the company, and then I'll talk a little bit about my background.
So Danny started the company back in 2013, mostly as a pen company. He was making customized pens at a company had the nickname of Blackout X. And what he found was after about a year of doing this, the biggest problem people had was filling these things. It wasn't the fact that there were many competitors out there. But he found that if he could find a filling machine that could do many of these at a time and automate the back end of the industry that was a way to go. Danny has a engineering background and also in technology companies, working in technology companies. So he had a good background to start this and developed our first machine in 2015. And that's kind of how we came to where we are.
I joined last year, and my basic background is I'm more of a finance guy. I'm from Boston Mass. I moved out here. And my background was...in technology I worked for Delly MC [SP] for a while, for five years actually. I was in the hedge fund space and the investment management space. I have a Harvard MBA. So I was a traditional finance guy that had some technology background that really understood what needs to be done in this industry and found that Danny had a great solution and a great way to get involved in the industry, and really take advantage of what we knew about technology.
Matthew: So you went to Harvard in the hedge fund space, more traditional finance. And what is it about the cannabis space that you find exciting or different or how would you compare and contrast it?
Mark: So I think the issues you have and, you know, you're either right or wrong when you picking a stock. Either it goes up or down. So there's a much more leeway here in terms of developing customized solutions and doing other things to try to automate the backend of the business for folks.
The other part of the industry, you know, when you're managing money, it's more about you and understanding stocks and how they're gonna move up and down. This industry is more...a lot about people and the interesting folks that you have as customers, a lot of customers with different wants, needs, and other things. So, you know, this space is quite different. But my technology background, from before I was in the hedge fund industry, really perked my interests in terms of getting into this industry.
Matthew: How is it working with an actual physical product or automation products that create a process for your customers? Is a different thing when you're having to iterate physical product. How do you feel about it?
Mark: Yeah. So I think...you want to get a win in the investment industry, say you hold a stock, a big position and now you're gonna acquire or something great happens then we get a big increase in the stock price. That's terrific and it's kind of a one-time feeling. But it's...I think it's much more enjoyable to have a company come in that's producing a lot of oil, their own capital putting into this, and really having trouble trying to automate the backend, and just seeing their happiness and what they're seeing in terms of our products and what we can help them out with. And then watching that eventually get to the dispensary shelves. Watching the whole backend automation process is a little bit more rewarding in terms of putting the time and effort in and just watching the stock go up. Although the money...the capital is probably better in the investment business. It's a little bit more rewarding on the whole side of it.
Matthew: Okay. And can you tell us the spectrum of types of companies that are purchasing your filling and capping systems? Is it all the CBD pen companies, or do you have the THC for dispensaries and what kind of customers do you have?
Mark: Yeah. So it's kind of state-by-state in terms of what you have. We have actual growers who are buying our products. We have pro-soil producers that are buying our products. We have some distributors that are buying our products and dispensaries. So, it depends on what the state laws are in terms of what the integrated solution has to be. But we have a plethora of customers. But our traditional customer is a grower who will do some seed to sale the whole way through. And, again, we're from California, so I'd say 70 to 75% of our customers are from California. But as everybody knows, there's more states coming on and we're adapting our business model, different states that are out there today.
Matthew: Okay. And since...I mean, this is an audio podcast, so it's hard to visualize what your filling machines look like. But if I was looking over your shoulder and you're explaining to me what this machine is, how would you describe it?
Mark: So what you do is...how the machine works is there's 100 pins and a piston that basically drops down into an oil base and it holds many milliliters of cannabis oil. And, basically, there's a dual heating system where the needles in that piece of the equipment is heated, and also the oil pan or bin is heated as well up to about 120 degrees Celsius. So you can get very viscous oil in there. It basically drops down, comes back up, and sits for about maybe five seconds, then migrates over to where the cartridges are.
They can either have posts on them or no posts or they could be disposables. They could actually be tincture bottles. We can fill anything. We can customize the machines to do anything. And then it drops it down in a very...it's all very heated obviously. Drops it down into the device that we're gonna fill. The Pistons drop and set in and you fill up your device. And from the soup to nuts on the filling side, you probably have anywhere between 20 and 40 seconds, average about 30 seconds, to drop down, extract, move over, and fill 100 cartridges at a time.
Matthew: Okay. Wow. And so how long did it take? You said the gentleman that created this was Danny? And how long did it take him to get this thing to a point where it was working for him?
Mark: Yeah, you know, so Danny started selling these in 2015. And the issue that he had to be honest, and this is coming from a technology company, is service and support is as important as the technology itself. You learn more about your machines when they're in the field and you're also servicing them. Danny would...back in that day was a one-man band. So the machine is now on a 7.5 version iteration, and we have great success now. There were successful with some older machines and it was hard to do it. So we now have a full staff to help service these machines in the field. That makes a big, big difference. And the feedback that we have today has been terrific over the last nine months.
