Editors’ Note: This is the transcript version of the podcast we published last Wednesday with Derek Du Chesne. Please note that due to time and audio constraints, transcription may not be perfect. We encourage you to listen to the podcast, embedded below, if you need any clarification. We hope you enjoy!
Rena Sherbill: Welcome again to the Cannabis Investing Podcast, where we speak with C-level executives, scientists and law and sector experts to provide actionable investment insight and the context with which to understand the burgeoning cannabis industry.
I’m your host, Rena Sherbill. Hi, everybody. Welcome back to the show. Thanks for joining us. I hope everybody is taking care of themselves out there and staying as safe as they possibly can and staying as healthy as they can possibly can.
I’m going to keep the intro short, because we have a great thorough, in-depth interview conversation with Derek Du Chesne, who is now President and Chief Growth Officer at Exactus (OTCQB:EXDI), a company that only really recently pivoted into the hemp and the cannabinoid market.
In researching Derek before we talked – right before we talked, I went on his Instagram and he was at Frank Sinatra’s house in Palm Springs. And some personal background on me, my grandfather was a record distributor in Chicago and met Frank Sinatra and they became lifelong, really good friends. I grew up going to that house in Palm Springs.
So it’s a thing in my family if a Frank Sinatra song comes on when we were somewhere or if somebody references Frank Sinatra, anyone in my family will have a close affinity with that person or that moment where we heard that song.
So once I saw that with Derek, I knew that it was going to be a fun and great conversation and I was not wrong about that rule of thumb in my family did not disappoint. It was really great talking to Derek. He has so much energy and passion, and you’ll hear that from him about the space. So really great to talk to Derek.
Obviously, what else is happening in the world aside from investing in cannabis and those beautiful subjects that we like to talk about and pursue and passionately push forward into the world and into people’s minds. So they know more about responsible investing in the cannabis space.
Right now, the world is in such turmoil. With COVID, everybody had – was forced, I think, to reflect and really go inside in terms of themselves and figure out what’s important to them and reevaluate and adjust some things. And then with the terrible things happening in the States and also that are affecting the rest of the world in terms of this racial injustice that we have been confronting for way, way too long.
Obviously, the cannabis industry has a lot to reckon with in terms of the racial injustice. While companies are – have huge market caps and signing million-dollar, billion-dollar deals, there’s a lot of people sitting in jail for selling an eighth of weed. There’s a lot of people sitting in jail for having weed on them, not even trying to sell it. And obviously, the minorities – the racial minorities are sitting in jail for a lot longer, and it’s a gross injustice.
And I hope everybody listening to this knows the grave injustice that’s been done. And I’m sure you do. I wanted to highlight, because I think we all know the injustices, but sometimes when we’re met and faced with numbers and figures, it kind of puts a different spin on things.
So I just wanted to quickly – before we get to Derek’s interview, I wanted to share with you, our loyal listeners, some facts about the cannabis industry and how far we really need to come.
The U.S. administration recently approved a number of cannabis industry companies that they are eligible for the PPP aid, which is great, and those companies deserve it and it’s great, but there are 40,000 inmates serving time for cannabis charges right now.
And while COVID is spreading through prisons, it’s already killed 415 people. COVID has killed these cannabis “offenders” and infected just under 30,000 people. Some of the first U.S. inmates that died of COVID were serving time for nonviolent drug charges. The first U.S. prisoner to die of COVID was serving a 27-year sentence for nonviolent drug charges.
The first female federal prisoner to die of COVID was serving a two-year sentence for a nonviolent drug offense. A man serving a life sentence in Louisiana for selling – I want to repeat this. A man serving a life sentence in Louisiana for selling $20 worth of cannabis in 2008, is saying that he has scared for his life because of the COVID situation in prison.
So just horrific. An older man who died in prison from COVID was just about to finish a almost two decade prison sentence for cannabis charges. A lot of people are saying that some prisoners who are in for nonviolent offenses should be eligible for home confinement during the pandemic. And this older man who died after serving in almost two decades sentence, he was called a poster child for being eligible for this and then died before anybody was ever able to grant him that.
So things to keep in mind, as I hope, we all pursue a better path, a more evolved path and many things for the cannabis industry to improve upon. I know many companies are really invested in improving that I know many executives that are really invested, many employees.
So let’s keep doing the work. Let’s keep pushing justice forward. And let’s keep growing this community. And I always love hearing from listeners. I really feel like we’re building a community out there, and that gives me a lot of joy and pride. And let’s keep going. And I wanted to say those figures were compiled by Accountable.US, which is a nonpartisan watchdog group that exposes corruption. So I appreciate the work of Accountable.US.
And I hope you enjoy today’s conversation. It’s a really great one. We talk about all things hemp and cannabinoid, and Derek shares with us the future of Exactus, how they envision themselves being a supplier to the ecosystem of hemp and as cannabinoids get further developed more with more cannabinoids.
We also talk about a lot of the genetics that have to do with hemp. And how you grow a good product and why Exactus has really carved out for themselves a place in the industry that’s reputable. And what that does in terms of brand recognition and farmers coming back to them.
And Derek also talks about the desire to consolidate the industry. And how once that starts happening, Exactus wants to grow and be a really big player in the hemp and in cannabis industry by doing that consolidation, by buying up companies that go under the Exactus umbrella.
And then we talk about driving down prices and how Derek’s vision of seeing a $5 bottle of CBD or CBG or another cannabinoid and a big box retailer for $5, not for a couple of hundred dollars and driving down the price of hemp seeds, all of that gets done once the industry matures. So that’s Exactus’ goal, really great to hear from Derek. And as always, I hope you enjoy the conversation.
