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Max Simon of Green Flower Media introduces Steve DeAngelo and his new book, The Cannabis Manifesto. Steve and his book are poised to change the national conversation around cannabis.
Learn more: http://cannabismanifestobook.com
Visit this site to get free bonuses that are available for a limited time.
[1:31] – Max’s background
[2:38] – Max talks about Steve DeAngelo
[3:51] – Max talks about his documentary about Steve DeAngelo
[5:59] – Max talks about Steve’s book, The Cannabis Manifesto
[6:45] – Where can people find The Cannabis Manifesto
[8:26] – Steve DeAngelo’s interview
Matthew: Hi, I’m Matthew Kind. Every Monday look for a fresh new episode where I’ll take you behind the scenes and interview the insiders that are shaping the rapidly evolving cannabis industry. Learn more at www.cannainsider.com. That’s www.cannainsider.com. Are you an accredited investor looking to get access to the best cannabis investing opportunities? Join me at the next ArcView Group event. The ArcView Group is the premier angel investor network focused exclusively on the cannabis industry. There is simply no other place where you can find this quality and diversity of cannabis industry investment opportunities months or even years before the general public. If that’s not enough, you will also be networking with the top investors, entrepreneurs and thought leaders in the cannabis space. I have personally made many of my best connections and lifelong friendships at ArcView events. If you are an accredited investor and would like to join me as an ArcView member, please email me at firstname.lastname@example.org to get started. Now here’s your program. Today I am pleased to welcome Max Simon to CannaInsider to discuss Steve DeAngelo and his new book The Cannabis Manifesto. Max, welcome to CannaInsider.
Max: Thanks Matt.
Matthew: To give us a sense of geography can you tell us where you are in the world today?
Max: I’m in beautiful Ojai, California which is right in between Santa Barbara and Los Angeles.
Matthew: Oh great. And what’s your background? How did you get involved in Steve’s book and the cannabis industry?
Max: Well I’m the CEO of a company called Green Flower Media, and we produce really high quality cannabis content. And actually Steve DeAngelo saw one of our early Coming Out Green campaigns and came to us and said you know I really love what you guys produce, and I’ve got this book coming out. And it just so happens that I have about a decade of experience doing product launches. I used to run Deepak Chopra’s products business. And even though it wasn’t really part of our kind of business model, when I started to get to know Steve more and I read the book itself it was so clear and so evident that this book needed to be read by millions of people that we decided to help out. And so we kind of came on as partners to bring this book to the world in a much bigger way.
Matthew: The majority of listeners will be familiar with Steve. I mean he’s a legend in the industry and activism, but for the new listeners that aren’t really familiar with who Steve is and his message, can you give us a summary?
Max: He’s best known for being the founder and executive director of Harborside Health Center which is the largest medical marijuana dispensary in the world, in Oakland, California and they have another one in San Jose and another one coming out soon. He’s quickly expanding. And Haborside Health Center is known as kind of the gold standard for how these dispensaries should be run from every aspect; from the quality of the cannabis to how they are following guidelines and regulations to how they treat their staff to the environment itself. So he’s known within the industry for that. Publically most people know him as the star of Weed Wars which was on the Discovery Channel. Where it was a miniseries. That’s how I found out about him years ago is through that show.
Matthew: And you have a mini-documentary that is out now about Steve that I saw on your website, and I have to say it was really heartfelt and touching and I feel like I know Steve more after watching that. And there’s a couple of little tidbits in there that I didn’t know about his background that was really interesting. Can you tell us about that a little bit?
Max: Well I think you know his rap sheet of credibility is pretty impressive. I mean everybody knows about Harborside and about Steep Hill Laboratories. He cofounded that, and the cofounder of ArcView which I know most people here on this show are familiar with. But he’s also been a pretty devoted activist for so much of his life whether it was in Yippies which was really kind of an anti-establishment group from the D.C. Smoke-ins where he was organizing some of the very first cannabis protests to really going head-to-head against the federal government in so many different ways.
And you know what a lot of people don’t know is Steve (4.33 unclear) is extraordinarily humble and really sincere man. I mean I’ve been almost surprised by how genuine he is with this mission. But a lot of people also don’t realize how much he’s had to give up by being so devoted to cannabis his whole life. It’s a very exciting time right now, but it’s mostly been a very scary and frustrating time and so he never had kids because of his cannabis activism. You know he’s really had to be constantly almost scared of what he owns in fear that it’s going to be seized by the federal government, and yet his mission has been so pure because he believes so deeply in cannabis and what it can bring to the world.
Matthew: We’re going to play an interview with Steve in a minute here, but before we do can you tell us what’s important to know about the book The Cannabis Manifesto?
Max: I think the most important thing is that this book has the ability to legitimize the value and the benefit of cannabis on a global level. And so whether you are wanting to become more well-educated yourself about the benefits of cannabis or how to use it responsibly or all the ways you can use or whether you’re trying to move agendas forward and legislation or for lobbying purposes or whether you want to become more involved in the industry and understand the opportunities and the ways you can get involved, this book has a very comprehensive approach to those different issues articulated in a more thorough and kind of clearer way than I think has ever been published in a book before.
Matthew: One thing that really I find remarkable about Steve is that he has the ability to connect with every generation and demographic. You know to my mom to a younger cousin to somebody from a totally different environment and culture and that is a huge gift. Where can we find this book? Is it available on Amazon, online, where can people get it?
Max: So my company is producing this campaign right now to get the book on the New York Times Bestseller list which is probably worth mentioning because if we can do that, The Cannabis Manifesto will literally become the first cannabis book to ever reach the New York Times Bestseller list which would be not only a huge accomplishment for the industry but of course a really nice pat on the back for Steve. And right now the book came out and if you go to www.cannabismanifestobook.com you’ll see a list of really amazing bonuses that are only available for a limited time right now that you get for free when you actually order your copy through the website. And so the website will tell you to go get it through Amazon or Barnes and Nobel, but to come back and get your bonuses. So go to www.cannabismanifestobook.com right now and you’ll see all the amazing things that you get for ordering the book during this window because if you do it will help us get the book on the Bestseller list.
Matthew: Yeah and I know a little bit about the dynamics, the Bestseller list, but one thing that people can do if they know they have an interest in Steve or cannabis is to consider purchasing a book for a friend or family member or multiple books. That really helps out a lot. Steve is kind of the Obi Wan Kenobi of our industry, and I really want to do everything possible to support him in his efforts in decriminalizing and legalizing this plant, this amazing plant. So Max, thanks so much for coming on the show today and CannaInsiders here is your interview with Steve DeAngelo.
In this episode Matthew Kind welcomes Bryce Berryessa to CannaInsider. Bryce is an extraction wizard and he opens up the kimono and shares the most intimate and granular details about how to create winning edibles and concentrates.
What are The Five Trends That Will Disrupt The Cannabis Industry?
(Hint: It’s not about legalization)
[2:20] – Bryce talks about Freedom Enterprises and what they do
[2:45] – Bryce’s brands, Hashman Infused & Waxman Concentrates
[5:05] – Bryce discusses pesticide testing
[7:38] – Is the drought in California affecting cannabis cultivators
[8:52] – Bryce compares extraction technologies
[11:58] – Bryce explains paraffins
[12:51] – Bryce’s opinion on vaporizers
[14:27] – Bryce discusses fractionation
[16:51] – Bryce talks about terpenes and terpenoids
[21:49] – Positives for using butane or propane in extraction
[25:29] – The difference between extracting from leaves and buds
[27:55] – California—Flower or Concentrates
[29:38] – Bryce talks about his chocolate bar made from pop rocks
[34:20] – Bryce’s contact details
Matthew: Hi, I’m Matthew Kind. Every Monday look for a fresh new episode where I’ll take you behind the scenes and interview the insiders that are shaping the rapidly evolving cannabis industry. Learn more at www.cannainsider.com. That’s www.cannainsider.com. Are you an accredited investor looking to get access to the best cannabis investing opportunities? Join me at the next ArcView Group event. The ArcView Group is the premier angel investor network focused exclusively on the cannabis industry. There is simply no other place where you can find this quality and diversity of cannabis industry investment opportunities months or even years before the general public. If that’s not enough, you will also be networking with the top investors, entrepreneurs and thought leaders in the cannabis space. I have personally made many of my best connections and lifelong friendships at ArcView events. If you are an accredited investor and would like to join me as an ArcView member, please email me at feedback at cannainsider.com to get started. Now here’s your program.
Matthew: We continue to witness consumer preferences pivot from cannabis flower to infused products, concentrates and edibles. This change in cannabis consumer behavior is happening rapidly and it requires that we learn a whole new vocabulary of terms and ideas. To help us sort through all this going on in the extraction and concentrate market is Bryce Berryessa. Welcome to CannaInsider Bryce.
Bryce: Thanks for having me.
Matthew: Bryce to give us a sense of geography can you tell us where you are in the world today?
Bryce: Yeah we’re located out of Santa Cruz, California. So about 30 minutes south of San Jose and about a little bit over an hour south of Oakland and San Francisco City.
Matthew: Very nice there with the boardwalk. Little Utopian city there. Very nice.
Bryce: Yes, it’s a beautiful place to be and you know it’s been such a integral part of the cannabis movement. The first cooperative and collective ever founded and organized is called WAMM, The Women’s/Men’s Alliance for Medical Marijuana and they sprouted up so to speak in Santa Cruz and are still thriving and serving patients here today.
Matthew: Nice. Now what is the name of your company and what do you do inside of the cannabis world Bryce?
Bryce: Yeah so our company is called Freedom Enterprises and we essentially build and create brands in the medical cannabis marketplace and products with those brands. So our two flagship brands are Hashman Infused and Waxman Concentrates.
Matthew: Okay. Can you tell us more about Hashman Infused and Waxman Concentrates?
Bryce: So our flagship brands, Hashman Infused and Waxman Concentrates kind of started back in 2012 with the intention of creating lab tested, extremely safe and high quality products for the medical patient in California. So I come from a dispensary operator background and what we noticed is that there was a lot of patients that were producing products with good intentions to provide to dispensaries throughout the state, but because there’s no regulation or regulatory framework in California. Many of them were doing things in their home kitchens without any basic understanding of food safety or proper food storage. A lot of the concentrate producers were producing concentrates without a good understanding of appropriate inputs and how to use safe ETL listed equipment.
And so our vision was to look at the models in other states such as California or such as Colorado, Nevada, Washington and to kind of self-regulate and also look to other industries to see what are the safety requirements for food processing and manufacturing for example. So that intention kind of helped grow our two brands into what they are today and you know now we’re really proud to be one of the largest edibles and concentrate companies in California. We’re third party certified through SC Labs. We test all of our pesticides or all of our trim for pesticides and all of our oils for residual solvents just to ensure that safety is our number one priority.
So we do, under the Hashman Infused line, chocolate bars, capsules, tinctures. We have a coffee. We’re about ready to release a sublingual breath spray that’s really neat. The effects of that can be felt in about 15 to 20 minutes. And then for our Waxman line we do a variety of CO2 oils, waxes and are getting ready to release vaporizer cartridge and pen in the next couple of months.
Matthew: Is there any easy way to see if flower or leaves have pesticides on them because I know there’s a lot of people out there that want to know hey am I having some suboptimal experiences with cannabis because of pesticides or some sort of residue that’s on the flower or plant? What are your thoughts around that?
Bryce: Yeah I mean it’s a very loaded question, even in states that have regulation because it’s federally illegal that EPA has been hesitant to come out with pesticide guidelines for cannabis use. So there’s a lot of hot conversation and topics around it. For example there’s a product that people use for mildew and miticide called Eagle 20, and supposedly it’s pretty safe and it’s systemic, but if you use it in the proper application you know with food then you can use on a food crop, but when you enter it into cannabis, which you’re then going to inhale which is then absorbed through the lungs it creates a whole different set of questions and potential health hazards and effects.
And so what we’ve found the best way is to work with the patient or work with the farmers so they’ve adopted best practices. We know where we’re getting our medicine from. We go and visit the farms and on top of that even though we’re still working with the farmers, we test. Testing for pesticides is also not a great science yet because to do a full plethora of pesticides it’s extremely expensive. It’s going to take weeks to calibrate your machine and cost thousands of dollars. And so most places in California that do allow for pesticide testing are only testing for the 40 most common pesticides. And as most consumers are aware, there’s thousands of different pesticides now.
So I think the key is to just really work with or really purchase medicine from a reputable dispensary that works with their farmers or purchase medicine from companies that really are aware of how they are sourcing their material because I think that especially in California if patients were aware how much pesticides were used in producing cannabis and how prolific it is, they would think twice sometimes before wanting to consume. So it’s definitely that deserves a lot more conversation, and it will be nice as we get further down the road with federal regulation that they actually provide us with some guidelines from a cultivation standpoint as to what pesticides are safe and what to use.
And the last thing on that topic, the California State Water Board did just release recommendations for integrated pest management which have some good advice and some recommendations on what to use. And so that’s the first governmental agency in the state that actually has decided to tackle cannabis. And so they’ve did it with water use and with pesticides a few months ago.
Matthew: What about the drought issues in California? Is that affecting the cannabis cultivators at all?
Bryce: Yeah I think so. You know I think it’s affecting anybody that’s doing agriculture. So what we’ve noticed in the state is that it’s dry. So there’s reservoirs that were full three years ago that are virtually empty now. And there’s not regulation per se for ground use of well water and ground water. And so a lot of Big Ag is sucking up prolific amounts of water and we’re seeing the aquifers that are subterranean go empty and it’s so bad that the land is actually shifting. So parts of California are sinking because we’re removing so much of the ground water.
You know I think that the most important thing is that to try to encourage people to cultivate sustainably and to maximize their water usage to ensure they’re using as little as possible. One way that a lot of farmers that are pretty savvy out here do is they recycle their water from their air conditioner and their dehumidification systems if they’re growing in a greenhouse or indoors. And then they actually reuse that water to irrigate rather than just letting it go down the drain.