So we really hit the inflection point of our filling machines really serving...And we have some new R&D things going on with that new machine, which we hope to...We have an e-shark coming out in the third quarter, and we hopefully have what we call...our main part is called the 710shark filling machine by the way. And we have...we're all aquatic nature by our product names here, and we have what's called the whale, which is gonna be a fully automated system filling, capping, and packaging hopefully available by end of the year into Q1 next year. So we have a lot of R&D going on to further make our products even better and serve the industry that is growing so fast.
Matthew: And where do you see this kind of fitting in in the landscape of different ways to fill with oil, to fill cartridges, because, I mean, it's just such a big part of the industry now. People want vape pens. They're so convenient. They're so discreet. It's not going away and it's very profitable because, you know, if you can automate this, you know, this is a very tiny, tiny little cartridge and you're selling them for a good chunk. So there is good dynamics on both end for the consumer and the business owners. And I'm trying to understand what the landscape looks like, and do you see a divergence in how the delivery mechanisms for oil are kind of manifesting?
Mark: So I think that the big thing we're seeing now, and if you've seen it with jewel...jewel, and packs, they're kind of the pod business. And that's gonna really pick up some speed now. And we think that that's gonna...we're adapting our machines now. The trick to fill the pod is even harder than to do the cartridges. But, you know, we see in our customer base today, our potential customer base, probably 80% plus don't have a filling solution, and they're having people do it by syringe and by hand. So they're filling them by syringes, which isn't nearly as exact as using an automated machine.
And also they're capping it by hand, which also causes other problems. We can probably increase the spillage and other things by about 42% from our testing of using our automated machines versus doing it by hand. So we're trying to basically create new machines to, as I said, work with the packs [SP] type pod companies, and also increase the speed and lots of oil that's gonna be out there. But we see this growing further and further. And as new states come on, we go to shows. We just did a show last week in Detroit, Michigan, which isn't...the machine is not quite legal yet.
We had one in New York which is illegal. So, they look at our machines and they say, "Wow, this is great, but we probably are only gonna sell 50 to 100 of these a day." And we just sit back and say, "We're from California. Just wait. Wait a year or two and you'll understand what the demand is gonna be." So we see as it goes on state by state a lot of opportunity. But we wanna teach people early, "Here's the benefit for using these machines and why it's so important."
Matthew: And so if I have a vape cartridge I need to fill, the oil I put into this it might be different from the next guy, is that where the heating element comes in to try to get this to a uniform viscosity? I mean, is there any difficulty in terms of one company's oil is thicker than the next or is more viscous in terms of how the machine operates? Or how do you get it to a point where you make sure the customer can feel confident that their oil will be able to work in this machine? Is there any questions or on that?
Mark: Yeah. So we have a cleaning element. And our new machines have an automated cleaning thing. So if you go from one oil to another, the last thing we wanna do is have someone mix oils. It's like any their product in the world. If you use the same machine to do one type of milk, and you use it for another type of milk, 2% nonfat versus something else. So we wanna make sure that our elements, our heating elements, are completely clean. We have ways that we have our customers...we teach them how to clean the machines between fills.
So our goal is, you know, make sure that it takes about maybe three minutes in between if you're gonna go from one viscosity to another in terms of...or one type of...We have a company...a customer called Flavor X that has a bunch of different machines and different flavors they're doing. They don't wanna mix their strawberry versus their blueberry versus their other products. So they'll buy multiple machines. They could do it on one, but they just found it easy to do it by separate machines. So different ways to skin the cat. But our cleaning solution, our cleaning system works great. And our new e-shark, that I talked about coming out, has an automated cleaning system that basically you just press a button, it's all clean, and it takes about three minutes to do. So, we're very aware of not going to mix other people's oils.
The other question you have on viscosity. Obviously, we have tested in all our machines that are probably 95% plus that are...it's more than honey how thick it is. And we understand...we actually have...recommend having a heat gun to get it into the trades. But our machines can heat it up and work tremendously well. The problem we have is getting it from the actual oil bin, it's like a brick, to heat it enough to make it viscous enough so it gets into the oil bin. And we have different ways to be able to heat that and preheat as well. So those are things that we're working on to make sure that we can basically fill up any thick distillate in the country today.
Matthew: Okay. So let's talk about what happens downstream in this automation after the cartridge is full. Can you tell us about the capping system?