And in my model cannabis portfolio, I’m long Trulieve, Khiron, GrowGeneration, Curaleaf, Vireo Health and Isracann BioSciences. You can subscribe to us on Libsyn, Apple Podcasts, Spotify, Google Play and Stitcher.
Derek, welcome to the Cannabis Investing Podcast. Really happy to have you on the show. Thanks so much for taking the time and joining us.
Derek Du Chesne: Thank you, Rena. Appreciate it, and very happy to be here.
RS: So my first question typically to guests is how they found themselves, how they got to the cannabis industry? I feel like your answer is going to be different than all the rest. So let’s get into it. How did you come to the cannabis space?
DDC: Yes. So I had a pretty long and interesting kind of transition to it. But when I was – a couple of lifetimes ago when I was younger, I was in the entertainment industry, I wanted to be a writer growing up.
And so I studied screenwriting after high school that led me to getting a strange audition for hosting a Disney show, which then led me to getting acting classes and booking, kind of taking that route for a long time in the entertainment space and worked on dozens of TV shows, movies, et cetera. And then I started to understand the production was really what excited me, because you have a lot more control of the final product and it’s more control of, yes, of your career.
So I got into producing film and television by 2013, 2014 and produced my first theatrical release movie in 2014. And then around 2015, when apps started to really explode and really take center stage, and I saw an incredible opportunity there. And my best friend, Matt Crown, had started an app called Klique, which was a social networking app was essentially turned into a group dating platform to help curb sexual assaults on campuses. So we partnered with Joe Biden’s charity called, It’s On Us. And that was – it’s a charity to help raise awareness and prevention for sexual assaults. So for Klique what it was, is an app, where instead of going out and meeting a stranger, one-on-one from the Internet, you and your friends join a Klique and swipe left, swipe right and meet up with other groups of friends that want to go out and socialize.
So it was pretty interesting launching in the collegiate space, where we could connect different like, sporting groups with other different groups and just people to get out of their comfort zone and try things the other friends were trying. And that was something that we were pretty passionate and excited about. We saw a void in the market. And that started to take off pretty well and, say, 2016 and around that time.
So my mother has been pretty sick the majority of my life, over half of my life with MS fibromyalgia, like to the point, where sometimes if you touch her, she’ll collapse in pain and her nervous system just shuts down. So in ovarian cancer, handful of other things. And around 2016 got to the point, where it was pretty, pretty scary.
So I moved back home to take care of her, walk away from Klique. And she – after 15 years or so, doctor’s appointments nothing seemed to notice more and more medications and more things that I chew off your left arm to keep you right. And that led me to going to Huntington Beach Urgent Care and brought her in there and I saw this clinic that was at the hospital and it was a cancer pain clinic.
So we went in there and met with somebody who explained to us what was initially pushing cannabis marijuana. I’ve tried that for a pain alternative for my mom. On the cannabis edibles side, she had an allergic reaction, she got very sick from it. And she was just, yes, having an allergic type reaction to it.
So that was out of the picture for years. So then he started explaining CBD to us, another cannabinoid. And at the time in 2016, myself and I think the majority of America didn’t know or had ever heard of CBD. So we had tried CBD suppositories, which was a pretty effective way to administer it into to get it into your bloodstream, as well as bypassing the liver. So you can get higher dosages into your bloodstream.
And so that was kind of the first thing that we – my first discovery of what CBD was. And, obviously, I’m not a medical practitioner and I’m in no way shape or form making any sort of medical claims. I’m just telling my story on how I discovered CBD and what got me here.
So after my mom trying and getting put on these CBD products within the next six months to – six to 12 months, she had seen incredible results with just her overall health and her well-being. She was no longer using a wheelchair or walker. She was more active.
She was – she’s – I mean, I’m not sure what it helped, but it was helping. And her overall health had become exponentially better when she was on and she was still taking a handful of the medications, but she was off of 70% of it by a year, a year out. So she was a lot more coherent. And I felt like I got my mom back.
So I was, at the time, very kind of confused and lost to why this had never been an option or brought up to us prior to now after so many years of different types of medical practitioners seeing her for all these different ailments.
So that’s when I decided to start researching it and talking with different charity groups that we’re working with like children’s, like children with brain cancer and infants that were using cannabis to treat it in a lot of different doctors at UCLA and, et cetera, and started meeting with all these people and really with learning, obviously, the effects on epilepsy and anti – the anti-inflammatory and the stuff that we are allowed to say that it does. This was prior to EPIDIOLEX and all that stuff coming out.
I was blown away that there is more of a natural plant-based alternative there that, that can supplement the medications that she’s with, and that could really help her. So I shifted completely. It was go back into tech or go back into a film production and finance, or this is something where I really felt wasn’t a monetary calling. And it was something that like, I really felt like I needed to make a difference in this and help bring more education to this.
So then I started just speaking and going to different conferences and educating people on the benefits of cannabinoids. And like two weeks after I kind of decided to make the shift, I started a company called Healing Ventures, which originally was going to be a marketing company for brands that wanted to add cannabinoids into their products.
And at the time, nobody was – I mean, Walmart, Kroger, Target, all of the Johnson & Johnson, P&G, like all the big distribution and co-packing and retailers were definitely not ready for it then. And so that was a bit discouraging. But fortunately, being based in California, the companies that did understand the benefits of CBD and what it was, where the cannabis companies.
So there is some pretty large cannabis companies here that we’re looking to expand their customer base outside of just to the state operation and provide CBD products on a nationwide and global level. Obviously, consumer education was lacking in a big, big part of that.
So some of the now very, very successful global brands that started off as cannabis brands and made the transition into hemp products, Healing, those are some of my first clients at Healing Ventures. And originally, it was more of an educational platform where I would go and speak in front of 2,000 veterans and discover – and discuss the benefits of CBD and talk about opioid addiction, and all these different things that would affect whatever the audience would that I was speaking in front of, whether it was in front of veterinarians or just all different types of people and all different walks of life.