Matthew: Good idea. Now let’s back up a little bit to extraction technologies. Can you walk us through the different types of extraction technologies that exist out there?
Bryce: Yeah there’s many, many, many. So you know the most standard and longest known method for extracting cannabis is with a dry sieve. So when you hear people talk about Moroccan Hash or Kief you essentially use a fine screen and pound buds or trim on that screen and then the resin glands fall through it and you end up with a dried concentrated cannabis. You know after that Bubble Hash got extremely popular where you essentially are submerging cannabis material in extremely cold water and getting the trichome heads to break off and then running it through a screening process much the same way you do with a dry sieve to remove it.
And you know as technologies developed and it’s become more common and accepted they’ve taken technologies from other industries, like the pharmaceutical and food industries to do hydrocarbon extractions and CO2 extractions. And those are probably the most popular extracted forms of cannabis right now is hydrocarbon such as butane or propane or CO2 oils. And generally what they’ll do is they take the hydrocarbon and a machine that is stuffed with your cannabis trim or your cannabis flowers and they utilize it as a solvent under low pressure to essentially push it through screens and filters and collect all of the oils, the waxes and the paraffin’s, separate it from the plant material and then you’ll take that and go through a post-processing process that allows all of those hydrocarbons to purge out of it. Another thing that people like to do, just take it one step further and take that plant matter, the waxes, the oils, the paraffins and winterize it. Meaning they essentially put it with ethanol or another solvent and drop it to subzero temperatures and then that will separate out all of the waxes and the paraffins. So the end product is a really pure, highly refined oil.
With CO2 you don’t necessarily need to go through some of the post processing because CO2 is not a flammable material. CO2 systems are ran at much much higher pressure and are generally much more expensive to purchase than hydrocarbon equipment. And so you know CO2 is generally regarded as safer especially in non-regulated environments like California. So our company we only extract with CO2, and we do a super fluid, critical CO2 extraction which is high pressures over a long course of time and we’re able to fractionate the material so it actually collects into three different vessels. So we have oils in one, our waxes and our paraffins going to another and then terpenes and water go into the third.
Matthew: Wow, you just dropped a knowledge bomb on us so let’s just back up a little bit.
Matthew: So fractionating is, you’re saying you’re separating the waxes and the paraffins. People understand what waxes are, but what’s a paraffin exactly?
Bryce: Paraffin is just another waxy substance.
Matthew: Different viscosity than a wax?
Bryce: It’s a part of the plant that you would want to not necessarily inhale. But it is also part of the plant that is able to make different type of concentrates. So a lot of the things that you see like wax would usually have waxes and paraffins in it or they also call it earwax, butter, elves bread are kind of other textures for cannabis concentrate. All of those contain the plant waxes to some degree. Whereas when you have a shatter or oftentimes most of the oils that you find in vaporizer pens the waxes have been stripped away from that. So it’s just the oil in those.
Matthew: How do you feel about vaporizer pens in general? Do you feel like those have quality cartridges are going around the popular ones, or do you feel like they’re suboptimal in some ways?
Bryce: You know I think it’s like any consumer product. You’re going to have something that is a low quality and something that’s extremely high quality and there’s a lot of companies that are just pumping out as much as they can to feed the demand at a low price. And then you have companies that are really focused on having the best oil possible for their patients. So it’s nice that one unique thing about our industry that I think is going to change over time, but I’m really grateful that it’s kind of the culture right now is that it’s been in the dark and in the shadows and there’s so much cooperation amongst companies and amongst individuals and so much information sharing that it’s almost open source cannabis so to speak.
So if you go onto Instagram or Facebook or MassRoots there’s a lot of knowledge sharing going on to push the community forward as a whole and I think because of that you’re seeing where a few years ago there was more dangerous concentrates and less refined oils, less quality. Now that’s really changing. The bar is being raised and people are working together to create the best products possible.
Matthew: So let’s go to fractionating a little bit because that’s an interesting concept I don’ t think people hear enough about. So you’re saying when you’re using your super critical CO2 machine you have different vessels and the paraffins and waxes and the oils all go into their proper vessel. How does that happen? How does that fractionation process occur so those things can be routed to their proper vessel? Maybe is there a certain temperature, a certain pressure? How does that work?
Bryce: Yeah there’s a couple of ways to do it. And I think the easiest way to start is kind of just give a basic definition of fractionation. All fractionation is is a separation process in which a certain quantity of a mixture such as a gas, a solid or a liquid is divided during a phase transition into a number of smaller quantities which is called fractions. So if we have a vat of oil, we can run it through filters at different pressure to create or to separate the different elements of that oil. So when you’re doing a super fluid critical extraction you essentially extract all of the oil from the vessel where the cannabis is at one time, and then that will move through a liner or column. And then there’s different pressure settings for the different vessels. So I know that the molecules for an oil is going to be able to move through a filter that’s different in size than the molecule for a wax. Same thing with the terpenes. Those are generally the most volatile and small molecules.
So by playing with the pressure settings of your extraction it’s going to collect different elements of that oil that you started with. Another form of extraction that’s becoming incredibly popular is known as fractional distillation. And so essentially a lot of the clear product that you see out there is created through fractional distillation. What they do with that is they use different glassware and columns that are extremely high temperatures to take the oil and evaporate it. And as it evaporates it condenses and there’s different temperatures that will evaporate different parts. So the waxes are going to evaporate at one temperature. They go, they condense, then they go through a column and then they collect into another glass vessel. Then you can switch the temperature to get the oils or to get the terpenes. It’s really hard to get terpenes in fractional distillation because they’re so volatile and have such a low boiling point that most of the clear product you see out there it doesn’t have the smell or the pungent aroma that would be associated with a cannabis extract.
Matthew: Okay very helpful. What about terpenes and terpenoids? Recently at a ArcView Group event Steve D’Angelo was on stage and he said here’s a hint of what the future holds for the cannabis industry and he was saying a little bit about terpenes and terpenoids and how that’s going to become such a big element. What was he talking about there?
Bryce: Yeah terpenes are amazing. So they’re a large and diverse class of organic compounds that are produced by many different plants in nature so not just cannabis. So as cannabis is a medicine gains legitimacy there’s a lot of people out there in the scientific community that believe that part of the effectiveness of cannabis lies within the different terpene profiles and the mixture of these compounds. It will be neat to see over the course of the years as they’re studied just find out what is beneficial for what element. And so the general consensus is Bubba Kush for example is an indica and people say well indica is really good for pain relief, but for some reason Bubba Kush is really good for pain relief. More so than a lot of other indicas.
So the general belief is that it’s because of the unique terpene profile. It creates a synergistic effect that allows those components to come in and work with the body and work with the cannabinoid receptors to mitigate some of that pain. So terpenes some of the most common are limonene that are found in cannabis. It’s also found in citrus. Pinene is found in pine trees. It’s also found in cannabis. There’s some terpenes that are really common in black pepper and lemon grass that when you actually add to CBD, cannabidiol, they increase the effectiveness of the CBD and allow more of that to bond with the brain. So working in conjunction with these terpenes I think we’re going to be able to see better deliver mechanisms for effectiveness. So if I have an infused product that I’m eating that has certain terpenes in it it’s going to allow my body to better absorb that so I get better effects with less of a dosage needed. You know terpenes are also fun because they are kind of what make cannabis unique. So the difference between OG Kush and Bubble Gum is terpenes. Like that’s what’s going to give it its unique characteristic, its aroma, its flavor and a lot of those essences.
Matthew: So you touched on aroma there. Is this already happening in the marketplace where cannabis is extracted into an oil or a wax and then terpenes are added to modify the profile or flavor of the product to make it more desirable for an end user?
Bryce: Absolutely. And it’s actually kind of a controversial topic in the cannabis community. Some people are purists and are really adamantly opposed to that concept, and other people really enjoy it. So you know I will give you an example. There’s a lot of additives to food that we eat that wouldn’t necessarily be in the food, but because science and palate has dictated that it might be a good thing there’s kind of a consumer demand for it. One of the products that’s most prolific in the cannabis world that adds terpenes into it is this clear product that I talk about which is a highly refined distilled cannabis oil. Because when you’re done with that process it smells very soft and kind of not very plant like. It’s got almost a slight burn aroma to it. So a lot of companies try to mask that and increase the desirability by adding natural flavors from the food world or natural terpenes found in the plant world. Where we’re getting even more sophisticated now is now thanks to fractionation and the (20.22 audio cuts).
Matthew: Oh I lost you Bryce.
Bryce: … and then they’re able to remove the water from the terpenes and actually put cannabis terpenes back into their product. There’s very few companies doing it. We’re working on it right now and I know there’s a couple of companies in Colorado that are also working on that. But that’s going to be something that’s going to be really exciting to hit the marketplace is to have cannabis-specific terpenes then reintroduced into these vaporizer oils and these smokable products that are strain specific. Trying to mimic a Sour Diesel profile or an OG Kush profile by using terpenes from the plant world that aren’t extracted from those strains has proven to be extremely difficult and inaccurate. So that’s why you don’t really see a good fake, so to speak, OG Kush vaporizer oil because big big companies that are in the perfume and aroma world have been working on this for the last few years to varied limited success. So the key is going to be to actually extract it from the cannabis material and reintroduce it I think moving forward.
Matthew: Now there’s still some people in the cannabis community that prefer butane or propane for extraction purposes. We know that those two things can be explosive which is obviously a big negative, but apart from that what are the positives? What are people looking for when they’re still choosing the butane or propane?
Bryce: Yeah so from just a basic application standpoint generally hydrocarbon extracts are able to better preserve the terpene profile and are a lot easier to produce a variety of texture with less sophisticated lab equipment than it takes for a CO2 concentrate. I think that’s why they’re more prolific. There’s a lot more hydrocarbon extracts on the market than CO2 and some of it is in due part to the ease of being able to utilize hydrocarbons to do extraction. Anyone that can spend five minutes online and go to the hardware store can make a cannabis extraction with butane or propane. I don’t recommend it. It’s not safe and it poses a lot of risks, but I think that’s why in general they’re so popular is because just the ease of being able to do it from a do-it-yourself standpoint has been well documented and is fairly easy to do.
CO2 equipment generally comes from the pharmaceutical industry. So to purchase a super fluid critical CO2 extractor, a very small bench top hobby system is going to enter at over $20,000. To utilize a machine like we do in my company which is a Waters, you’re looking at anywhere from $150,000 on up. Some of the Eden Labs machines are upwards of $300,000. So you know the barrier to entry to be able to facilitate that kind of extraction is much higher than with hydrocarbons. And that’s just the machine. That doesn’t include any of the post processing equipment that you might need such as a rotovate or a scientific freezer that goes to negative 40 degrees Celsius if you’re trying to do winterization. You know fume hoods are extremely expensive. So for hydrocarbon and butane and propane, you know, it’s simple to do, but it’s not simple to do correctly.
So there’s a reason why Colorado and Washington and Nevada allow for those things and allow for that type of extraction. When it’s done with the right equipment that’s ETL certified and people have the right training and it’s done in an explosion proof facility, you know it’s a very safe and effective means of extracting. The danger is posed when people that don’t know what they’re doing and aren’t doing it with the right machinery and the right facility are working with a flammable gas that can ignite at any given time. Another problem with hydrocarbon extractions is that although there’s a lot of pure gas out there that claims to be 99 percent pure butane or 99.5 percent pure propane, there’s other chemical components in those gases that are toxic in the parts per billions. So a very very finite small amount of some of these components that are prevalent in hydrocarbons that are still in the final cannabis concentrated product can be carcinogenic and can actually pose a health risk.
So it’s really important that as the country goes towards regulation and you know the state that I’m in California that we allow for hydrocarbon extraction because it’s a great way to extract cannabis, but we do it in a very regulated way that ensures that the people doing the extraction are going to be safe and ensures that the final product is going to be safe and free from carcinogens because California is a medical state. So people are, and this is a medicine. And oftentimes you want to make sure that the medicine that you’re using isn’t actually going to pose any health risks or cause issues on top of it.
Matthew: Now what’s the difference between extracting from the leaves of the cannabis plant versus the flower or buds?
Bryce: Sure. So you know most extraction is done with the leaves. It’s a byproduct of manicuring the dried flower. The dried flower is probably one of the most popular ways to consume cannabis but it’s also highly valuable. So fewer people use flower than trim. If you do flower for extraction, you generally are going to get a higher yield because there’s more essential oils and trichomes present on the flower than the leaf material. Oftentimes you’re going to get a more robust and higher percentage of terpenes in that final extraction.
There’s some new extraction tech coming out that’s pretty interesting called Live Resin. With that people are actually taking fresh buds before they’re dried and cured and they’re dropping them to below negative 40 degrees Celsius and then they’re running extractions on them that way and it comes out with a really aromatic and very wonderful smelling concentrate. Much higher terpene profiles and some Live Resin than you would see in traditional ways of extracting.
Matthew: What’s happening there at those really low temperatures that accounts for that do you think?
Bryce: Well you want to get the water out of the product that you’re extracting especially with CO2 extraction because the difference between a polar and a non-polar solvent kind of causes tension. So if there’s water present then the CO2 is actually less effective as a solvent. So you’re getting less concentrated product out of it. So by dropping the temperatures of something that has a high moisture content, you’re essentially freeze drying it. And so you’re using subzero temperatures to remove that moisture before you do the extraction. So that’s kind of the principle behind it.
Matthew: That’s interesting. Okay. Now how is California addressing or how are Californians adopting concentrates? Do you feel like flower is still the number one thing or is the market turning? Because definitely in Colorado it’s a major, major pivot to all kinds of concentrates and edibles and infused products and tinctures. It really seems like flowers is really shrinking in popularity. It will always be there, but it just seems the convenience and the ability to dial in what you want with the infused products is changing the landscape a lot. How do you see it in California? Still mostly flower?