Mark: Yeah, sure. So we just developed, and we're releasing this month, our new capping machine. It's called "The Captain", again, an aquatic term. And what we can do is it's basically our proprietary cartridge, which again is called "The Cove [SP]", which is a top airflow cartridge and it's very unique to what we're doing. So we basically can cap ours. We have a more of a press-on snapping cap with top airflow. And I'll explain both reasons why we designed it this way, and Danny did a great job doing this as well. So we traditionally...we tried doing the vape cartridge business last year when I just got in here. And we found out between 25 and 30% of the carts coming out of China were leaking through the air holes in the bottom of the cartridge. And if you're spending all this time growing, cultivating, extracting, doing depesticiding and everything else, and you have a $2.00 cartridge that's leaking, you're not too happy.
So we basically left the cartridge business and said, "You know what, let's develop our own proprietary cartridge." Danny took about four to five months to do this and did a great job. So we have a top airflow cartridge that really can't leak. It doesn't leak. It can't leak through the bottom. And the way we also design it, which is a snapping. We have an eight-ton capping press system that basically once you fill it up, it marries the top of the cartridge, which is the mouthpiece and the stem, with the bottom piece, which is the cylinder to hold the oil, and an eight-ton press presses it in, and in about 10 seconds your carts are now filled and capped. So with under...so, we'll give it under a minute that you can have this whole thing done between filling and capping 100 cartridges versus...we think it's a 60 times output improvement by doing it by hand. We've tested it many times, and that's what we think we can get. So that's where the new cold carts meets the new capping machine. Again, it's the captain and the cold carts.
Matthew: Okay. So now we've got the cartridge filled and capped, any plans to further automate the downstream processes?
Mark: Yeah. So today we sell a blister pack machine that can do...you can do either 2, 4, or 16 at a time. Basically, we can design the surrounding around the blister pack that usually comes with the cartridge, potentially a battery, and maybe a charger, whatever you wanna have. So our customers do this. They come in and work with our web content people, and design how they want to get this to the shelf of the dispensary. We're also working on a box packaging product. We actually have it with a third party. We gonna have our own soon as well.
So today we're doing blister packs and some type of boxing, and we'll have more packaging on the backside. We also plan to partner with some of the larger packaging companies out there. We're right down the street from Kush Bottles and some other folks that we're working on doing that. But our focus over the last 12 months has been perfecting the filling machine, getting the capping machine going, getting the cartridge going. We're gonna be kind of fully done with that this month, and then we're gonna look more in the backend packaging. So it's kind of a...we wanna make sure our products are all quality, we know how they work, customers are happy, then we're gonna move more into the package side.
Matthew: Okay. Now with all this talk in the news and in media about robotics and AI and how they're are coming for all the jobs and automation is gonna happen. And it is already happening. You can see these robots making burgers and stuff now. It's...there's...If you look in some modern automobile factories, everything happens in the dark because there's no humans in there. So the robots don't need light. So it's pretty crazy looking in and it's a dark room. So how do you see robotics impacting this industry when you look down the road?
Mark: Obviously, I think it'll have a big part. The big thing is it's still...the big boys who are robotics now are mostly publicly traded companies and they, either through their shareholders or through the SCC or other things, can't really get involved in this industry yet. It depends. Everybody has different opinions if this is all gonna became federal legal. If it does, what the timing is. So, eventually, you'll see more and more robotics come in. But I think, for today, we're working on developing solutions that are impacting the market today and allow our customers to get the best results they can possibly have. I think, like, in another industry robotics will be more important.
But in this industry as well you have different viscosities, different things of care that you need to do. You kind of equate it to the wine industry. You still need a big human element in terms of testing, tasting, and making sure that things are done the right way. I think it's very similar to most of the cannabis industry. So I think it's gonna be a long way until robotics takes over, and you'll still gonna need a human element in this whole process.
Matthew: We talked a little bit about Shenzhen and their prowess in manufacturing. Do you see more manufacturing coming back over to North America and maybe some more expertise kind of boomeranging finally back over here as China is really not a low-cost geography anymore?
Mark: Yeah. I think you'll see a lot going back. Actually, our new Captain, which is a capping machine, has been produced in the US and manufactured here. We'll do a new filling machine. We're weighing the opportunity in the US. So based on two reasons, they can...our costs here have become more comparable with the Chinese costs. The quality if they're near you, you can monitor them rather than having factories in China. You have the language issues. You have quality delivery issues. So we're trying to do more, more coming stateside from China.
The cartridges probably will remain there for a while because just the human capacity to make these and the cost savings. That's probably not gonna change for a while. But we're trying to bring more and more back to The States where we'll hopefully have, again, where our cart machines all US. Our filling machines will now possibly be in the US. And the other piece is Mr. Trump has the thing going on with China right now where there's levies and taxes and other things going on. So we don't wanna bring our costs up to our customers because we have a 25 to 30% increase from China from a US-China trade war. So we're trying to, basically, hedge that and we're spending a lot of time getting our production based in the US.
Matthew: And where are you in the capital raising process?