And so started off as that, then turned into a marketing company for brands, that one of these cannabis brands that wanted to add CBD into their products. So then, we started launching a handful of these brands. The first two brands that we did zero to a million in revenue in the first 90 days.
So it was just tremendous success and tremendous results. And this was – the industry was a lot – a much different time back then. It was – you could launch a company with just a tincture or just a soft gel and that’s it, and the company would explode.
So, as these brands were scaling, the issue became supply chain, and we would have to – which is never the problem. It was never something that we were seeing in the past, where we’d have to cut back on the marketing, because we weren’t able to get a consistent reliable product.
And since the industry was in such its infancy back then finding, I mean, cannabis manufacturing was everywhere or marijuana manufacturing was everywhere. But hemp was very, very new to the United States, and the 20 – this prior to the 2018 Farm Bill.
So there was only Kentucky and Colorado had the pilot programs. And so – and those were all essentially for research. And then a lot of these individuals that were in the space that were growing hemp, it was – these were marijuana farmers that then once marijuana became legal, could no longer farm it, because they had prior felony conviction. So they transitioned into hemp.
So next thing, the larger players out there were a lot of these ex convicts and some of them were really great to work with, but unfortunately a handful of them out there were pretty big scam artists. So it was very tricky navigating supply chain a few years ago. And we started offering supply chain services, which then kind of took over the main focus of the company and was a total kind of nightmare for a year or two, just having quality control issues and the lab testing was a lot different on a national scale than it is now as far as the calibration and effectiveness.
And so, the quality control is a big issue, timelines at the time now the story is different as well. But there was not nearly enough hemp grown in the United States in the last couple of years to keep up with the demand. And so there’s all these different things that I wish that I knew nothing about whether it’s equipment breaking, electrical, supply of hemp, et cetera.
So that led me to working with a lot of the bigger guys out there – earlier players out there, Mile High, GenCanna, et cetera. And it – and then that finally led me to working with a company called EcoX, which was, at the time, primarily a processing and extraction company that was building out and known for building out processing and extraction equipment.
So became a good customer of theirs and really liked their processes and and the team and just their product was consistent and reliable. And then finally, allowed me to scale my business even farther and greater without having to worry every month or two, if we’re going to get the product, if we’re going to get it in time, if I’m going to have to get on a plane and go hunt down, where the product is or how we can fix it or how we can get a refund and that was I should have quit a dozen times over dealing with that kind of circus.
And yes, so became their – big customer of theirs and they were a big fan of them. They were a big fan of my company. They offered me a partnership role around the end of 2018, and I was doing some consulting for them. So I had left Healing Ventures and I joined that company. And we – prior – the prior year, they did around, say, $7 million in revenue, then $35 million in revenue, and then closer upwards of $70 million to my knowledge from last year.
So, incredible growth, incredible company and we’re really able to position ourselves as the supply chain, the best processing in the United States, if not globally. So that was a very, very fun ride and learning experience and traveled all over the world speaking every week almost at a different conference and a multitude of industries, because every kind of industry became the – every trade show became the CBD show.
And so many talk shows and so many just educational platforms that I would have killed to be on two or three years ago, were all inviting me to come speak and educate people on CBD and that was really why I got into this. So that was a lot of work, but a dream come true.
And then the main finance people here behind Exactus had reached out to me middle of last year, and we started doing some business together. And I’ve known him outside of work for years. And they made a lot of different investments in different parts of the supply chain and had a just a lot of different hiccups along the road and asked me to come on and help at the time I was unable to around the end of 2019 when the markets collapsed for raw materials. The oversupply has really went from within a year, the price of CBD isolate from $8,000 a kilogram to $700 a kilogram, which is pretty, pretty insane.
So once I started to see this happening, and you started seeing these processors, who raised tons of money $40 million, $50 million, $150 million in debt, that based on projections that this is going to be – the margins were still going to be there and the volumes are still going to be there.
And I saw that happening and I saw a lot of these people in trouble. And then I started continuing the conversations with Exactus. And I was really attracted to the public markets and the ability like what responsibility that, that brings and the capabilities that, that brings, including the ability to start acquiring brands and different parts of the supply chain to bring it under one umbrella and really create something for longevity.
So that is what led me to, I think, in January. Just, yes, January, I started doing some real consulting and diving into what Exactus was and their history and figuring out where the flaws were and figuring out what – if I could bring any value to the company and then made the move in February to Exactus there. So long story long, that is how I got here.
RS: Yes. Journey is typically a long, even if it’s not that varied, I think, in different steps. I’m curious, how did you find like learning the business side of things? I mean, your background is more on the creative side. It sounds like what was that process like in terms of kind of changing gears and doing more business focused, being in a more business focused profession?
DDC: Absolutely. So the entertainment industry, you’re, especially when you’re producing a project, so each whether it’s a commercial, especially a movie is a three to five-year process from developing the script to preproduction to post to the festival. So it gets promotions, release, et cetera.
So each time you’re doing this, it’s essentially a start-up company. You’re hiring the crew. You’re assigning roles. You’re managing accountability, managing the budgets. So, and it’s essentially start-up after start-up when you’re in film production and film finance.
So I learned a pretty significant amount there on the production side. I didn’t understand or realize then how that would kind of translate into what I’m doing now. But I think, I learned a tremendous amount in that space.
And then on the corporate side, once we – once I joined Klique and on the tech group dating platform, I learned a lot than regarding fundraising and managing a team outside of a lot of different creatives on the production side, because when you’re working in production, it’s 16-hour days and everybody is just that’s crazy, crazy grind mode, and then you shoot it for a couple of weeks and then it’s back to normal schedules. And it’s just a lot different work environment, pace and different personalities.