Bryce: No I think what you’re finding in Colorado and Washington is being mirrored here. I think a big reason for that is this standardization and the quality control that is starting to happen in the industry. So whether by force in a regulated state or just by the evolution in a state like California, before consumers would walk in and get a brownie and not know that that experience is going to be the same as the brownie they had the day or the week before. But now there’s so many companies that actually do accurate labeling and are putting the same trim or the same source material into their products that consumers and patients can now have a chocolate bar, none month, eight months later, go to that company and have the same chocolate and have the same effect.
And I think that you know that regulation and that standardization is really pushing the popularity of edible forward and same thing with concentrates. You know concentrates are discreet. It’s kind of like having a glass of wine. If you’re hitting it from a vaporizer pen, you can pretty much medicate almost anywhere. It takes a lot of the ritual out of it and it becomes more just easy technology to use to medicate. And I think because of that you know that’s a big reason why they’re gaining in popularity. You can also inhale a much smaller amount of concentrate to get a psychoactive effect as opposed to flowers. When they’re done properly they’re generally regarded as more safe because you don’t have a lot of the combustible materials that’s found in flowers that are in concentrates.
Matthew: Great points. Now you make an interesting chocolate bar on 420. Can you tell us a little bit about that?
Bryce: Yeah we have a 420 Pop Rock bar and it actually is kind of a fun story. My partner and I were visiting a food scientist in a little town outside of San Francisco a few years ago. And she was working on developing our nutrition facts for some of our products and as we were leaving she just happened to mention to us that she had three pounds of Pop Rocks in the trunk of her car. She said I just got back from this food convention and I have all these Pop Rocks, can you guys do anything with them and we said yeah we’ll take them. So over the course of us eating lunch we were brainstorming on what to do with this abundance of Pop Rocks and you know we decided that for April, which is 4/20, you know the international unofficial stoner holiday, we would do a limited edition chocolate bar that had Pop Rocks in it and because it was 4/20, we were going to do a 420 mg chocolate bar.
That at the time was unheard of. There has sense been a race to the top to see who can put the most cannabis in an edible as possible So you now see chocolate bars or brownies that have over 1,000 mg, but a few years ago 420 was a lot. We though you know we were taking a risk. We didn’t think people would want that much, that potent of a bar and it ended up becoming our number one seller. So we made 500 bars for the month of April, and blew through those. And to this day we still keep that. It’s the highest potent product that we offer. It’s the only one that’s more than 200 mg, but people really tend to enjoy it. And for people that medicate heavily you know it’s a really good value, and it’s fun to eat.
Matthew: Yes and for people that are new listeners to CannaInsider typically an adult dose is considered 10mg. So 420 would send you to outer space pretty quickly for most people. Some people could eat that much or consume that much and it’s really not that big of a deal. If they’re a fast metabolizer or a slow metabolizer, there’s a lot of different variables, but just to give you a sense of scale the state of Colorado considers an adult dose 10mg. So that is huge.
Bryce: Yeah and right around that subject it’s also just important to throw out for people that haven’t had a lot of experience that it’s best to always eat edibles with food. It helps metabolize them a little bit better and remember that if you’ve smoked before you’re going that in a few minutes, but an edible can take over an hour before you feel the effects. So start low and go slow.
Matthew: Yes great points. As we get close to 2016 do you think California will pass legislation that will make cannabis recreationally legal?
Bryce: I think it’s unlikely that the state is going to do it or the state legislators, but there’s a couple of initiatives that are gain momentum and I think will be on the ballot for voters to decide that have been submitted by different groups. So there’s a great medical bill being worked on. It still has some flaws, but there’s a lot of traction behind it called SB266 and that would regulate the medical aspect of cannabis in California but we will see what happens with adult use. I’ll be very surprises if there’s not at least one or two options for voters to choose come November of 2016.
Matthew: Do you think a lot of the black market growers can make a transition to you know a legal market growing because it’s still a huge part of the culture in Northern California to have these grows that are not let’s say they’re black market grows. What’s going to happen to those growers do you think?
Bryce: Yeah you know it’s hard to say. I think the only thing that we can hope for in this state is that as regulations come that the barrier to entry is not going to be so high that only the affluent or established corporations are going to be able to participate in the cannabis industry. This is a cottage industry that has thrived in this state for decades, and there’s a lot of good will intention people that want to be able to continue their lifestyle and to continue to provide high quality medicine for their patients. So you know that is a whole is kind of where I hope it’s going to go and as far as the black market goes it’s hard to say. You know hopefully those people will see that it’s a much better transition and a much safer way to live your life to transition into the legal market. You know as long as there’s a pathway to do it, I think you will see a lot of people choose to go down that path in to incorporate and pay their taxes and participate in their communities in a much more formal way than they have in the past.
Matthew: Bryce as we close, how can listeners learn more about your products?
Bryce: Yeah you can check out our websites www.hashmaninfused.net or www.waxmanconcentrates.com. We have a lot of our test results on SE Labs so www.selabs.com. Also you can find a lot of information that’s valuable. We have a ton of great links and resources if people are wanting to educate themselves and try to understand more about concentrate manufacturing and production, medical effectiveness for terpenes. We really want to be a resource where patients can get the knowledge that they need. I can also be emailed at email@example.com.
Matthew: Okay. Bryce thanks so much for being on CannaInsider today. We really appreciate it.
Bryce: Yeah Matt thanks for having me. It was a good time.
Matthew: If you enjoyed the show today, please consider leaving us a review on iTunes, Stitcher or whatever app you might be using to listen to the show. Every five star review helps us to bring the best guests to you. Learn more at www.cannainsider.com/itunes. What are the five disruptive trends that will impact the cannabis industry in the next five years? Find out with your free report at www.cannainsider.com/trends. Have a suggestion for an awesome guest on CannaInsider simply send us an email at feedback at cannainsider.com . We would love to hear from you.
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Kyle Sherman and Chase Wiseman are poised to disrupt the cannabis seed-to-sale tracking software space with their software company called FlowHub.
Important: What are the five trends that will disrupt the cannabis industry in the next five years? Find out with your free report at: https://www.cannainsider.com/trends
Key Takeaways From This Interview:
[2:09] – Kyle talks about how FlowHub was born
[5:05] – The software development process
[10:00] – Kyle talks about the importance of FlowHub’s customer service
[11:58] – Is FlowHub hosted or installed on a local server?
[13:48] – Chase talks about FlowHub’s research
[15:57] – Kyle talks about the iPhone function for FlowHub
[18:25] – Frustrations in the market with the existing software
[21:28] – Other uses for the software besides the Nug
[23:09] – Kyle explains the process in migrating to FlowHub
[23:54] – FlowHub’s price point
[24:55] – Where is FlowHub available
[27:17] – Contact details for FlowHub
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Matthew: Hi I’m Matthew Kind. Every Monday look for a fresh new episode where I will take you behind the scenes and interview the insiders that are shaping the rapidly evolving cannabis industry. Learn more at www.cannainsider.com. That’s www.cannainsider.com. Are you an accredited investor looking to get access to the best cannabis investing opportunities? Join me at the next ArcView Group event. The ArcView Group is the premier angel investor network focused exclusively on the cannabis industry. There is simply no other place where you can find this quality and diversity of cannabis industry investment opportunities months or even years before the general public. If that’s not enough, you will also be networking with the top investors, entrepreneurs and thought leaders in the cannabis space. I have personally made many of my best connections and lifelong friendships at ArcView events. If you are an accredited investor and would like to join me as an ArcView member, please email me at feedback at cannainsider.com to get started. Now here’s your program.
As the legal cannabis business grows in the billions the market for software that can help cannabis cultivators and retailers grows with it. Up until recently there have only been a small amount of companies in the seed to sale software needed to run day-to-day operations in the cannabis space. However, there are new entrants doing very exciting things. One of those new entrants is FlowHub. I am pleased to have the co-founders of FlowHub, Kyle Sherman and Chase Wiseman with us today. Chase and Kyle, welcome to CannaInsider.
Kyle: Thanks for having us Matt. It’s awesome to be here.
Matthew: Now to give us a sense of geography, can you tell us where you are in the world today?
Kyle: Sure yeah, so actually I was in L.A. for almost ten years. Saw the industry there and then about a year and a half ago my wife and I we located to Denver. So now FlowHub is Denver based from the get go.
Matthew: Great. Kyle tell us a little bit about how you got into the industry and how you connected with Chase and how FlowHub was born.
Kyle: Sure so yeah you know about a year and a half ago my wife and I moved from Los Angeles to Denver. We just kind of wanted a change of pace. You know we were in the entertainment business out there, saw the industry really grow out there, and I just… man there was kind of this thing about Denver that was just really appealing. So we, you know, we saw Weed by Sanjay Gupta. That was like one of the last things we did in L.A. We also got married, you know before we left and we just kind of were like okay cool this is the next chapter you know. So we saw the Sanjay Gupta special. It was like you know oh my gosh I want to be a part of this movement. I really want to be a part of legalization.
So let’s go to Denver. Let’s figure it out, and so when we got out here you know because of my entertainment background I was quickly able to get involved with Dixie Elixirs, help them with some of their marketing stuff, did some videos for them. I helped Weed Maps out with some stuff and just kind of got connected in the industry. And at that point I had met someone who was putting together his vertical supply chain. Literally he had a marijuana infused products facility. It had a store. It had a retail location and had a grow facility. So really I saw that whole thing come together and while working at this grow facility, you know we were doing stuff on a clipboard and piece of paper because there was no great software platform out there that could actually do the things we needed to get done. No one was doing it.
And so I spent all this time there trying to figure out how could we manage our plant easier? How can we manage our compliance easier? There was nothing there. And so I was like man we have an opportunity to create something. And so I reached back out to Chase. We grew up together and we actually, it’s funny. Chase and I we went to elementary school and we were, gosh Chase we were like 11 years old when were like penny trading stocks.
Chase: Yeah not very successful, but yeah we were penny trading stocks.
Kyle: I mean we were just such a mess, but we’re trying to figure out you know how to do business together back then. And so it was funny because we kind of split off. You know I was in L.A. Chase was doing some entrepreneurial stuff, and we were just kind of doing our own things. Learning you know like building up this kind of like I don’t know just inventory of awesome stuff, all these experiences. And so we came together. I reached out to Chase and I said look dude there’s an incredible opportunity and you know Chase was, yeah, he had been looking at cannabis as well. And so it was just great timing. And yeah I mean the rest is history right. We started this company and now you know Chase was in Chicago at the time. He’s now moved out here with his wife and kids. That’s just kind of how we are now in the industry. This is probably it right Chase.
Chase: Yeah that’s pretty much it. That’s pretty much the creation of the beginning of FlowHub yeah.
Matthew: So Kyle you had this frustration first hand where you’re seeing hey there’s no great way to manage the plants that I can see. I’m doing it pen and paper. This could be the 1800s you know. We got to bring this up to speed from a technology point of view. So how did you make that leap from frustration to actually giving birth to a product that’s going to solve problems?
Kyle: Sure, wow, that’s a deep question, but I like it. So you know it’s funny because you know I think being there I started prototyping out kind of things that I thought would be really useful tools to have in a system you know. So while I was kind of simultaneously looking for a platform to fill this issue, I thought there was one out there honestly. I really thought I would find one. So in just playing around and developing stuff I think I started to really see that there was an opportunity here to scale this to be like I could help all these people. You know my thought was I mean gosh if we can help you know 10 growers you know help them get 2 more harvest out of the year, we could lower the price of cannabis in our state which means patients could be getting cheaper medicine, which means people who want to come out here as tourists and you know come try recreational cannabis for the first time, they can do that cheaper.
I mean it’s just so cool to be able to affect these things. So I saw the big picture of where you would go with it and really how much impact we could have if we did it right. So I think in that very beginning part it was just prototyping and figuring out where we could go with it with that bigger picture thing. And then in terms of like how we actually executed that, I think it was I mean a lot of I mean gosh we’ve talked to well over 100 different business owners at this point especially very early on especially. We spent a lot of time you know researching and talking to people in different states and what their needs were and what they were facing. You know and just realize there’s all these parallels across the board, and so with all this research I mean really FlowHub was born in talking to people and our customers. You know this is not stuff we just made up. I mean this is all really built from the ground specifically for regulated cannabis. And it’s built really by growers and people who’ve worked in this industry now and who’ve pioneered the industry. So it’s really incredible what we’ve built. I mean it truly is an incredible product and you know we have gone from zero to sixty very quickly.
Matthew: So there is a few other software companies out there that help the seed to sale tracking that we’ll say they’re more the incumbents there early on. The industry has changed a lot since they started their companies. You’re coming in now. Do you feel like you’re somewhat leap frogging where they started and going right to the second generation?
Kyle: You know look man, here’s the thing. These guys, these previous players that are out there already we’ve needed them. They’ve been fantastic. They filled the void. They’ve brought our industry where it is today. You know and I think what’s really important now is we’ve had that experience. We’ve been able to build this regulated market. We figured things out and they’ve pioneered that. I mean this was stuff that they did early on. You know these are the players. And I think, you know, we can’t forget about that. They really helped us get to where we are today, but I think looking ahead we’re looking at a really big industry.
We’re looking at an industry that’s going to scale very quickly. I mean there needs to be tools that are written really well from scratch for this business because if you don’t have tools built from scratch, you will never be able to scale them and optimize them the way that you could you know if you do it right from the get go. And so I think you know with that opportunity in mind you know Flow Hubs come along and it’s taking these great you know sensibilities that these other players have come in and said hey you know we need to track these products from seed to sale. We’ve taken that to the next level right. FlowHub says now we’re going to track these products from seed to sale and we’re going to do it so well and it’s going to be so ridiculously easy that someone can come and start working at a dispensary and within hours know exactly how to use our software. It’s incredibly simple.
