In this edition of "Rising High," The Fly conducted an exclusive interview with Rex Kary, chief operating officer of FluroTech (FLURF), an Alberta-based technology company that provides cultivators with an alternative to traditional lab testing. Here are some of the highlights:
CANNABIS AND HEMP TESTING: FluroTech is a company that provides cannabis and hemp testing equipment to growers and law enforcement to detect early contamination and potency. The company’s CompleTest was designed to help cultivators streamline their testing processes. “We have developed a platform technology that allows us to test pretty much anything,” Kary said. “We just have to develop the science and the software that goes behind that.” The device itself is a one-time sale, he said, but the company sells individual consumable packages alongside it to consumers. The test was originally designed around the legalization of marijuana in Canada to give growers a tool that they could use to get potency results in-house and in less than 30 minutes, the COO said, however the Farm Bill was passed in the U.S. opening up the market for hemp growers. “We shifted our science a little bit, not much, to allow us to identify or to go in and cater to the hemp market,” he said. “Our original test was a THCA/CBDA test and we had a low detection limit of THCA at three quarters of 1%...We went back and asked our scientist to bring that detection limit down so that we could help the hemp growers and they did. We brought our detection limits down to 0.1% of THCA.” He added that under USDA guidelines, the main test has to be completed in a decarboxylated state so the company created a test down to 0.1% THC. The COO said it’s important for cannabis growers to know their potency as price increases with potency, while its important for hemp growers because if the plant is above 0.5% THC, they have to burn the crop. “Growers are looking for is something that can help them to know where they are during the grow season and if they’re approaching anything that is non-compliant as hemp, they can just harvest right away and have the biomass tested after the fact,” he said.
COMPETITIVE EDGE: When asked about how the company plans on gaining and retaining market share, Kary said the company is focused on building a distribution model with good quality distributors that touch hundreds of customers. “We still will be working with the customers,” he said. “We’re constantly communicating with them and sending them new fresh consumables but it’s the distributor model that’s going to work for us very well.” When touching on the company’s key differentiators, Kary noted the extreme accuracy on the company’s tests and an error margin of 0.03% at the low detection limit. “We can definitively tell that a sample is hemp and what’s very important to regulators and growers trying to measure the test is you can take the same sample, test it ten times and you’re within a very, very close margin of error,” he said. “More importantly, you can take several different CompleTest devices, measure across the different machines and get the same result.” The COO added another differentiator is how the test equipment is easy-to-use with training to run a test taking about two hours. Portability is also a key benefit of the test, he said, with customers buying both the desktop model and field model. “They want to have one at the facility and they want to have one in the field as buyers are purchasing in the field,” he said. “This way when somebody is testing with their own device, they very quickly know what they’re buying and what they’re paying for.”
HEMPLAB AGREEMENT: FluroTech announced Monday it had entered into a U.S. distribution agreement with HempLab allowing the companies to collaborate to introduce the CompleTest to regulatory bodies and law enforcement agencies on the East Coast. “What it used to be before the Farm Bill is that law enforcement could be using dogs, the dogs would smell it, they’d stop a truck and then they’d impound the truck,” Kary said. “Well a dog can’t tell the difference between hemp and marijuana so what has to happen now is somebody’s got to take that sample.” The COO said law enforcement can send the sample off to DEA labs, however there are only 47 DEA-approved labs in the U.S. making the turnaround for results “extremely problematic.” “Law enforcement is trying to find ways that they can be testing in the field and get early results,” Kary said, adding one of HempLab’s founders is a police chief. “He wants to bring this to the regulatory bodies and show them that they can be testing in the field or at a nearby precinct and get the results back in minutes, if not an hour or two.” The quick results will allow police to send truckers on their way rather than holding a truck for days, he said. “We’re able to deliver a product that will allow the regulators to catch up with that legislation,” Kary said.
EXPANSION: The COO said FluroTech has long-term plans to expand globally and already has one unit that has been delivered to Colombia. “The customer is using it in their own facility and they’re negotiating with us for a distributorship in that region,” he said. “We have discussions closing in on distributors in Australia as well as in Europe. Companies that are looking at our testing solution see the benefits and are trying to move this into international circles with us.” He added the company is looking to ensure that it designs, manufactures and builds the device to fit all jurisdictions and is seeking to lift its GMP compliance up to EU GMP so the device can be used in Europe.