So, being with Klique, it allowed me to really learn more about the corporate structure and operations on that side. And really, when I got into this space, I just figured it out. It wasn’t anything that I was traditionally trained for, I knew how to start and operate – start and operated a couple of businesses prior to this. And Healing Ventures had pivoted originally from an educational platform to how do we monetize and that was becoming a marketing company, which became very successful pretty quickly.
And then supply chain, which I knew nothing about at the time, I didn’t know anything about hemp genetics. I didn’t know anything about equipment, manufacturing and the different types of extraction and or the different cannabinoids. So it’s been a three, four-year crash course.
Now I can build out equipment. I can tell you everything that you need to know regarding genetics. And I’ve been on the forefront for product development, working with whether it’s the tobacco, cosmetics, pharmaceutical, pets, food and beverage, just the general health and wellness industries, all of these different industries are adding CBD products into their offerings in their portfolios.
So we’ve been working very closely with so many different companies and a multitude of industries on product development. So it’s all been a learn as you go, sort of experience. But I think that we’re – everyday is a new challenge and a new adventure. And I think that we’ve come a long way and the industry is, I think, at its infancy.
So the hemp CBD side of things is in the cannabinoid and terpene profile extraction industry is and the health and wellness is one small piece of it. But if you look at China, we’re – they’re pretty substantially ahead of us on the manufacturing aspect or all aspects of manufacturing and you look at – they did a big reform three, four years ago back in textile reform. They invested hundreds of millions into hemp. And very little, if any of that was towards cannabinoid and terpene extraction and that is for hemp plastics and batteries grapheme, textiles, fibers.
So I think that this industry as a whole is at its infancy, and there’s still going to be a lot more to learn. And a lot of different industries are looking at the benefits of hemp and how it can help them in a – looking to the future in a sustainable, more efficient way.
RS: You talked about some of the changes since the Farm Bill passed. What are your thoughts? I mean, it is in its infancy. What are your thoughts in terms of how the FDA is dealing with CBD? What’s happening with the market? There has been so much confusion, I think, for consumers. There was like this great thing. And then I think a lot of nervousness about what some companies were selling. Where do you see it now? What’s your kind of take on where the market is right now?
DDC: So, where the FDA currently stands and how it’s affected the market? It’s very, very interesting, because, especially – and so prior to the 2018 Farm Bill, a lot of the big operators, including Healing Ventures, the big manufacturers and processors were sort of operating in the shadows.
And after the 2020 and prior to the 2018 Farm Bill, or before the 2018 Farm Bill, a lot of the companies that I was trying to talk to about hemp and CBD and adding different cannabinoids to their products, would tell me to get lost. And this was some of the larger CPG companies that I’d mentioned before.
And then almost immediately after the 2018 Farm Bill, a lot of these – on a global scale, a lot of these brands and companies that we grew up with, now are calling me looking for raw materials, for product development and bringing me into to help consult and supplying them, so they can start their R&D.
So it made – the 2018 Farm Bill made a dramatic shift in the market. The market exploded. I never would have imagined it growing this quickly and becoming this accepted on a global scale. So that did wonders for the industry.
As far as the current guidelines, well, after the 2018 Farm Bill, the issue then was internal policies for companies. So now, it’s an agricultural commodity. It’s an agricultural product. But the issue was that whether it’s Wells Fargo, whether it’s the banking side, or Amazon, or a lot of these companies hadn’t their internal policies, hadn’t caught up with the legislation.
So they were still a ban on hemp products or CBD products. And now that’s opened up pretty significantly over the last two years since then. But then you have the regulatory side, which for my executives or my previous companies and we are welcoming regulations. They cannot happen fast enough, because, that with any emerging industry and not having regulations, there’s a lot of opportunity, but you’re going to attract not the right people all the time.
So you’ll see probably a weekly basis a news report or something coming out on some sort of publication, where the reporter went in and tested 20 CBD products. And 19 of the 20 didn’t have what was advertised on there. And 15 of the 20 didn’t have any CBD at all.
So, that’s a big problem. And when it’s not regulated correctly and people don’t have proper procedures in place, but you don’t know what you’re getting. And not so much this year, but last year, in the year before, when there was a shortage of raw materials on the market, we saw a massive influx from foreign products from China and from elsewhere that you look at it, you test it and then it looks fine on the potency side. And – but then, two weeks later or a week later, your full panel test come back.
And in the full panel test, it’s riddled with pesticides or with heavy metals. And you can’t put that in product and a lot of companies they bought it and they didn’t cut into or didn’t want to take the loss. So they put it in product and you’re putting out toxic materials and products on the shelves. And I saw so much of that over the last year, especially two years ago, not so much this past year, but especially two years ago.
So that was a pretty, pretty scary thing. And with a lack of regulations, it’s really up to the companies to create their own to just set the standard and hopefully, the industry will follow. And there’s a very few companies that actually are. And you go to a lot of these trade shows and you talk to the CBD companies, and there’s so many CBD companies out there now and you ask them, where does your raw materials come from? What farm is it coming from? Who is processing it? And I think a lot of the times, the answer is overseas or I don’t know. And hemp is such an incredible powerful plant that when you plant it, it is like a sponge.
So it remediates the soil and the air. So if there’s a fire that happened a couple of miles down the road, that hemp plant is going to absorb all those chemicals. If it’s planted in heavily polluted soil like certain parts of China where hemp production is significant, it’s going to pull all the lead and the mercury and all the heavy metals and the pollutants out of the soil. And then as you can test that bio mass that raw hemp and it’s not going to show up. But when you’re processing it and isolates all these things and spikes, then you see it in there.