And so I think you know when you compare us to kind of these players that have been around for a minute you know you’re looking at a company that’s using the latest, greatest technologies and bringing that into a package that’s just ridiculously easy to use. So we’re empowering these small business owners. I mean to run at extremely efficiency. I mean this kind of efficiency you wouldn’t typically get as a small business. You may get it at an enterprise level, but we’re giving these tools down to the smallest of growers and I think that’s really exciting. We’re going to be optimizing small businesses at incredible amounts. And so you know again it’s just like about using you know using this modern technology and kind of bringing it into the hands of these people who just want to grow weed. These guys love cannabis. That’s why they’re in this industry. They don’t love compliance, are you kidding me. You know let us take care of that. That’s what we’re here for. I mean we’re technologists. We love building this stuff. We’re also activists. We love the plant, but let us take care of all this really annoying computery stuff because we’ll do it. That’s what we love doing, and you guys love growing weed. So it’s like this kind of cool like thing right that we come together on. I think all of our clients really feel so taken care of because of that kind of thing. So I hope that answers your questions.
Matthew: It does.
Kyle: Chase do you think there’s anything we should add to that?
Chase: No I think it was perfect.
Matthew: I love the enthusiasm here guys. Now let’s dig into the nitty gritty a little bit.
Kyle: You know what, can I add one more thing? I’m so sorry to interrupt.
Kyle: One thing that’s so important to us at FlowHub, I don’t want to let people down something by not being able to hear this but it’s like one of the key factors that I found was customer service is number one in this business right. If you don’t have great customer service, you’re going to fail. Our industry right now, I mean, other entrepreneurs that are out there building businesses, customer service 150%. To us at FlowHub it is almost more important than our product, but our customer service is just so vital to us. I just want to make sure that everyone out there who is you know listening to this understands that how important customer service is and especially to us at FlowHub. It’s vital. So you know really whenever anyone is using our platform and they want to get a hold of us they can, and that has really been the key thing we found. You know there’s very few cannabis companies out there with fantastic customer support. You know one that comes to mind is Pax. You know they make the little Pax vaporizer. They have an incredible customer service department and I just wanted to add that.
Matthew: Yeah Pax is awesome but it’s officially just for tobacco. It’s not for anything else right?
Kyle: I know that’s what they say. It’s ridiculous you know, but I mean their customer service Matt is incredible because my Pax broke down gosh a year into using it, and they replaced it within like four days. I mean it was like I sent mine back. They overnighted me one. It was awesome. This was while I was in California and I mean that kind of customer service I mean the trust is great right. I’ve sold my friends on gosh I’ve probably sold ten of those just because of that instance of having this incredible experience with their product. So for us it’s the same way we want to offer our customers the best service possible. And it’s really just as important as your product experience.
Matthew: Now is FlowHub a hosted solution? How does it work? So just for people that don’t know hosted would mean that it would be, the application would be on FlowHub’s server versus a local client. Can you walk us through is Flowhub hosted, how does that work?
Kyle: Sure. This is a really funny conversation right because we’re kind of now coming up into a point technologically as a society where it just doesn’t make sense to house your own infrastructure. Why? Well because people put billions of dollars in infrastructure now, and then share that technology with smaller businesses and subsidize that cost across all these small businesses right. So instead of spending millions of dollars on infrastructure and building this crazy data center with our redundance we can provide incredible redundancy across the United States and across the world using a Cloud based host right. So for example we’re built on Amazon’s AWS, Twitter is built on AWs, Netflix is built on AWS. You have world class applications built on Amazon’s AWS servers. Look if Amazon goes down, the internet goes down. The internet is done right. There’s so many websites and web applications hosted on Amazon’s AWS Cloud services.
So for us it’s really important to provide super redundant servers and we keep it all in the Cloud because that ‘s where data is safest. You know people will try to tout you know hey we work off the cloud. We work on independent little servers. You know what, what is this, 1995 right. That’s not how things work anymore. It’s 2015, and we’re able to provide a way lower cost application with way more security and way more redundancy being in the Cloud. And so we’re very very proud to be a part of Amazon’s family in AWS Cloud for sure.
Matthew: Chase, the story of Intuit and the gentleman that started that he sat with his customers as they use the software for the first time to understand how they use it an how they want to use it. What kind of research is FlowHub doing to ensure that you really understand the problems and opportunities on a granular level?
Chase: Yeah definitely so the whole thing with this is like our initial customers have told us time and time again that it’s very hard to get problems they come across you know in their current systems that they’re using resolved. And many times they don’t even get, you know, any replies for weeks or maybe even months at a time. Our whole philosophy is, Kyle kind of went on earlier was you know when starting it we have to have the best customer service, the best customers overall experience and you know it’s a prime motivator for us. It’s you know parallel to as he was saying you know our end product. But you know the whole thing with us is we rarely ask ourselves what feature we believe we need to help the end user. You know our attitude has always been to work alongside a diverse clientele to ensure that the daily frustrations that everyone, you know, up the levels of a small grow to a large grow are met first before we start putting in the bells and whistles. You know this obviously kept our feature below really low, and you know we never have a confused user because it will increase productivity on the day-to-day operations ten-fold if not more and that’s more important than having a special tracker that no one’s going to use.
Matthew: Kyle and Chase you had me into the office in Denver a few months back and what you did left a lasting impression on me because I think about something called the Cone of Learning. And if you can visualize a cone at the top of it people learn in different ways but when someone tells you something you can kind of learn it. When they show you, you learn it deeper and when you’re involved in the process you learn it the deepest. And when I came into your office one of the first things you did was hand me an iPhone I believe with an exoskeleton on it and said Matt, move this plant from here to here and you didn’t give me any instruction. You just said do it and I did. I walked through doing it using a handheld device exactly as it was designed to do. What did you have me do there? How can you explain it to people that are just listening? You know they can’t see this. So tell them what we did there.
Kyle: Sure so you know it’s funny working in a grow facility and dealing with compliance and moving hundreds of plants around in a day and having to report that back to state and then report it into internal systems. You know we really early on I found there’s this huge headache and disconnect between really what tools were available and what you actually had to do right. I mean it’s pretty labor intensive tracking thousands of plants around a facility every day. I mean it really becomes you know quite the headache. And right now you know you have people because they can’t rely on their current software solutions, you know, you have people writing things down with a pen and paper and you know wheeling around desktops on carts that are plugged in with extension cables trying to figure out ways to you know log all this stuff with laser scanners.
And so we early on said you know let’s throw all that away. We need to deliver something that just makes these operations so much easier. So easy that someone like you Matt could come in right and start doing thing right away. No reading a manual or having to take webinars. We want to get rid of all that. It’s 2015. You know it’s incredible the things you can do with computers now. And so what we did is we created the Nug, and the Nug is a really cool handheld scanning device that lets you scan in you metric tags here in Colorado. So what you can do for example is in bulk say you have a room full of 500 plants that you need to move from veg to flower in a single day. You could go scan 500 tags and press move on the device and it’s going to log that move, time stamped with the particular user with their badge number that moved it.
So it’s incredible. Our transparency and the level of detail that our software goes into is incredible. And it’s just so, I mean, it is so easy anyone can do it. And we always say it’s always fun is like you know even the most medicated individuals can use our software and it’s true. We designed it for growers and cannabis users and people who are just obsessed with cannabis across the board. Everyone can use the Nug and can use FlowHub. So we’ve just made it very easy to do some of these simple tasks that use to take forever.
Matthew: It was very simple. Extremely simple. Now what’s the number one complaint you hear from perspective customers about their existing software where you’re like hey this obviously, I mean, we touched on customer service, but is there any feature or is it moving plants? Like what are the things you hear the most where it’s just like goddamn we’ve got to fix this.
Chase: Yeah so that’s a pretty easy one, but I mean the most obvious problems I mean every grower knows about it’s the loss of inventory, sometimes even gaining inventory at random. I don’t know how that really works. Consistent server crashes leaving the customers to resort to pen and paper, you know, sometimes for days losing thousands of dollars. Overall confusion you know really just navigating through the process to stay compliant I mean you know sometimes you’re going through these programs and there’s dropdowns and you can do five to ten different you know workflows or five to ten different ways that you would have never you know no one knows which one you know the right one to do so they just kind of start clicking around and hope they stay compliant.
You know look we’re over a decade into the 21st Century they shouldn’t be worried about monotonous tasks and data verification. I mean give us the computers, you know, people shouldn’t be (19.13 unclear) anymore. I mean as I said it’s a decade into the 21st Century. You know we like to think of our product acting like Siri. It’s intuitive enough to recognize what our customer is trying to do and it has rails like a railway of saying hey just go down this path. You’ll get there. You’ll stay compliant and you know you’re not going to get fined. And that’s kind of like you know our whole philosophy and we get rid of that, all those complaints pretty much right away.
Kyle: Yeah I think Chase hit it on the head. I think like the biggest complaint is like easy to use and trustworthy right. I mean like when you’re using a piece of software you want to trust that it’s working. Right now you’re recording this conversation we’re having and you’re just hoping right that your software is recording the conversation. I mean imagine doing these podcast recordings and then only maybe 80% of the time it’s actually you’re getting a full recording and the other 20% you’re just unsure. And so that’s kind of where the state right now, right, where people are not even encouraged to use their current software, even encouraged to try to take time to learn how to use it because it doesn’t even work that well anyway.
And so I think it’s all about really addressing the usability of software in general right. Chase said we’re a decade into the 21st Century here. I mean software should be dead easy to use right. I mean a grandmother can use an iPhone now. it’s incredible right. I mean Joe Schmo should be able to use a Nug and should use our web app without much training. So really it’s about making things so easy to use and the user interface is just so simple and intuitive, and it’s about creating the backend codes so that it’s guaranteed to work every time. You know our software is trustworthy. You know that it’s going to have the same output every time no matter what you throw at it right. I mean our software works and that’s what we set out to do early on is we spend that extra time developing rock solid software where a lot of other players just try to scale fast, but our platform when you use it and you seen it. It’s solid as heck. I mean it’s like, and that’s really what it’s all about for us and we’re going to evolve from here. It’s really, I’m excited about our future.
Matthew: And how do you use it besides the Nug, I mean, is it tablet, desktop? I mean how do all the people in a grow or a dispensary, how do you envision them using it apart from the Nug.
Chase: Yeah so I will kind of break it down real quick. So currently we have the IOS app which we call the Nug and really that’s just the employees that are in the garden kind of walking around. They’re not really at a computer most of the day. Then we also have the web app, and this is for inventory and compliance employees, administrators, owners, pretty much anyone that’s going to be at the desk most of the time or outside the grow. And we also actually have a view app that we’ve been creating that can be downloaded on any smartphone and the business owner or administrator can use it and just get quick stats on their grow, you know, how many more plants they can have on a license or you know how many plants are in their grow, how many are in veg, how many in flower. I mean just quick things that they can just get you know right in the palm of their hand. So that’s kind of how our system works.
Kyle: I just want to add to that just to kind of clarify for some of the listeners here, you know, you don’t have to provide your own IOS device. You know what we do with Flub is really unique, and we actually give you guys that device. So essentially what you’re getting is a Nug with an IOS device built into it. You don’t have to worry about sourcing that. We literally give that you so that headache is not yours to deal with. Again it’s all about making things dead easy. So we have the web app, our Nug which is a standalone hardware device. Again that’s one unit that we give away and then we have a review app by Flub like Chase mentioned. It’s a really powerful offering.
Matthew: So if I’m an existing cannabis cultivator and I’m like hey this FlowHub software sounds great I want to move over or migrate to it, what is integration or migration to FlowHub look like?
Kyle: You know it’s really cool. Right now we can actually sync our grower’s account with metric which the government system here in the States. So literally the onboarding process is wildly fast. Oftentimes on average we find that we’re able to set up a grow and have them off and running using our platform within three hours. People knowing exactly what to do and how to use it. It’s incredibly fast and simple to use. I mean for people that haven’t seen it yet I encourage you to reach out to us and we will absolutely give you a little demo because I’m just so excited to be able to help so many people at such a kind of a large scale.
Matthew: What about price point? Is it variant on the size of a grow or number of users? How does that work?
Chase: Yeah so we’re finalizing our exact price point now to stay competitive with our competition, but our goal from the beginning, you know, we don’t want anything to be confusing. You know the price point’s really simple. You know we try to make it as simple as possible. There’s no contracts. There’s no setup fees or necessary hardware you need to buy for it to work. You know it’s pretty much we just give you one of the Nugs and you have full access in the web app, unlimited computers, a small monthly subscription. And you know if you want another Nug, which a lot of customers will. For every thousand plants you should probably have one Nug. You can add it on for an additional monthly fee. So it’s just really simple.
Matthew: And when will FlowHub be available?
Chase: So FlowHub’s compliance and workflow accelerator, so for their grow is available now actually. You know we just released it a couple of weeks ago and our POS system will be available towards the end of the year.
Matthew: Okay. And what about geography. I imagine Colorado is ground zero and then you go out from there or how does it work?
Kyle: So you know look right now we are so focused on providing the best products for our Colorado customers. We are talking to people all over the country. I mean it’s amazing how many people have reached out to us too. They want to try our stuff, but right now we are very focused on Colorado and we are going to make everyone’s life easier here first. When we do that we can talk about moving on, but really it’s all about addressing the needs right here right now because there are a lot of them. And that’s what we’re about to do and we’re in the process of doing. So you know it’s just we’ll deal with Colorado first and we’ll go from there.
Matthew: Good plan. Now in closing how can listeners reach out to you or I should ask are you still looking for investors for FlowHub?
Kyle: To date we’re fully funded, but we’ll possibly raise capital in 2016. We’re just not 100% sure yet.
Matthew: Okay and….
Kyle: We’re getting real nosy there Matt.
Matthew: Well I got to give you guys a complement. You’re really energetic. You’ve got a lot of enthusiasm. I can tell everybody over in your office is borderline obsessed with making this successful and that’s really the place you want to be.