Mark: So Danny, who founded the company, had done a couple of rounds to get us off the ground and really get him really rolling on this process. And last year we did a convertible note for about $1.75 million that closed in December. We had our first institutional money come in in March, end of March of this year. And so we have...we've raised, in those two rounds, $3.25 million. And we're actively...probably we're good for at least through the end of the year and to next year where we'll explore and see what we have to do. [inaudible 00:23:49] another round or what that might look like.
Matthew: Okay. And are you open to investors and listeners reaching out to you if they're interested in learning more?
Mark: Absolutely, yeah. I love to talk to them. We're actually contemplating doing what's called a reverse merger in the US over the next probably 30 to 90 days. And what that entails is you buy a company or they buy us, it's reverse merge into, and we have a vehicle, publicly traded vehicle, that will hopefully have by...into the fourth quarter this year. And the good news about us is, again, we don't touch the plant.
So all though it's federally illegal, some of our customers obviously are in the business. But we're basically, as you introduced us, we're selling the picks and shovels and overalls to these folks. So we're actually not touching any cannabis at all. We just supply those who do CBD, hemp, whatever it might be. We supply them with all the equipment. So we have no federal issues at all. So we think we shouldn't have a problem having a public traded stock by the end of the year.
Matthew: Great. Well, Mark, I like to ask a few personal development questions to help listeners get a sense of who you are personally. With that, is there a book that has had a big impact on your life or thinking that you'd like to share?
Mark: I think going to HBS, I had written...I mean sorry, I had read Clayton Christensen's books talking about management of change. I think anything he's written was a big influence on my life early on, understanding technology and how it impacted change really can impact a business and one's own growth rates. So that was...to me, at the age of 26 to 28, his books were really positively impacting my life.
Matthew: Is there a tool web-based or otherwise that you consider vital to your productivity?
Mark: We do a lot of things with Asana because we have so many different clients. Our Asana tool book and we did a lot of freebased apps, and we're getting more into...a more CRM and other things today, but Asana in terms of working tools and having tasks for our people, because we're so spread out, there's so many different products, and making sure that customers are all aware of them. That's been a great tool for us internally here as we...As I said, I came here last year and there were three of us in Danny's garage. Now we have 4,000 square foot office with over 20 employees growing fast. So having things under control in this type of environment is pretty tough, and that's kind of a good tool for us.
Matthew: If you were doing something else totally not in this industry at all just for fun or for the challenge of it, what would that be?
Mark: I'm a big sports fan. So, I did spend some time...I had worked for the Boston Red Sox [inaudible 00:26:53] from Boston, so something in the sports and marketing entertainment industry. Now I spend 90% of my time on Convectium in this industry where I find it it's a challenge every day and it's a lot of fun and you see all the growth. But my other part of my life is a lot around sports and sports marketing and following that. So it'd probably be something in that realm.
Matthew: Okay. And when you go to a Red Sox game, are you a face painter?
Mark: I used to be. Not anymore. [inaudible 00:27:19] the World Series on Friday [inaudible 00:27:21].
Matthew: Would you consider putting your LinkedIn photo as a face painted version of yourself? I'm just kidding. I'm just kidding.
Mark: [inaudible 00:27:28] joke. Maybe on Halloween.
Matthew: At 4:20 maybe we could do that. Okay.
Mark: Exactly, that's a great idea.
Matthew: Mark, thanks so much for coming on the show. As we close, let listeners know how they can find out more about your business, and for accredited investors, how they can reach out to you as you go through the capital raising process.
Mark: Sure. So our website is www.convectium.com. And that will have all of our products. It'll have demons on there. You can see our machines running. You can see our capper and our...more importantly now our new cartridges. Again, we have kind of what's called a Gillette or an HP model now where we're doing...we can say our machines are razors, and our cartridges will be the razor blades. We'll be buying them monthly. So that's kind of our new business model. We're excited about that. Again, our phone number here at Convectium (800) 605-3580. And any investor questions or anything you might have, you can email me directly and I will always respond. It's email@example.com. And I'm always free to answer everybody and reach out. And we'll probably do a lot more investor shows going on in the back half of the year as we hopefully get this public offering completed.
Matthew: Mark, thanks so much for coming on Cannainsider. We really appreciate it and good luck to you.
Mark: Thank you very much. It was a great pleasure being here and thanks for the opportunity.
Please do not take any information from Cannainsider or its guests as medical advice. Contact your licensed physician before taking cannabis or using it for medical treatments. Emotional consideration may be provided by selected guests, advertisers, or companies featured in Cannainsider. Lastly, the host or guests on Cannainsider may or may not invest in the companies or entrepreneurs profiled on the show. Please consult your licensed financial advisor before making any investment decisions. Final disclosure to see if you're still paying attention, this little whistle jingle you're listening to will get stuck in your head for the rest of the day. Thanks for listening, and look for another Cannainsider episode soon. Take care. Bye-bye.