So, I think, we personally as a company and I think a lot of the leaders in the space are welcoming guidance from the FDA, finally, to put these regulations in place. But in the meantime, how it’s affected. The consumer side has been pretty significant. So 20 – after the 2018 Farm Bill, especially in California, you would see all these different CBD snacks or CBD drinks and they didn’t know very well. And big companies, we’re starting to make them. And then the FDA came out and said, “No CBD is – it’s not a grass generally recognized as safe product.”
So that’s no, not okay for food and beverage. So then they started pulling it off the shelves and finding the companies that were doing it. Well, then you’re also seeing restaurants, globally, coffee shops, bars, adding and CBD to coffee to all these different delivery systems.
So the FDA made that announcement and scared a lot of these people, so that kind of pulled back. You’re seeing a lot of that come back now. But anytime, they make a negative announcement that it really affects the sales, especially on the raw materials on the B2B side, which I’m sure also, in turn, is affecting the consumer side.
So that’s really been a hindrance. And I think a lot of the companies and the larger processors, et cetera, I mean, we’ve been having conversations with some very well-known brands that we grew up with that are massive on a global scale. And that they’ve been doing in-product development for it and ready to pull the trigger and massive chain restaurants and CPG products and beverages that you see everywhere. But they’re all waiting on guidance from the FDA, and I think the industry had expected it by now to come.
So a lot of manufacturers and processors have overextended themselves preparing for that, putting – raising $100 million and building out 100,000 square foot facilities. And with that, now, since it still hasn’t come, yes, the industry has grown exponentially from these health and wellness brands and the skincare brands, and all these different brands.
But where it’s really going to grow is food and beverage. When that market opens up and the FDA says, “Yes, it’s okay.” That’s, for example, we help to get the first CBD products on the shelves at CVS. And initially, CVS, it was going to be a kiosk. And then it went from being a kiosk to an Endcap.
And then, especially the first couple of months, it was sold out almost immediately at the stores. And then now, it’s looking like with the supplement side, it’s soon going to be an aisle. But the second that food and beverage opens up, I mean, for example, like Natural Products Expo East and West, where there the last couple of years, obviously, this year was canceled due to Corona.
But every single, whether it’s a vegan beef jerky or a hot chili sauce or a cereal or a snack bar, even for children, you’re seeing all these different companies from every part of ingestibles in food and beverage that are doing product development. They want to add CBD into their products, because they see the benefits of it, and they understand that it could help their products grow.
So – and the second, the FDA releases guidelines. I think, it’s going to go from an oversupply in the market and the raw material completely crashing like they have over the last couple of years to, I think, for example, Hershey’s or Coca-Cola. Well, just one of these larger customers comes in and does such significant volumes that wipes out the entire supply chain in the United States.
So then the price then goes up and the people that have made the investments in building out GMP facilities and have true visibility and traceability into their – from the genetics to their farming to their bookkeeping, et cetera, those are going to be the people that win. But I think everybody thought this was going to happen a year ago. And we still don’t know if this is going to happen next week or then in the next two years.
So the industry has been limited on its growth due to the FDA guidance. And I think, it could have possibly happened by now, but the whole world is in a coronavirus frenzy right now. So a lot of things and legislation and conversations have been shelved. But, for example, if you look at the EU, right, so they recently passed the Novel Foods Act.
And up until March of next year, right now, it’s a kind of a free for all over there and the UK, especially it’s where the United States was two years ago and cannabinoid and hemp and CBD products. And it’s grown pretty exponentially. But now that they’re essentially – the Novel Foods Act is going to allow CBD and food and beverage products throughout all the EU. And this is going to start by March of next year. But in order to get that, there is a massive investment and amount of research and vetting in order to get through that application process.
So, I think that they’re doing it the correct way. And the second that, that happens, hopefully, legislation globally, will see see to take their lead and replicate a similar kind of vetting process and bring the industry to a newer level, because the lack of regulations has really hurt the reputation of the industry and the companies that are doing it correctly.
RS: Right, right. It’s interesting to see how it’s going to play out, but it also feels like just part and parcel of being part of this industry. It’s like if you think one thing is going to happen this way, it comes at you from the other direction in a slightly different way. I think, we think things are going to happen linearly and they almost never do.
I think this is just more proof of that. It’s interesting, though, during COVID, I mean, obviously, it puts everything on pause. But do you think ultimately, this time helps push forward these kind of initiatives? Because it will help so many more people. What do you think of in terms of like COVID? Obviously, it puts things on pause, but how else do you think it affects things?
DDC: Yes. So, the coronavirus has definitely halted a lot of conversations about not just, obviously, CBD about a million other things that were happening in the world. But on the consumer side, we are seeing and not just hemp on the consumer side, we’re seeing on, say cannabis, for example, an incredibly large increase, I mean, look at the Cannabis stocks, right? And we’re seeing the demand skyrocket and it being deemed an essential service, and that’s on the marijuana side.
But if you look at on the hemp side, what do people take CBD for, right? And I can’t get into the stuff that they take it for, because it’s not proven to – by the FDA, but a lot of it is different mental stress and that sort of thing. And it does help reduce inflammation, and we’re seeing the demand on the consumer side.
Coronavirus, I think, has put a lot of things in perspective for people for what matters to them. And I think a lot of people, including myself, were kind of just running on autopilot. And now, with the whole world being flipped upside down, it’s allowed people to really take time to themselves and more time with their families and remember what matters most and that’s our connection that now people are feeling deprived of.
But our human connection and our health, and people are looking for more alternative and natural ways to take care of themselves, because, obviously, coronavirus is not attacking people with a weaker immune systems and preexisting conditions.