Kyle: I mean Matt our team is incredible. I mean we have, and one of our guys was at NASA for eight years. You know we have another that was with the Department of Defense doing software in surveillance aircrafts. I mean we have a diverse group of guys. One of our guys dropped out of a PhD economics program. I mean these guys are brilliant people and they’re also activists and people who believe that we need to make some social change happen here really as soon as possible, and they want to be part of the movement. So I mean this software is written with love. It’s written with passion. It’s written by guys who want to see change and it’s written by guys who are going to be around a long time to see this through, and it’s just… waking up in the morning Matt and coming in here and working with this incredible team is a dream come true. I mean we are doing some of the coolest stuff right now and it is an incredible experience. This is a dream come true for our entire team.
Matthew: I think you just came up with your tagline there, you know software infused with love.
Kyle: Software infused with love products, yeah, that’s it.
Matthew: Yeah love infused.
Kyle: Love infused, I love it.
Matthew: So guys please let the listeners know how they find FlowHub online.
Kyle: Surely yes. You can find us at www.flowhub.co we’re not .com. We’re .co so we’re www.flowhub.co. You can also find us on www.instagram/flowhubco, www.twitter.com/flowhubco and by the way we have some great pics of Nugs we put up there. We put pics of shatter up there. I mean we get all sorts of cool goodies from our customers. So we love posting pictures on Mass Roots. You can find us on there. We’re at FlowHub on Mass Roots. You know gosh join us on our social media it’s fun. We have a good time on there.
Matthew: One just side not there. Now I remember reading a press release or something. You have a relationship with Mass Roots. Is that something you can talk about?
Kyle: Sure I will go into it real briefly. So we’re doing some really exciting stuff with Mass Roots. Our visions are very much aligned. We both see the same things in the future. I think Mass roots has some really incredible things in the pipeline. I mean you know they are organizing a very large group of cannabis consumer. And from that there’s some pretty incredible metrics you can get and gather. And we can deliver some really incredible metrics back to business owners. What we’re developing with them is going to be really exciting. I cannot wait to show you what we do with them. We will have more on that in the coming months, but it’s going to be really exciting and retailers and grow owners are going to be very excited about some of the stuff we have to offer them here in the near future.
Matthew: Awesome. Kyle and Chase thanks for being on CannaInsider today. Again everybody that’s www.flowhub.co you can find them at and you can hear the energy and enthusiasm over there. It’s a crazy party and I wish you guys all the success in the world. Thanks for coming on.
Chase: Thanks so much Matt.
Kyle: Thank you so much Matt this has been a pleasure. Really appreciate it.
Matthew: If you enjoyed the show today, please consider leaving us a review on iTunes, Stitcher or whatever app you might be using to listen to the show. Every five star review helps us to bring the best guests to you. Learn more at www.cannainsider.com/itunes. What are the five disruptive trends that will impact the cannabis industry in the next five years? Find out with your free report at www.cannainsider.com/trends. Have a suggestion for an awesome guest on www.cannainsider.com, simply send us an email at feedback at cannainsider.com. We would love to hear from you.
Some quick disclosures and disclaimers, me your host works with the ArcView Group and promotional consideration may or may not be given to CannaInsider for the ads placed in the show. Also 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. 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.
Matt Chapdelaine is the founder of HerbFront.com. HerbFront.com looks to help cannabis cultivators and retail dispensary owners find real estate in desirable locations where landlords and ordinances are friendly or at least tolerant of cannabis businesses.
Learn More at: http://www.herbfront.com
Important: What are the five trends that will disrupt the cannabis industry in the next five years?
Find out with your free report at: https://www.cannainsider.com/trends
Get the Free CannaInsider Podcast:
[3:32] – Environment of the Merchandise Mart
[4:13] – What is Herb Front
[5:16] – How cannabis real estate is unique
[8:38] – Matt talks about the response to Herb Front
[9:43] – Are there abundant lease opportunities?
[10:27] – The number of properties listed on Herb Front
[11:02] – Matt talks about how he got into the cannabis real estate space
[12:19] – Matt discusses Herb Front’s business model
[13:13] – Where are most of the properties located
[14:45] – Matt gives a walkthrough of the workflow of Herb Front
[17:00] – Matt talks about problems getting loans for business build outs
[19:07] – Matt discusses common questions he receives
[20:14] – Matt talks about signage regulations
[21:14] – What’s the typical size space that potential customers looking for
[22:56] – Contact details for Herb Front
Matthew: Hi, I’m Matthew Kind. Every Monday look for a fresh new episode where I’ll take you behind the scenes and interview the insiders that are shaping the rapidly evolving cannabis industry. Learn more at www.cannainsider.com. That’s www.cannainsider.com. Are you an accredited investor looking to get access to the best cannabis investing opportunities? Join me at the next ArcView Group event. The ArcView Group is the premier angel investor network focused exclusively on the cannabis industry. There is simply no other place where you can find this quality and diversity of cannabis industry investment opportunities months or even years before the general public. If that’s not enough, you will also be networking with the top investors, entrepreneurs and thought leaders in the cannabis space. I have personally made many of my best connections and lifelong friendships at ArcView events. If you are an accredited investor and would like to join me as an ArcView member, please email me at firstname.lastname@example.org to get started.
The ArcView events take place quarterly and do have capacity restrictions based on the overwhelming demand to attend, as well as the venue capacity restrictions. As a CannaInsider listener, you will get connected with other investor members prior to your first ArcView event. Again if you’re interested in becoming a member, please email me at feedback at cannainsider.com. Now here’s your program.
It’s right to celebrate when you win a cannabis cultivation or dispensary license, but shortly after the celebration it becomes evident that there are many difficult tasks ahead. One is finding real estate for your dispensary or cultivation facility that is properly zoned in a good location with a landlord that welcomes cannabis tenants. Today we’re going to learn how Herb Front solves these problems. I am pleased to welcome Matt Chapdelaine founder of Herb Front to CannaInsider today. Welcome Matt.
Matt: Hey Matt it’s good to be here. Thank you.
Matthew: Matt to give us a sense of geography where are you in the world today?
Matt: Today I am in Chicago in our home office here in the Merchandise Mart. We are located within 1871 which is a real estate, sorry, technology accelerator based right on the river in downtown Chicago.
Matthew: Yes and what a massive facility that is. You could probably see it from outer space. It’s just so immense. Now the Kennedys owned that for many years. Is that owned by them, do you know?
Matt: In some levels yes. To your first point it’s the largest office building in the world after the Pentagon, that one point was so big it had its own zip code. And you’re right, the Kennedys did own it. They eventually sold. A couple of years ago they sold their interests to the Vornado Real Estate Trust, but they took shares in that company. So while they don’t own it directly anymore they’re large shareholders in the entity that does own this building and it never ceases to… I never cease to miss the irony that this building was entirely built on bootlegging alcohol and here we are revolutionizing, at least the real estate portion, of the cannabis industry.
Matthew: Right. Now before we jump into Herb Front, you’re kind of an interesting technology accelerator environment there in the Merchandise Mart. And we always hear about California and even sometimes here in Boulder and places like Boston, but maybe you could just give us a high level overview of what kind of environment you’re there in the Merchandise Mart.
Matt: Sure. Sure. We were 1871 which is the working space that we’re in is filled with about 500 different technology companies from around the country. It’s a massive facility. And then within 1871 we’re part of an accelerator called, sorry, an incubator called Elm Spring. And what Elm Spring does is they’re the premier real estate technology company, sorry, accelerator in the country. And that’s where we got our start about six months ago, and it has really helped us grow our business over the last six months.
Matthew: So let’s get into it. What is Herb Front exactly and how should we think about it?
Matt: Sure. Herb Front is a technology company first and foremost that has also built a national network of commercial real estate brokers that handle and specialize in the cannabis real estate transaction. When you buy a home you probably want to find the best deal online on a site like Zillow or Trulia, and then you want a good real estate agent to help you find the property and give you a smooth and seamless transaction. We thought why not do the same with cannabis real estate. There’s some very different protocols involved which is where our technology comes in, but in its simplest form that’s what we are.
Matthew: So what are the big challenges? I mean in other ways with real estate a tenant or a prospective buyer and seller meet and they go through a number of different variables or different talking points to try to understand if they’re a match. How is that different in the cannabis space?
Matt: Sure well the human component is obviously a big piece of this industry. There are some owners and landlords and sellers that are more than comfortable to sell within this industry and there’s some that are not which is why we built this national network of brokerages, of brokerage companies that actually specialize in this transaction and have experience in this transaction. So there is the human element which is why our human network is so important to what we do, but beyond that there’s certain technical components that our technology solves that go into making a property compliant or non. And there’s really three main areas, technical areas that the transaction is focused on that can make a property good or bad.
The first is zoning. The second is the sensitive uses that are near it, and then the third is the debt that may incumber a property whether it’s FDIC insured, and I will go through each one of those kind of step-by-step. Each state and each municipality has their own zoning requirements. So on the most basic level you have to find a property that is zoning compliant, and our software takes care of that. The second piece you’re going to have to look at is the sensitive uses that are around that specific property. They vary state to state and municipality to municipality. You know in Illinois, I will give you an example because it’s the one that I’ve dealt with the most at this point personally, is the distance between your property and a school and the distance between your property and a daycare. Schools are a little bit easier to identify, but home daycare centers can exist in someone’s home and you may not even see them.
So you could get down the road very far in a transaction only to find out that there’s three or four children being babysat in a daycare, a registered daycare facility across the street or down the street and you know that property all of a sudden becomes noncompliant. And then the third piece we had talked about lending. If you choose to lease for your dispensary or your edibles manufacturing, you’re in cultivation, a property that is incumbered by FDIC debt, like say Bank of America has the mortgage on the property. They can call that loan and while your state may say hey listen this dispensary is legal the Federal Deposit Insurance Corporation of America might not see it that way. So it can put the dispensary and the landlord in a very tricky position.
So just all of those technical pieces we developed our technology which we call Predictive Mapping, and it takes all those data points and it’s displayed in a very interactive map that shows in any community across the country which properties are compliant and which properties are not. And they’re less than one percent of the properties in any market we found are actually compliant for this industry.
Matt: So it’s really like finding a needle in a haystack and it can be very time consuming and very inefficient without our technology.
Matthew: What’s the response been so far?
Matt: It’s been fantastic. You know we launched here in Illinois at the same time that the licenses were being issued. So applications had already been submitted, the review process had gone through. So we didn’t think that there would be any need for us Illinois. We immediately started looking at other markets, and about six or seven dispensaries were given their license and told hey here’s your license but you have to find a new compliant property and you’ve only got a few months to figure it out. It took them a year the first time and now they have a couple of months to figure it out. The most common response is where were you guys six months ago? We really could have used you, but you know we were able to help the people that were in distress here in Illinois and now we’re working on (9.27 unclear) with brokerages and dispensaries throughout the country.
Matthew: Do you see more properties being offered for lease to cannabis cultivators and dispensaries or is it mostly to buy outright?
Matt: It’s a mix. If I had to make a lean in one direction, I would say most of the cultivation centers are purchased if only because the TI, the Tenor Improvements and additional costs that go into the location are so intense. They’re much higher than the dispensary. So those properties tend to be purchased. On the dispensary side they’re primarily leased, but those are… I’m more leaning in one direction. It’s a mix across the board.
Matthew: Okay. And how many properties are currently listed on Herb Front today?
Matt: At this point we have about a dozen of properties that are just verified zoning compliant. We’ve had more than that, but there’s been a pretty brisk rush. Once we put a property online and we make people aware of it, those properties have been put under contract pretty quickly. So at the current moment we have about a dozen opportunities.
Matthew: So give us a little more detail about your back here because you obviously know a lot about real estate and now cannabis and real estate. What was kind of the opening you saw as being a real estate professional where you kind of had a light bulb moment?
Matt: Yeah, you know it was two-fold. The first one was I had a property that was for sale or for lease out in the suburbs of Chicago. This was during the licensing period and we had a potential dispensary come to us and really offer us way more than frankly anybody else was and really frankly what the property was worth. But when I asked them why they were willing to pay that premium they just said listen this is one of the few zoning compliant properties that we would be interested in this licensing area. And I didn’t really think much of it at the time. The owner of the property was an older landlord. She didn’t want to be involved in this industry and so we ended up passing on the opportunity. And so I never really thought much of it.
And then about six months down the road someone else started talking about it. This was a person who I have known for a long time. I really respected them, and when they said yeah there’s a huge disconnect in this industry. Why don’t you take a second look at it? It was then that I kind of thought oh okay, there’s something here and that’s kind of where our journey began.
Matthew: What’s Herb Front’s business model? How do you make money?
Matt: Yeah, we essentially, we act very much in a brokerage capacity. So we have our national network of brokers. Only brokers who are part of our network who we’ve verified on a couple of different levels as part of our due diligence process are given access to our technology and our maps in any area. So Matt if you are in Colorado and you pass kind of our background check and you’ve established yourself as a leader in this industry in your area, we’ll give you these maps actually for free. But then in return what we do is we take a percentage of your commission revenue for the transaction.
Matthew: What are the top cities and states where you have listings? Is it pretty much Illinois right now and then where do you see the most growth?
Matt: No, we only have one in Illinois right and there’s not a lot of growth here in Illinois. There’s on desirable license still left to be awarded and that’s frankly where our listing is. I don’t know if it’s under contract yet, but it should be soon. You know the growth is two-fold. On the East Coast there’s emerging markets that state legislatures are approving medical marijuana. So there’s certainly a lot of growth there, but then there’s a lot of growth in the western states that had established medical and recreational marijuana for a while. Municipalities are frankly reining in a lot of the dispensaries that are already there and they giving them stricter guidelines on where they can be and what the zoning requirements are. So we see a lot of movement in the established markets. So the opportunity is both in the established markets and the emerging markets at this point.
Matthew: I imagine California is a big, fat, juicy opportunity for you here hopefully in the next year or two.
Matt: We are getting more calls there than we know what to do with right now.
Matthew: Wow. Well let’s walk us through how it typically works so we can visualize and internalize what it’s like to be on Herb Front. I just won a cultivation license let’s say and I’m looking for a property. How does it all go from beginning to end? What’s the typical workflow?