CHALLENGES: When asked about the biggest challenges facing the industry, the COO said he views the biggest single issue as the disconnect between legislation and law enforcement. “What we’re seeing in Canada is companies have built out their facilities in anticipation of a market demand that is not materializing because the demand is being served by black market product,” he said. “Until there is enforcement, we will continue to see that being an issue.” Kary added he sees the challenge as the single largest impact economically for large legal producers as they’re losing market share to product that doesn’t have the same tax base and same cost base because there isn’t the same quality control.
OPPORTUNITIES: As the cannabis space develops, Kary said he sees opportunities in penetration of the hemp market as well as in biomarkers. “We don’t see any other portable device that can get down to the detection limit that we can with the same accuracy,” Kary said. “That opens up virtually all growers of hemp to be checking their product and wanting to know exactly where they are during the grow season.” He added the company also has the ability to create a test for heavy metals and is looking for joint venture partners that can help it accelerate production of the tests. “What we realized as a company is to bring some of these future tests to market, we are much better off bringing in partners that can accelerate our growth,” he said. The COO also said he sees another larger opportunity in biomarkers due to the device’s very, very low detection limits allowing the company to create an attribute that can be absorbed by a plant. “We can create a barcode for an individual producer enabling tracking of the product that’s in the package, not just the package,” Kary said. “We’re in discussions with parties that may be joint venture partners with us that can help us finalize and commercialize our biomarking technology.”
CORONAVIRUS: When asked about the impact the coronavirus outbreak has had, the COO said FluroTech recognized quickly it could be shut down as the company works at a university and therefore implemented a contingency plan early. “We we’re able to move all of our people off site and built two remote shipping areas,” Kary said. “We have three labs that would have as many as five people in each lab, we got it down to one in each facility so they’re safe and are working on a rotating schedule.” He added that the company’s sales and marketing teams have gone remote, presenting the test to customers through video and customers have actually voiced concerns that their normal labs are not operating. “People are not getting their test results so they’re starting to call us,” he said. “Ironically I’m thinking March is going to be our best month in sales.”
OTHER CANNABIS STOCKS: Other publicly-traded companies in the space include Aleafia (ALEAF), Akerna (KERN), Aphria (APHA), Aurora Cannabis (ACB), Auxly (CBWTF), Biome Grow (BIOIF), CannTrust (CTST), Canopy Growth (CGC), Canopy Rivers (CNPOF), Cresco Labs (CRLBF), Cronos (CRON), CV Sciences (CVSI), Delta 9 (VRNDF), DionyMed Brands (DYMEF), Elixinol Global (ELLXF), General Cannabis (CANN), Greenlane (GNLN), Green Thumb Industries (GTBIF), GrowGeneration (GRWG), Harborside (HSDEF), Hemp Inc. (HEMP), Hexo (HEXO), India Globalization Capital (IGC), Indiva (NDVAF), Innovative Industrial Properties (IIPR), ICC International Cannabis (WLDCF), Khiron Life Sciences (KHRNF), Liberty Health Sciences (LHSIF), MediPharm Labs (MEDIF), MedMen (MMNFF), MJardin (MJARF), Neptune Wellness Solutions (NEPT), Organigram (OGI), Origin House (ORHOF), Planet 13 Holdings (PLNHF), Real Brands (RLBD), Sproutly (SRUTF), Sunniva (SNNVF), Supreme Cannabis (SPRWF), Tetra Bio-Pharma (TBPMF), Tilray (TLRY), Trulieve (TCNNF), Valens (VLNCF),Vireo Health (VREOF), Wayland Group (MRRCF), WeedMD (WDDMF), Westleaf (WSLFF), Wildflower Brands (WLDFF) and Zynerba (ZYNE).
FluroTech
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APHA
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Aurora Cannabis
+0.1414 (+19.02%)
CV Sciences
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CannTrust
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Canopy Growth
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Cronos Group
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Trees Corporation
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IGC Pharma
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Tilray
+2.17 (+43.14%)
Trulieve Cannabis
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ZYNE
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