So with – they’re looking for different ways to strengthen their immune systems, as well as I’d hope that people are being more health conscious and sleeping better and eating better. And I think a part of this conversation has been people taking more supplements. And with that comes CBD, and we’re seeing the overall demand on the consumer side pretty – and the conversations are expanding a lot more than they were prior.
So I think it’s, yes, it’s been a hindrance on the world and obviously, supply chain for example, like, when things were at its peak, we had a couple of hundred thousand dollars with a product is sitting at customs in the UK, because people just like they’re very understaffed. And you’re seeing that on a global scale, whether it’s shipping or whether it’s just different parts of the supply chain were being interrupted, because people were unable to work or wasn’t safe to go to work.
So, that was a big hindrance early on. Now things have picked back up. But I think that with the coronavirus era, yes, there’s a lot of negatives that have happened. But there’s also a lot of positives. And I’m excited that people have taken this time to reflect on what matters most to them. And I’m happy to see that the conversation of CBD has been – has expanded.
I mean, you’re seeing there’s a Benzinga article, I think it was. There’s an article that came out recently that, that I saw online that said, the CBD search interest is more popular than Beyoncé, Kim Kardashian and veganism. So, people are starting to pay attention to things that matter most their health. So I think that’s an exciting time. And overall, I hope that, like I said, with the EU passing the Novel Foods Act, I think that’s a very powerful step in the right direction.
We could have, for us, especially last year, there’d be a really strong three months to six months for the industry growth and sector growth. And then the FDA would come out and say something that wasn’t – wouldn’t so much be negative, but wasn’t positive to the industry. And things would tank or go on pause for a month to two months. So it’s been kind of a roller coaster, but we’re – it’s definitely made so much progress. And I never imagined, it would get as big as it has as quickly as it has.
So it’s incredibly exciting to see the industry started with cannabis brands, adding it launching CBD products and was basically soft gels and tinctures and edibles then. And now, you’re seeing medical devices, nebulizers, all sorts of different topicals and like cancer patient radiation, burn creams to anti-aging products. We’re adding it and, as you know, additional ingredient.
And what I’m excited for is, not when you walk into a CVS or a Sephora or wherever, and you see here’s the Neutrogena or La Mer under eye cream with CBD, or here’s the candy bar with CBD, or it’s on the front of the packaging or what I’m excited for it. I think, we’re getting there in the next couple of years, where it’s going to be such a popular raw ingredients and raw material, but it’s not even on the cover of the packaging.
It’s just you look back and then the size for font to the back of the ingredients. And it’s just – it’s listed in there cannabinodiol, because I think it’s now going to be so widely available, widely accepted, and I think it’s very effective.
RS: Yes. I definitely think there is nothing greater for this time than cannabis and CBD, like it feels tailor-made for what people are going through just in terms of exactly what you’re saying, being getting more mindful, being more aware and really understanding the role of mental health.
I think, in general, certainly, when you’re in lockdown with maybe a couple kids at home, a spouse or two, I think, it gets – and people’s kind of understanding of what other pills, other medications are doing kind of the destructive properties that are there. It certainly seems that that’s the way society is going. Yes, I guess, the hope is just that the regulations serve the consumer as well. But yes, it seems like they’re taking their time to do that. So within that ecosystem of CBD, where do you see Exactus as a player?
DDC: So Exactus, I recently joined the company and let’s start with the history of Exactus to where it’s at now. So prior to making the jump into hemp, well, they say, let’s start with kind of what I’m familiar with what they’re beginning.
So in February, I think, it’s 2016, Exactus was developing medical devices for measuring paralytic enzymes in the blood and it’s like herbalizer and I think the devices are called a nebulizer. There is a diagnostics business, and the time was severely hampered by a shortage of capital for development.
And as it was all the licenses for the IP and the underlying technology, along with kind of the black eye, the industry following the Theranos debacle. The leadership and executive management team at the time, a lot of it had kind of dissipated or fell off due to lack of funding.
So the executive management team was left started pursuing additional opportunities, want to say, late 2018, some fairly recently and looking for different ways to add shareholder value in different industries. So they’ve done a lot of research into different sectors and seeing what – where they saw opportunity.
So they then decided to expand the focus and pursue the hemp CBD space, which especially 2018 was booming at the time. And the decision from that was, the 2018 Farm Bill was very well publicized and everybody kind of started looking at the industry is not so much is the weed or marijuana industry. And people – most people still don’t know the difference between hemp and marijuana, right? And I think this passing it as an agricultural product really helped put eyeballs on it and help with consumer education.
So the Farm Bill, which was the Agricultural Improvement Act of 2018, authorized the production of hemp and removed hemp and hemp seeds from the DEAs, I mean, a Schedule I Controlled Substance and also directed the Department of Agriculture, the USDA to issue regulations and guidance to implement programs to create that infrastructure and regulatory framework around the production throughout the United States.
So since Exactus entered the space, they started off on the farm side. And that’s where their initial investment was. And Oregon, it’s 200 acres and it’s called the Emerald Triangle and a really popular area for cannabis cultivation and hemp cultivation. And so they started off on the farm side.
And since then, they completed the first harvests. I had a handful supply agreements with some strong companies, and that was kind of where I came in, which was the end of last year, maybe beginning of this year, really. And the company essentially had invested in farming, which is great and definitely necessity leads to it. I think if you look at the numbers of what farming did two years ago to what farming is now.
For example, last year, even last summer, biomass, the hemp raw materials was – it’s based off of percentage points of cannabinoid profile. So if it’s saving 10 points, or 10% of CBD, then you pay per point, right? So it’s – then it was about $4 a point, so it’d be roughly $40 a pound for that material. And now, it’s down to 0.25 cents a pound.