Matt: Sure it’s one of two ways. In the perfect workflow it’s you’ve just won your dispensary license. You would logon to Herb Front’s listing site, and from there you would be able to search the zoning verified properties that we have. And right now we’ve got a pretty small inventory because we’re still kind of getting ramped up here. But if you found something that you liked, you would then be able to reach out to that broker who controls that listing. Let’s say it’s not a perfect scenario and we don’t have any actual listings in that area. We probably have a broker that has access to that map, at least in that area. And what we would do is we would put you in touch with a broker who’s part of our network in that area and we would give them the map so you could begin going out to find properties that are not listed at this point and finding off market opportunities. And that’s frankly where a lot of the transactions are getting done. A lot of the best properties are not even on market right now because the owners don’t know that they’re positioned well. So yeah if we don’t have a property listed in the area that you’re interested in, we will put you in touch with a broker who has access to the properties that comply.
Matthew: Now I want to kind of circle back to loans a little bit because obviously if you’re doing a build out, particularly if you’re a cultivator, you need a loan or a lot of businesses do. Maybe they have capital they’ve raised and they don’t need a loan, but loans are an important aspect to building out a business. And you know we’ve moved away from banks holding loans like they did yesteryear. Now they’re more transactional and they are more fee collectors, toll keepers on the way for loans going to Fannie Mae and Freddie Mac, those type of things. Do you see any problems occurring? We talked about the FDIC piece a little bit, but if the bank doesn’t hold the loan and then gets pushed off to one of these government agencies, have you heard of any problems with that at all or they seem okay with it?
Matt: No, no, we’ve heard a lot of problems with it which is why we actually have something that we call Herb Front Capital. It’s a syndicate of lenders who will lend on the real estate piece only. That’s what they’ll lend on, and they’re not Fannie, Freddie secured. You’re not going to find the same rates that you would find at say a Bank of America, but they’re also not the same terms you’re going to find in a hard money loan where you have very short term and very high interest rates. So we’re actually putting that together and which should be launched probably in the next week or so. That will give dispensaries or cultivation centers the ability to access capital as it pertains to the real estate.
Matthew: Okay. So there’s a huge gap between. Let’s say, a lot of mortgages are based off the 10 year on. So that’s around let’s just say 2.4 percent right now. And then hard money lenders are clearly in the double digits, sometimes high. So that’s a huge kind of chasm. Where do you typically see this interest rate falling then for someone that wants Herb Front Capital?
Matt: It’s really on a case-by-case basis, but it’s fair to say that it’s halfway in between. If Bank of America is going to give you let’s say 3.5 to 4 points on your home over a 20 year or 30 year amortization and on the other extreme you have hard money that’s a year or two at probably 20 percent, you know, our capital structure is on average somewhere very close to the middle between. So high single digits, probably very low double digits with some term that gives you some breathing room.
Matthew: Now is there any questions you get over and over again that you might be able to answer here on the show?
Matt: Well for the first one, you know, the one I get often and all the time is that first piece. What are the things I need to be aware of? It’s one, it’s finding that human component that is willing to be a part of this industry. Two, what zoning issues do I have to worry about? Three, what sensitive uses are there in my area that affect a property and how far away do I have to be? And then the fourth piece is the lending piece that some people have and some people don’t. It depends on the capital structure of the entity that’s involved. Those are the big questions yeah.
Matthew: Have you seen regulations in terms of signage? I notice when I go down to Denver some of the dispensaries there have signs you can see from a mile away. Do you see that in terms of, you know, Chicago is pretty famous for ordinances and aldermen and people regulating every little piece of everything. Do you see a lot of that like how dispensaries should look from the outside in terms of how it can say it’s a dispensary?
Matt: We have not had any exposure to that. It’s not part of what we do. So you know as much as I would love to comment on it, we haven’t come across it and it’s not something that we’ve…
Matthew: Sure, it’s a post sale issue right?
Matt: It’s a post sale. It’s more, you know, there’s some really good consultants out there that handle the internal security, the external security. You know there’s different pieces to this process and we’re very much focused on identifying real estate that complies for the community in which it’s in. We help the community and we help the dispensary.
Matthew: Okay. Now in terms of the size of the real estate that’s desired by most dispensary owners, new dispensary owners and new cultivators, I’m sure there’s a wide spectrum, but can you give us some ballpark guidance in terms of how big a space they’re typically looking for?
Matt: Yeah on the cultivation side it really varies all over the board. There’s some enormous ones out there and there’s some relatively small ones that have used stacking plans inside to make a very small place produce a lot of product. So cultivation centers it’s really all over the board. When it comes to dispensaries you know 2,000 square feet with parking is kind of the ideal. Some have gone down to 1,500 square feet and some have been a few thousand square feet more than that, but for the most part that’s really where we’ve been. We represent Café Serendipity who is one of the largest if not the largest franchiser of dispensaries in the country on a lot of their transactions, and that’s really what they’re looking for in terms of ideal space plan and it really falls in line with what a lot of other dispensaries are looking at.
Matthew: Sure and I encourage listeners to go back and listen to the episode with Megan Stone who is a dispensary designer that talks about making sure that your customers don’t feel like criminals because there is a lot of dispensaries that are not welcoming because they really haven’t thought out the layout that much, and it’s really helpful to have ample parking. You know when you walk in a place where you can kind of normalize and look at the dispensary instead of kind of being shuffled off somewhere. So I encourage you to listen to that episode. But Matt, as we close how can listeners learn more about Herb Front and what you do?
Matt: If listeners want to learn more about Herb Front I would strongly encourage you to go to www.herbfront.com, that’s www.herbfront.com like a store front but Herb Front or www.herbfrontcapital.com which we will be launching here in the next coming weeks.
Matthew: Great. Matt, thanks so much for being on CannaInsider today we really appreciate it. If you enjoyed the show today, please consider leaving us a review on iTunes, Stitcher or whatever app you might be using to listen to the show. Every five star review helps us to bring the best guests to you. Learn more at www.cannainsider.com/itunes. What are the five major trends that will impact the cannabis industry in the next five years? Find out with your free report at www.cannainsider.com/trends. Have a suggestion for an awesome guest on www.cannainsider.com, simply send us an email at feedback at cannainsider.com. We would love to hear from you.
Andy Joseph is the founder and CEO of Apeks Supercritical. Apeks makes high quality CO2 extraction machines. These machines allow cannabis leaves and flowers to be broken down into the super valuable cannabis oil the market is demanding. In this podcast we’ll explore the technology and promise of cannabis extraction.
Learn more at: http://www.apekssupercritical.com/
[2:05] – What is Apeks Supercritical
[4:00] – Andy talks about how he got into the supercritical machines business
[5:49] – Andy explains different extraction techniques
[15:09] – Andy gives his opinion about the “art and science” of extraction
[17:11] – The most popular infused extracted products right now
[25:45] – How much oil can be derived from 10 pounds of sugar leaf
[29:45] – How long does it take to process the 10 pounds of sugar leaf
[32:14] – Andy discusses how long customer run their machines
[34:27] – How easy is it to operate Apeks Supercritical machine
[36:33] – Andy talks about the pricing of the different machines
[40:37] – Andy discusses the future of the extractions
[42:23] – Mistakes made when purchasing an extraction machine
[47:13] – Contact details for Apeks Supercritical
Matthew: Hi, I’m Matthew Kind. Every Monday look for a fresh new episode where I’ll take you behind the scenes and interview the insiders that are shaping the rapidly evolving cannabis industry. Learn more at www.cannainsider.com. That’s www.cannainsider.com. Are you an accredited investor looking to get access to the best cannabis investing opportunities? Join me at the next ArcView Group event. The ArcView is the premier angel investor network focused exclusively on the cannabis industry. There is simply no other place where you can find this quality and diversity of cannabis industry investment opportunities months or even years before the general public. If that’s not enough, you will also be networking with the top investors, entrepreneurs and thought leaders in the cannabis space. I have personally made many of my best connections and lifelong friendships at ArcView events. If you are an accredited investor and would like to join me as an ArcView member, please email me at feedback at cannainsider.com to get started. Now here’s your program.
We’ve all heard of the 80/20 principle. Applying the 80/20 principle to the cannabis industry one might say that 80 percent of the profits are attained by sales of 20 percent of the products. But Vilfredo Pareto who created the 80/20 Principle also said that the 80/20 principle can be taken further and that 4 percent of the products in a market can make up 64 percent of profit. I believe that extracted cannabis oil is the 4 percent of the cannabis marketplace that will make up 64 percent of the profit of that marketplace. Today we’re going to hear why from the founder of Apeks Supercritical Andy Joseph. Welcome to CannaInsider Andy.
Andy: Thanks Matt. Thanks for having me on. I appreciate the opportunity to speak to you and your audience.
Matthew: Sure thing. To give us a sense of geography can you tell us where you are in the world today?
Andy: We are in Johnstown, Ohio which is a suburb just outside of Columbus, Ohio.
Matthew: Okay. And what does Apeks Supercritical do?
Andy: We manufacture supercritical CO2 botanical oil extractions systems. And what that means is we use liquid carbon dioxide or sometimes called supercritical carbon dioxide as a solvent to extract oils from botanical plant materials.
Matthew: So supercritical has to do with the state of the carbon dioxide. Is that what that term means?
Andy: That’s right. Most people are familiar with kind of the three states of matter; liquid, solid and gas that a lot of materials, you know water obviously is probably the most common one that can be in CO2 at normal atmospheric temperature and pressure and basically in the environment around us as a gas. It wants to be in gassiest form. And if you take the pressure up high enough and control the temperature in a certain way, you can convert that CO2 either into a liquid, so you can have liquid carbon dioxide. You can also convert it into a solid. Most people are familiar with dry ice, and it’s basically a solid form of CO2. But if you convert the pressure and temperature up high enough, specifically above approximate 1100 psi and 90 degrees Fahrenheit, CO2 will become what’s called supercritical.
Basically that’s a combination of liquid and gas properties that in the extraction world is favorable because it allows the CO2 to diffuse in deeply into materials. So it can get into deep nooks and crannies to allow it to extract oil out of plant material. But it also acts like a gas in that it expands to fill the entire volume of a container so it can get good exposure throughout the volume without being affected by things like gravity.
Matthew: How did you get into the supercritical machines business?
Andy: You know I kind of fell into it. I actually started as a broke college student after I got out of the Navy. And I was looking for a few extra dollars to help pay for college, so I started a fabrication business. And you know found a couple of customers that were interested in extraction devices. The applications at the time were flavorings and natural products, natural nutriceuticals, things like that. But then in about, about the same time that California legalized or started having a lot of activity in the legalized marijuana industry, that’s when we started seeing activity with the extraction systems more geared towards marijuana rather than flavorings where we got started.
Matthew: Did you have some sort of skill set in fabrication or did you just say hey I’m going to jump into this?
Andy: Well in the Navy I ran nuclear submarines. I was a mechanical operator and a mechanic on nuclear submarines. So I had a decent amount of mechanical aptitude to begin with, but in college I was going, I was studying welding engineering. And so you know I had a couple of part time jobs while I was starting school and working in machine shops and welding shops. So kind of between the exposure that I had in the military and some of the exposure that I had as a machine shop operator, machinist and you now a welder, those kind of things combine together to give me the base experience that I needed to start the fabrication business.
Matthew: Can you help us understand at a high level the different types of extraction processes there are including CO2 that we talked about a little bit; ethanol, BHO and any others that might be out there?
Andy: Sure yeah, I like to break the different extraction categories up into kind of the different topical areas. One, and these are all specific to marijuana but they are used in other industries as well. You know kind of the first category of extraction is really mechanical, and there’s two probably commonly used mechanical extraction methods that you’ll see in the marijuana industry. One of them is going to be, you know, using just a standard sieve method or making kief where people will take either dry ice, usually it’s some kind of dry ice block and put it into a bucket with sacks that have different layers of micron ratings on them. The dry ice effectively does two things. It makes the trichomes on the marijuana plant very brittle. So it freezes them, and then the mechanical force of shaking the block around will break those trichomes off and they will get sorted out based on their particle size through these different bags and that’s how you make kief.
A similar method is another one called Bubble Hash. Some people will call it ice water, and it’s a very similar process except for instead of using dry ice, you use water ice and regular ice and water and the same thing happens. Basically the cold water causes the trichomes to freeze and become very brittle. And so another common method that can be used is called Bubble Hash or sometimes ice water extraction method. Basically that’s where people will take something that looks a lot like a washing machine and they’ll put the marijuana in ice water, you know, water with ice in it. And it functions very similar. It will freeze the trichomes causing them to be brittle. They will break off and then they’re generally filtered through some kind of a mesh system to get a similar product. It’s a little bit more automated because you can use things like a washing machine. There’s more complicated equipment out there to do it now, but both methods are mechanical in nature in that they really just freeze the trichomes, break them off and then filter them out. Bubble Hash method has the obvious drawback that you have to get the water out of the product once you’ve done the separation and extraction portion. Whereas the kief method doesn’t, but kief is a lot more labor intensive.
So those are two very common mechanical extraction methods that you will find in the marijuana industry. Both are very inexpensive. They’re very easy to do. They’re clean, you know, you’re only using water or a solid form of carbon dioxide being dry ice. So there’s no residual solvents or anything like that, but they’re not very efficient from the standpoint that they do nothing more than break the outer layer of available oils off of the plant. So you aren’t doing an extraction. You can’t run it on kief for instance, or I’m sorry you can’t run it on trim because it has no solvency power. It can’t get inside of the plant and start to dissolve the oils out of the plant material. And so the yields tend to be pretty low and you tend to not get complete extractions.
Moving to the next level of extraction that a lot of people will see, I call them solvent based methods. These are going to be things that use some kind of a solvent, some kind of a solvating liquid to be able to do it. There’s really kind of two categories of this. One’s going to be using alcohol or ethanol as an extraction. This is referred to, a lot of people call this Rick Simpson oil. It’s one of the methods that people will make. Rick Simpson oil is basically performing in an alcohol or an ethanol extraction. And it’s basically a two step process where you immerse your material in alcohol or ethanol, let it sit there for some period of time and there’s different things you can do. You can apply some heat or you can keep it cold depending on what you’re trying to do.