So the farmers up until this past harvest is now, I think, it’s something a lot, “I don’t know if this is 100% accurate”, but I think it’s something along the lines of like 42 or 44 states have opened up for hemp production. And you’re seeing, especially with the trade war that happened with China, you’re seeing the farmers just getting beat up that with soy production or soy exporting and corn, just a lot of these farmers.
I grew up in Northern Wisconsin, where that’s the entire state is in which where I grew up, it was all farms. And a lot of people started losing their farms once this trade war started and it really affected them. So, I think it’s been really powerful and really incredible putting the power back in the farmers’ hands to be able to add this as sort of convert their farms over to hemp.
But unfortunately, with that, there has been a massive oversupply on the market. And the bottleneck has really been the processing, because now there’s millions of pounds out there still from last year’s harvest, which is the opposite of any other year. Every other year for this that we ran out of hemp and people were trying to import hemp just to process it to keep up with the demand.
While due to the lack of FDA guidance in releasing, saying that it is allowed in certain products and will be regulated, or just it’s going to be more acceptable through the government standpoint. It’s – the demand has slowly increased, but not nearly as much as the supply.
So when I came on, I saw that we have our farms in a couple of agreements. But I don’t believe – my last company, we had 400 acres of internal farms and another 1,500 acres of partnership farms. And I think, farming was a crucial aspect two years ago, and was it a great opportunity two years ago or a year ago. But now, there’s so many incredible people out there doing it that and I don’t think it’s the most effective, most profitable part of supply chain.
I think having strong farming partners, which we do have those relationships. And I think having enough to process your own is vital, and it is very important to have that quality control. But I don’t think it’s a necessity anymore. So I joined the company, beginning of this year, and I’m very excited about our future, because the – in addition to our farming capabilities, what I’ve brought over – so we’re processing all of our harvest from last year, which is now brought the company in some significant amount of revenues. So we’re finally, being able to process that.
But moving forward, what I – how we envision Exactus and the path that we’re on as being A, on the educational side thought leaders in the space, being at the forefront of product development and being able to supply raw materials to the cosmetics, wellness, food and beverage, tobacco, pets, et cetera, all to be able to supply raw materials to all these industries and become the reputable supplier and distributor throughout the world.
And I’ve had a very good pulse on not only domestically with these companies, but I’ve been working in the UK for the last couple of years as well. And now, we – we’re starting to work with the legislation in Japan after that opened up the beginning of last year. It’s been a slow process, but now Australia. So I mean, there’s so many incredible global opportunities opening up for distribution.
So for us, it’s building out where we restructured since I’ve come on, we’ve pretty much completely restructured the Board. We’re adding on more of the management team and hiring just a whole new just team for the company. And the Directors – the new Directors that have come on, cut the burn significantly and making the investments in the R&D and building out our sales and marketing teams to rapidly generate revenue.
So, last year, I think was more of a building year and making investments in different parts of the supply chain. This year, for us, is positioning ourselves as a reputable supplier and leader in the supply chain. And in addition to the raw material side, we recently launched a genetic solution. And I spent a good part of last year supplying a majority of the country with or a large portion of the farmers in the United States with their genetics.
And I knew everything, at least, the most there was to know about the raw materials, CBD isolate distillate, et cetera. But genetics, it’s a very different purchase. It’s more of a trust buy, because when you’re buying seeds, it’s – if you buy raw materials, you’re buying something you can test it, a week or two later, you get your results back. You’re getting regardless of where it’s coming from what you’re getting.
With genetics, it’s more of a trust purchase, because even if you have feminization tests and germination tests, you – that’s – those are done on a small scale. So whether it’s 100 seeds or 1,000 seeds, those aren’t going to be a proper representation of what 5 million seeds or 2 million seeds or hundreds of acres are going to be.
So farmers, we saw so much of it happened in the last two years, get burned by buying seeds from not reputable companies and brokers. And people were going out and buying hemp seeds from stores that weren’t feminized, and just selling those at $1 seed. And so it’s allowed me – it’s allowed us to have a real connection with these farmers and supplying them with quality genetics, and had a tremendous success story – success stories last year with the farmers that we worked with as at my previous company.
So this year, we’re working with with those farmers, as well as for us on the distribution and processing side, allows us to have a pulse on where the good genetics are and having the forming partnerships. So, supplying genetics, supplying raw materials, and our Interim CEO, Emiliano, he was part of the genetics division at GenCanna prior to this.
So providing that consultation to farms, because a lot – another big mistake that farmers were making wasn’t just – it wasn’t just the genetics. It was – they would make all this investment into farming hemp. But then, with irrigation and equipments, et cetera, but then the other two-thirds of the process is drawing and storing it.
And a lot of people, I think, the majority of people didn’t make that investment, and thought that somebody would just kind of take it off their hands. Well, this year, there’s only a handful of processes that are doing it effectively at scale. So, you have a lot of farmers that now have moldy product that’s been sitting there, and it’s been pretty devastating to see.
So, providing guidance on farming methodology, as well as the other investments that farmers need to make, I think, that’s going to be one very well growing division of our company that we just launched recently maybe a month ago. The core focus right now is becoming the leader for supplying raw materials and distribution for raw materials. For right now, the biggest ones are CBD and CBG.
One of our partner companies has the largest CBG grower in the United States. And we’re seeing tremendous growth in that cannabinoid, because the CBG is essentially the stem cell to all the other cannabinoids. And they have – each cannabinoid affects our body pretty, pretty differently and we’ve got over 100 cannabinoid within our body.
So whether it’s CBN, CBL, CBG, CBC, THC, THCV, CBDV, all these different things have different effects on our endocannabinoid system and we have a CB1 and CB2 receptors all over our body, and so neuromodulatory system that affects everything from our reproductive system to our nervous system, et cetera.