There’s quick wash methods where you run the alcohol through it and only allow the exposure time to be very short, maybe a few minutes. But basically you expose the material to alcohol. The alcohol leeches out or dissolves the oil from the plant and then you subsequently filter any particles or any material out of the alcohol and distill it off. Distilling it off can be as simple as literally evaporating the alcohol or going to something more complicated like a rotary evaporator. But the end result is the extracted oil that once all the alcohol has been distilled out or evaporated out, then you’re left with a alcohol free solvent. Some people will leave a little bit of alcohol in it and that’s generally referred to as a tincture, but that’s a typical solvent method that’s been around for a long time. Again used widely in the food processing industry as well. Most of vanilla extract is processed exactly the same way.
Another solvent process that’s typically found in the extraction world, again particular to marijuana is going to be using some kind of a hydrocarbon, and that can be butane, sometimes referred to as butane hash oil or BHO. Propane is commonly used or is becoming more common and hexane can also be used. Hexane is a little bit more similar to an alcohol extraction, whereas hydrocarbons like butane and propane tend to be a little bit more similar to CO2 from the standpoint that they tend to operate under pressure or at least close to pressure. Is if we look at propane and butane kind of as a similar animal, you know both of those methods are very commonly used primarily because two things. One, it’s cheap. You know the equipment tends to be fairly inexpensive. Even the closed-loop systems are you know can be 10 or maybe even 20 percent of the cost of a CO2 system. But it also is pretty effective. Butane and propane is a very strong, very powerful solvent. So the extraction efficiencies tend to be very high.
There’s drawbacks to using a strong solvent like that in that you don’t have any selectivity. It tends to want to extract out all of the available oils, waxes, paraffins available in the plant. And so there generally has to be some kind of a separation process within the extraction in order to keep the oils separate from the waxes. Particularly if you’re going to go and do something that’s going to vaporize it. Vaporizing the waxes can cause issues with, lung issues where you’re basically ingesting those waxes that have been vaporized as opposed to just the oil. So again butane and propane extraction methods are very popular, very common. The obvious drawback to both of those is the fact that they’re compressed, flammable gases. And so the explosion hazard can be a significant concern and can also be a significant cost.
I think a lot of people tend to underestimate the cost of a true hydrocarbon extraction facility and look at just the cost of the equipment and not the cost of the facility to operate it within. In order to be safe and legal it has to be an explosion proof facility that has monitoring, explosion proof switches and exhaust systems that are capable of being deenergized for switches and things like that. Also the evacuation system has to be able to evacuate the room in a certain amount of time. It has to all be integrated in there. It has to have alarming systems. All of these things are costs that have to be accounted for when you’re considering doing a butane or a propane operation.
Matthew: So doing a butane or a propane operation, do you think the costs are comparable once you take into effect that you have to make a blast proof room and create all these safeguards.
Andy: Yeah exactly and that’s moving on to the CO2 kind of comparison. When you look at the cost of a CO2 operation versus the cost of a butane or propane operation they start to become very similar if not the same depending on the size of the operation especially because of the fact that carbon dioxide is nonflammable. You don’t have to have the same explosion proof or blast room, as you said there, type of facility for a carbon dioxide operation. You really only have two safety concerns when you’re running the CO2 extraction system. The first is safe operation which is generally revolving around the pressure. So you have to make sure the operators are trained and understand and have the ability to see if there is pressure in the system and make sure the pressure is relieved properly before they try to open up vessels. Most of that is in design and training. But as far as the facility goes, you know the facility really just has to have a CO2 monitor in it. Basically it’s monitoring the level of CO2 in the room and it has to be able to alert or alarm any people or any operators who might be in the room to essentially exit the facility until the CO2 has gone away. So you know you don’t have to have an evacuation system. You don’t have to have explosion proof switches and all that kind of stuff. It’s much less expensive and much less complicated facility.
Matthew: Switching gears a little bit to the art and science question of extraction. There’s many people that say there’s an art and a science to extracting cannabis into concentrates. Do you agree with this statement and why or why not?
Andy: Well so I understand a lot of people refer to themselves as artisans or extraction artists. It’s great, but the reality of the situation is extracting is science. There is no art. There’s just science, and you know the application of temperatures, pressures, flow rates, time, pre-processing, post-processing, you know all of these things are all scientific in nature. They’re all application, you know, going through and making sure that you’re processing parameters are consistent. They’re being monitored, all of these things are just science. They’re engineering, they’re science. It’s not art. You know I tend to disagree with people who claim that they’re extraction artists because that would imply that they have some inherent ability to do an extraction, to perform some kind of an extraction that comes naturally to them, as though they’re an artist painting an art, you know, making a painting. Their inherent ability to see different things and create something on a canvas. That’s not necessarily even repeatable, that’s art right, and that’s not what an extraction process is, it’s certainly not what it should be.
To be a little bit harsh I think some people who refer to themselves as artisans or extraction artists are really just not being good scientists. You know they’re not tracking their parameters. They’re not paying attention. If they produce something that was by accident, then that’s great. I mean some of the best products in the world have been produced by accident. But turning that into a repeatable event is science. That’s not art.
Matthew: Okay. And maybe perhaps they’re referring to bringing products to market that people really want. In which case what do you see people using the Apeks Supercritical machine for the most in the cannabis industry to create what kind of products that eventually go to retail dispensaries?
Andy: Well so there’s really three products that the oil that comes from the Apeks Extraction Systems will be used in in kind of the marijuana marketplace. The first one is vaporizing pens. You know electronic cigarettes is kind of the public (17.27 unclear) the marijuana industry calls them vape pens or vaporizing pens. Oil that comes out of an extraction system, particularly a CO2 extraction system can come in a lot of different forms. One of the things we didn’t discuss as we were talking about CO2, supercritical CO2 before is the fact that CO2 is tunable. It has the ability to change its solvency power based simply on temperature and pressure. Competitive extraction methods like butane or propane don’t have that ability. They’re just on or off.
CO2 is unique because of the fact it can change it solvency power. What that means is you can actually extract out different portions or different molecular weights from the plant material. For instance you know there’s a range of molecular weights. People say oil kind of is, you know, what’s in the plant material, but the reality is there are light oils. There’s volatiles. There’s heavier oils. There’s light waxes, there’s heavy waxes. There’s paraffins. There’s a lot of different fats and lipids. There’s a whole range of molecular weights available inside of a plant. And each one of those molecular weights makes up the “total oil” or wax as sometimes people will call it. Using CO2 selectively changing the temperatures and pressures can allow you to bring out just the lighter oils or just the heavier waxes, depending on what your parameters are.
In the application of a vape pen generally people want to have the lighter oils. So you know there’s kind of two approaches that people will take with the CO2. One is to run parameters that produce just the lighter oils. You know those tend to be pretty lower pressures, colder temperatures. And the lighter oils that come out tend to be very fragrant, aromatic because they also have a lot of the volatiles intact. Those are all great things for a vaporizing pen. You need a oil that’s flowable. You need something that has a lot of flavor and taste which is generally the volatiles. The drawback to operating on that condition is that it’s generally slower. The solvency power is less, and so it takes a longer time to do the extraction, but the positive is you don’t have to do any secondary processing.
So you know a flipside or an alternate method that a lot of people will use with systems that don’t have the ability to run colder temperatures and pressures is they use a secondary process called winterization. And so they will take the extracted oil that generally has a lot more waxes and lipids present, they’ll winterize which is a secondary alcohol extraction to remove those fats and waxes. Then they’re left with just the oil. So the vape pens is kind of its own animal. It’s a very very popular product right now. Again our extraction systems can produce oil that is used directly in vape pens without any secondary processing at all. It’s also used sometimes in conjunction with the winterization process to produce a vapable oil.
Secondary or a second product that the marijuana industry sees a lot is what I would refer to as kind of the infused products market. These are going to be your edibles, your topicals, your lotions, things along those lines, cookies, elixirs, suckers, cakes, whatever, any kind of infused product. There’s really kind of two categories of infused products that people need to consider. And that really is it going to be activated or nonactivated meaning you know if you’re doing a chocolate for instance and you want to be able to have an activated THC content within the chocolate, generally the chocolate making process is at a low temperature. And so what you’ll have to do with your cannabis oil is you have to activate it before you put it into your chocolate. And when I say activate I mean decarboxylate or converting the THC acid into THC which is psychoactive.
And so the activation process is an important thing to consider especially if you’re not going to be baking or exposing your infused product to any kind of heat. Chocolate is a good example. And so activating the product prior to extraction is actually more useful because of the fact it will increase the yields with a CO2 extraction system. So a lot of our folks who have a topical or a lotion that doesn’t see any heat but they want an activated product or a chocolate or something like that, they’ll actually perform a prebaking process or decarboxylation process on the raw plant material prior to doing an extraction. Whereas materials like cookies or brownies that are going to be baked, they can use a nonactivated or nondecarboxylated extracted product in the cooking prior to baking and then the baking will actually do decarboxylation.
So you know it can get very complex and I guess kind of the point I’m trying to make here is that you know depending on what kind of product you’re going for, there’s a number of steps before the extraction and after the extraction that have to be considered in order to get the total product. I like to kind of say the corollary would be if you were going to go bake a cookie in your kitchen, you know, you wouldn’t just take the flour and expect a cookie to come out. You have to have the flour and the sugar and the vanilla extract and chocolate chips and all that kind of stuff in order to get the final cookie. Extraction is generally just one piece of the total process.
Now a bit of a corollary, a bit of a flipside I guess is a better way to say it is the third products category that people are using our CO2 extraction systems for and that’s the dabbing market. You know dabs are very very popular. It’s kind of a different form of vaporizing, generally very concentrated form. And the product types have many different names; Honeycomb, Crumble. I’ve seen muffins, you know, there’s just vaping oils, there’s waxes, there’s shatter. You know lots of different nicknames for what is all kind of this one product category called dabbing. One of the unique things about the Apeks CO2 system is the fact that it can run very very cold. We designed it originally to extract oils from botanical plant materials and you know plants aren’t designed to be, by mother nature they’re not designed to see temperatures above 100 or 110 degrees Fahrenheit. They start to have thermal degradation when they see that just because they weren’t designed that way if you want to call it that.
So we built our systems and we designed our systems to maintain very very low temperature exposure to the material. And you know the oil never sees a temperature above the extraction temperature in our systems which is an important concept because you know you can extract at a cold temperature, but if the separation vessel where the oil collects during the extraction process is heated, that if it sees a lot of heat during the extraction process, you can see thermal degradation even after the extraction has actually happened inside the machine. So we designed our systems around cold. One of the benefits that we found in the marijuana industry of being able to run cold like that is our systems can make a product that is referred to as crumble. It’s a very hard, very crumbly product that can be subsequently converted in a vacuum oven into a shatter or even a honeycomb type of product in a very very short amount of time; 10 to 15 minutes in a vacuum oven straight out of the extraction system.
The shatter that comes out is solvent free. You know the competitive process is going to be with butane or propane, and they’re have to do what they call a vacuum oven treatment of evacuate the propane and butane out of the extracted material. And sometime that can take three to four days in a vacuum oven and they have to flip the material over and it’s a lot of work. CO2 extracted crumble right out of our systems can go straight into a vacuum oven and be converted into a shatter product within a few minutes. And that product has become very popular here in the last three to four months.
Matthew: Now putting on the business owner hat or operations manager hat trying to understand how much oil or how much extraction I could do, let’s say I have 10 pounds of sugar leaf, which is not the flower but has the resinous THC sacs, trichomes on there. Is there a ballpark of how much oil I can get from that and how long it would take?
Andy: Sure so on a very very high level, 30,000 foot view a good rough number is 10 percent on trim. So you can expect to get about 10 percent yield of 10 pounds. So from your 10 pounds of sugar leaf you can expect to get about 1 pound of oil. Now here’s the problem with that statement. Number one, you’ll find that anyone who is familiar with a butane or a propane extraction will tell you that that’s ridiculous and they can get 15, 20 or even 25 percent yields from their butane process. So why would they ever use CO2? Well things you got to remember. Number one, if they’re pulling 25 percent from plant material using butane or propane, it’s going to have a lot of waxes in it. And so once those waxes have been removed, then the yield starts to become more in line. Number two it depends a lot on the parameters. Right so as we discussed before CO2 is tunable. So if you’re using subcritical or liquid, low pressure, low temperature CO2 extraction, you’re going to get a lower yield because you’re not bring out those waxes and resins. From a business standpoint that’s not good because you’re not maximizing the potential of the material. From a product standpoint it’s good because you’re getting oil out that you need for the vape pens.
The beauty of CO2 is you can actually do a two-step process. We call it fractional extraction where you can actually extract at a lower temperature and lower pressure to get the oil that would be preferable for a vape pen. And then you can come back and raise the temperature and pressure on the same material and subsequently extract out the heavier waxes and resins to get a complete extraction. So we generally will tell people that 10 percent is what you can expect, but the reality is the opportunity to get a much higher yield is there. And there’s two methods to do it. One is higher pressure, higher temperature going into the stronger solvency power of the supercritical CO2, realizing that the product you get is generally a very waxy material that’s not going to be desirable for vape pens, but is very desirable for an infused product. And in that scenario you can get 15, maybe even 17 percent yields if you’re doing a true supercritical extraction. Whereas you know 10 percent is more applicable to what you’re going to get that’s going to be useable for a vape pen application.
So it’ gets a little complex. We generally tell people 10 percent because it’s a conservative number that they can use in calculations and be confident that that’s what they’re going to get, but there are ways to get much higher extractions. One of those as I just said, a supercritical. Another method that a lot of people are using with our systems is they’re prebaking the material. And so they’ll bake the material, decarboxylate the material as we were talking about before in the activation process. And it does two things. One obviously it activates to convert the THC acid into the THC which is psychoactive, but it will also cause the yield to go up. It soften the waxes or converts some of the waxes into an oil that’s more soluble in lower pressure and lower pressure CO2, subsequently getting a higher yield and even in a shorter time. And so we see a lot of customers who will perform extractions subcritical extractions, low pressure, low temperature on decarboxylated or baked material getting extraction yields in the 15 to 18 percent range. Whereas the same material that’s been extracted under the same parameters that’s not decarboxylated will only give a 10 percent yield. So there’s a couple of different ways you can kind of manipulate the product even before the extraction that can produce either higher yields or a more favorable product if that meets all of your demands.
Matthew: Now back to the getting a pound of oil for 10 pounds of trim. How long would that process take, ballpark, to you know put all the trim in there and have it come out the other side as well. I guess it depends on the size of the machine that’s being used, but what can you tell us there?
Andy: Yeah again I’m going throw out some kind of ballpark numbers or rough numbers that people can use in their calculations. So you know a pound every one to two hours is pretty typical. Now again there are ways to speed that up and there are ways to make it longer. You know when you’re playing with a solvent that has tuneability you can change its solvency power. You can start to play a lot with those extraction times. You want to choose an extraction time that meets your production process. And what I mean by that is if there’s a diminishing return that comes from extraction times. And so as the process runs longer, you get less and less material for each hour that the material is exposed. And so there’s a point of diminishing returns, and that point is going to be different for everyone.
Some examples would be if you have an application or you have a situation where you’ve got unlimited material, you’re probably not going to want to try to squeeze the lemon as hard as you can, right, because the harder you squeeze it you get a lot of lemon juice first. But you know as you get to the point where the lemon juice is all gone, you have to squeeze harder and harder and harder just to get a little bit. It’s a very similar process here in that there’s diminishing returns depending on how hard you squeeze and your run time is effectively the squeeze. And so if you have unlimited material it may not make sense to run a full two hours or even three hours on the material because that additional hour, that third hour of extraction you’re going to get just a little bit of oil out of material as opposed to if you used that same hour for new material, you’re going to get a lot more the same amount of time.
Now if conversely you’re limited on the amount of material that you have available to, it makes a ton of sense to extend the extraction time even longer and squeeze that lemon as hard as you can so you can get the maximum return from your material. So again we generally will tell people a pound every one to two hours realizing that the times can be very flexible and you know tuned to match your actual operation.
Matthew: So back to the lemon analogy it makes sense to have fresh lemons all lined up, but sometimes you can’t have all those leaves or buds or everything you need right lined up as you need them, but that’s a great analogy to help us understand there. And it seems like in your experience most people are trying to keep the machines running 24/7, is that accurate?
Andy: You know it varies. We’ve really got quite a range of customers. You know some folks are definitely high production you know the thing runs, our systems will run literally 24/7. You know they’ve got contracts with you know as much material as they can get. These tend to be more the Northern California kind of guys and they’ve just got more material than they know what to do with, and they run the systems literally 24/7. And keeping that think running is very very important to them. And so you know just like any other good manufacturing process, an automotive supplier or whatever, they’ll have spare parts. They’ll have spare you know consumables laying around waiting so that if they do run into some kind of a hiccup or any kind of an issue, they can immediately get the system back up and running.
On the exact opposite end of the spectrum, and those tend to be our larger CO2 production systems that get used in those applications. Completely on the opposite end of the spectrum you know our smaller bench top systems get used a lot by what we call “club use”. It’s not so much personal use, but it’s usually a group of folks in a collective or a club that will get the system and they’ll have their small group of people kind of collaborate and you know put their material together, process it and use the oil specifically for the club. Those systems tend to run a few hours a day or maybe even a few hours a week, but allow the clubs to serve their patients with a clean, safe extracted oil that doesn’t have to be consumed. And you know they get a lot of control over the process in areas that aren’t as heavily regulated as California and, I’m sorry, as Colorado and Washington. You know there tends to be not as much testing and not as much scrutiny on the final product. And so there’s some concern especially from people who are using marijuana in medical applications that they want to know what is in their product, and the only way to really be sure is to do it their selves. So we will see a lot of people use our bench top systems to kind of get control of the medicine that they’re using for their patients.
Matthew: So the machines are pretty easy to use it sounds like if you can just get a bench top one for a collective and kind of figure it out or what kind of training is involved?
Andy: Yeah so all of our systems are all fully automated. Our bench top system does have a couple of manual valves so we tend to refer to it more as a semi-automated system in that the operator has to manipulate a couple of valves before the process is started, then it’s automatic from that point. Our larger production systems are fully automated in that they’ve got a touch screen where the user basically goes through and the machine will, once you push start, the machine will walk you through a series of prompts asking you for your temperature, your pressure, your time, and then it will do a couple of safety checks to make sure that the vessels are prepared to receive pressure, make sure that all of the vessels are closed properly, the hoses are connected. And from that point the system will take over and be fully automated.
That being said they are simple to operate from the standpoint that the CO2 system does all the work. However the operator still has to have some mechanical inclination. You know these are industrial pieces of equipment that are being used. They’re under high pressure. And the operator has to have some basic mechanical aptitude to be able to open a vessel, close a vessel, you know, to some degree even perform maintenance on the system; changing pump seals, changing o-rings, changing gaskets, things along those lines. So I wouldn’t say that you know just any, my mom will kill me for saying this, but I wouldn’t want my mom to operate the system because you know she’s not the most mechanically inclined. So you know it’s not for everyone, but the full automation and the automation of the system makes it much easier to operate compared to some of the other systems that you will see out there like the butane and propane systems that are all manually operated and even some CO2 systems that are out there today are still manually operated as well. The operator has to be significantly more skilled in order to know when to open this valve, when to open that valve, what pressure gauge to look at, when to do this, when to do that. All of those things go away for a fully automated system.
Matthew: Okay and what are the costs, the price points to get into different size machines?
Andy: Prices for our systems start at about $36,000. Our bench top system is $36,000, and that price includes training. Again it’s the full system. There’s no additional components you need for the extraction. Any secondary processing stuff would be additional obviously, but the extraction process is all inclusive there. And again training at your facility would be included in that price as well. That’s our bench top system. Our smallest production systems starts at about $86,000 and prices from the production systems go from $86,000 all the way up to about $190,000.
Matthew: Okay. Now there’s some young businesses out there that might have trim and they know they can get a positive ROI if they could just afford a system. So when they’re in that position what do you say?
Andy: We actually have a leasing program. We’ve developed a leasing program about three years ago, and it was in response to this exact problem. You know everybody in the cannabis industry was a startup three years ago. And so there was a lot of opportunity from a return on investment standpoint but not everybody had the cash. And so you know we developed a leasing program to basically allow folks to do exactly what you’re saying. You know our terms are generally 25 to 35 percent as a down payment and then the subsequent lease terms are going to be 10 to 20 percent interest rate over the course of 12 months for payments. You know it’s interesting we’ve had this program in place for about three years and you know depending on the credit worthiness that’s what’s really going to determine the down payment and the interest rate that we apply.
But I’ve had just about every one of the folks who’ve engaged us from a leasing standpoint or a financing standpoint, at some point in time during the process of the application they say yeah I intend to pay this thing off in a couple of months. And the reality is they can’t. You know the return on investment for these CO2 extraction systems, you know, it can absolutely be a matter of weeks. You know three to four weeks is very very reasonable number for return on investment. However, where people will generally get themselves in trouble is that assumes that you have a couple of things in place. Number one you’ve got a supply chain set. Right so you’ve got access to material and that material can come to you on a regular basis and you know you have the supply of material to be able to feed the extraction system. You also have to have some place for the oil to go, right, and this is where a lot of people get kind of hung up in the process. You know they’ll procure some material, they’ll have access to material, they’ll get an extraction system from us. They get the extraction complete and then they say well what am I going to do with this goopy peanut buttery looking stuff.
Three or four years ago people would just take that and they would smoke it and they would be happy with it, but nowadays you have to have a product. You have to have marketing. You have to have all the things that every business needs to have. You know you have to have an accounting system. You have to be able to pay your employees. You have to have a marketing and a brand that people can recognize and people are going to associate with. All of these things start to come into play in order to make that three to four week ROI on an extraction system actually reasonable and it happen. And so just about all those folks who’ve asked us for you know financing and taking on our leasing program say well I plan on paying this thing off in two months, and while it’s functionally possible I’ve had only one customer actually pay it off early. All of the rest of them have found that they need the cash to support the other portions of the operation or the other portions of the business in order to make the entire thing viable.
Matthew: Great points. Great points. Now looking to the future, 3, 5, 7, 10 years ahead where do you see the extraction and concentrate business heading and changing?
Andy: Well we’re already seeing concentrates. Again in the marijuana industry, we’re already seeing concentrates start to take over sale of flower. You know in some dispensaries it’s already taken over and in other ones it’s on its way to taking over from a percentage standpoint. So you know concentrates are very popular for a number of reasons. You know they’re just that. They’re concentrated so there’s higher potency levels for folks who have been consuming for a long time and have built up a tolerance level. You know they can start to actually get high again or be able to benefit from the medicine again. But there’s also a digression element to it. Vape pens in particular really help people be more digression, have more…
Andy: Discreet thank you, that’s the word I’m looking for. It allows people to be more discreet in their consumption. You know the soccer mom kind of is always the quintessential example. You know she doesn’t necessarily want her kids to know that she’s medicating or enjoying marijuana recreationally, and vape pens allow her to do that. But the edibles I think that’s really the area where I think there’s going to be a ton of activity in the future. Vape pens have already become very popular, but I think the edibles are going to become even more popular. Just because one it’s obviously discreet, but there’s also the element of it’s so much easier to use. You know you don’t have to carry this product around. Once you’ve got like a vape pen, you don’t have to have a dabbing apparatus. You don’t have to have your electronic nail and all that kind of stuff. Cookies are really easy. You know you put it in your purse or put it in your cooler and you take it and then you enjoy it and it’s gone. You know it’s very simple. It’s very easy to use. It’s very inexpensive, and you know I really think that that’s where the big push in the industry is going to go.
Matthew: Now I’ve asked you a bunch of questions Andy. Is there any questions that I didn’t ask you that I should’ve that people should be thinking about when they’re evaluating extractions and concentrates for cannabis?
Andy: Yeah, you know, probably the one… I guess I will reword your question in a slightly different way which is what mistakes do people make when purchasing an extraction system. You know and it all comes down to common sense. It’s research. Make sure you do your research. You know unfortunately in an industry that’s developed itself from an underground position still has some unscrupulous players out there. And you know it’s really important when you’re doing any kind of research that you ask all the right questions and you know get the details behind the answers. Don’t just take a sales guy’s word that you know this system or the thing it’s going to do whatever it says it does. Make them show you the details. Make them show you the data to support it.
We talked a lot about yields. We talked a lot about the throughput and the return on investment. Get the numbers. Show proof. I had a professor in college who told me once said, “In God We Trust, all others bring data.” And you know I think that’s the way people need to consider, the things that people need to consider when purchasing an extraction system. The other thing is do your homework on all parts of the business.
Back a few years ago, I like this story because it’s applicable to my welding days, you know a few years ago the West Coast Choppers and Orange County Choppers TV show were very popular. And you know I was working in the welding industry as a consultant effectively. And so I would get a lot of people who would say hey I’m going to start a motorcycle business. What kind of welder should I buy? And you know the welder was the first thing that they were going to buy because it tends to be the biggest purchase and it’s also kind of the coolest thing. Well the welder is just one piece of a very large puzzle of building a motorcycle right. There’s not just building the motorcycle itself there’s also who are you going to sell it to, how are you going to sell it and who is going to design it, where are you going to get all your parts.
And so I would encourage people to you know reconsider before going and buying a welder how they’re going to do the rest of the business. And you know very very similar corollary comes from the extraction side of things. People who want to start a marijuana business tend to go extraction first. They tend to think that top of mind because it’s the most expensive piece of equipment and it’s kind of got a wow factor to it. But you have to realize when you’re considering this that it’s a much bigger puzzle not only from a business standpoint of who’s going to do the finances, who’s going to do the marketing. You know what’s your plan for branding, but there’s also the actual process of getting the oil out of the plant and into a saleable product. Right, and that into a saleable product is an important piece. How are you going to take the extracted oil and put it into a vape pen right? Are you going to winterize it? Are you going to cut it? What kind of vape pen are you going to get? Where are you going to get your vape pens from? Most of them are coming from China right now and I’ve heard some horror stories about importing vape pens from China and basically holding people hostage to get their vape pens. If you’re going to do an edible product, you know, what’s the product going to be like? How are you going to make sure that you homogenized, meaning that you get an equal distribution of your extracted oil throughout the entire baked product. The chocolate chips don’t necessarily evenly distribute themselves in a cookie, but you have to make sure that the THC is evenly distributed. That’s an important aspect.
Testing, especially with the more regulated states like Colorado and Washington, testing is extremely important in making sure that you have the proper dosing, especially on the infused products. Where are you going to get your testing? Is the testing provider reputable. You know there’s still some states that are pretty new and in their infancy and the testing houses don’t have a ton of experience. You know so there’s a number of things that go in there. We get a lot of, I’m going to call them, early stage players or people who have an expressed interest in the cannabis industry and they really kind of start with the extraction process. And you know it sounds a little bit harsh, but you know we tell people go back and do your homework before you’re ready to pull the trigger on this thing because we don’t want you to make $100,000 mistake.
Matthew: Right, great point. Now are you still looking for investors?
Andy: No, no. We are not looking for investors at the moment.
Matthew: Good, good for you.
Andy: We’re fortunate enough to be in a position where we don’t need funding.
Matthew: Great. And Andy in closing how can listeners learn more about Apeks Supercritical?
Andy: Our website has a wealth of information on it. It’s www.apekssupercritical.com and that’s www.apekssupercritical.com.
Matthew: Great. Andy thanks so much for being on CannaInsider today, we really appreciate it.
Andy: You’re welcome. Thank you Matt, appreciate it.
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