So, what we’re really excited about the last 100 years, THC has been the hero, right? It’s what everybody knew about. And the last five years, it’s been CBD. But looking to the future, CBC, CBL, CBN, and I can’t say, because it’s not FDA cleared yet, but we’ve been doing a lot of product development and working with a lot of companies that are working with these raw ingredients and seeing just tremendous results and things that we didn’t know these different cannabinoids affected.
And so we’re very excited to be able to bring these different products to market at scale and help brands launch those products. And I think that as soon as, I mean, you’re seeing, like Avon has a CBD Skincare. If you walk into Sephora, or and a lot of these big box retailers, there’s so many different CBD skincare products, but there’s other cannabinoids that are tremendous for skincare.
And as soon as you see a Revlon or L’Oréal that has hundreds of millions and marketing dollars start to really promote CBD. I think that’s when the consumer education or at least larger CPG companies start to promote CBG, that’s when – not CBG, just different cannabinoids. But that’s when we’re going to see exponential market growth and consumer education is going to drive that and that’s really what’s been missing.
So we’re very excited to be able to continue researching and developing and figuring out how to bring these lesser known cannabinoids, yes, at scale. So every day, our technologies and our genetics are improving, so we’re able to specifically know breed things for these different cannabinoids. And I think this is just the beginning of the beginning or beginning.
Right now, CBD is taking the spotlight. CBG is a close runner up next for different reasons. But we’ve got 100-plus more cannabinoids to figure out and bring to market. So I think, we’re very, very happy, excited about that part of the future growth of the business and then that’s our core focus.
Obviously, with any publicly traded company, as our business grows and scales, we’re looking to the future and we – we’ve been – the company has had a couple of public conversations with mergers and acquisitions. And that’s something that we want to continue with the whole world kind of, especially in so many industries, including ours and distress due to coronavirus.
We are seeing opportunities – tremendous opportunities for brands that not only are produced and manufactured very well with the right raw ingredients, but have great leadership teams and have great products that are in the stores at all these different big box retailers that are now closed down. And they don’t have much of a direct-to-consumer presence. And we’ve got tremendous expertise on direct-to-consumer digital marketing.
So we’re having – we’re looking forward to the future, where after this business is stabilized and we really cemented ourselves as a leader, or the leader, and supplying different cannabinoids to a multitude of industries and raw materials and manufacturing, as well as genetics to farmers globally, I would love to jump on these opportunities, as our company grows and bandwidth grows to consolidate the industry.
So we take a handful of incredible brands and marry it with some of the best processors out there and create a self-sustaining ecosystem. And I think that’s the goal and the dream for a handful of companies out there. But fortunately, for us, we are a publicly traded company, and our growth and our numbers are going to be very public and our operations are very public.
So I think, it’s going to give us a significant opportunity and lead ahead of our competition in order to be able to do that, because there we’re seeing some big CBD companies that are listing or have listed, but their visions, I think, are a bit different than ours.
And for the overall longevity of the company and sector growth, the the dream is to marry in every part of the supply chain, and not so much. A couple of years ago, you had to be vertically integrated in order to survive, because you couldn’t get quality ad quality genetics and quality processing, et cetera, et cetera.
But now the industry has evolved so rapidly, but there’s incredible companies out there doing work with genetics and processing and so many great brands that already have consumer demand. And I think being able to consolidate those under the Exactus umbrella is going to be something very, very exciting for us.
RS: Yes. It definitely seems like consolidation is kind of where this industry is heading exactly for the reasons you mentioned. So do you feel like Exactus, the goal is to become one of the biggest CBD – one of iteration limited to CBD, one of the biggest cannabinoid kind of players in the market in terms of picking up assets that work well with your company is, that’s the main goal like in the next few years?
DDC: Yes, absolutely. So, we’ve – the company has done it as, prior to me coming on as looked at a couple of acquisitions and made one. The issue with doing this is like, you need the right teams. And each one of these businesses is a different team in different oversight and different leadership.
So, finding – and I’ve got a very good pulse and so does our team on what companies are doing things well and doing things the right way, and doing things for the right reasons, and doing things to help people and help the industry grow as a whole and not looking at margins and nickel and dimeing.
People shouldn’t be selling tinctures for $200, and people shouldn’t be like charging exorbitant amounts for raw materials and for seeds that hinders the industry growth like the better the product, the more cost effective it is and the larger the industry grows as a whole.
So for us, like I know my expertise. And my expertise has been supplying and processing and manufacturing genetics and raw materials, primarily in genetics, and have that very extensive rolodex in the industry in those relationships. But where I don’t have expertise is mergers and acquisitions and handful of other skill sets that, that this is going to take.
So, we are – our CEOs and interim CEO, we’ve been on the hunt for and meeting with some very incredible people. So adding on to our executive team and adding on to juts a lot of – just filling in a lot of the gaps of our team is going to allow us to make much more calculated decisions in the future. And also, as we’re absorbing and doing merging with these other companies, we’re going to be taking on companies that already have incredible leadership in place. And so we can all work under one roof and join forces.
Short-term, our goal is, we restructured to primarily being the suppliers, large-scale industrial suppliers for the highest quality and premium raw materials. But long-term, I think, our dream and a lot of people’s dreams is consolidating everything under one roof. And then you take the – it makes a lot more sense that way.
And then, if you look at brands out there, like Herbalife or a lot of big companies out there, that charts a significant amount for products, they do that, because they have transparency in the supply chain. They have, like you’re getting a premium product. You’re getting a product that is like you know, where the – what the seeds are, where it’s coming from, even trust that you’re getting what you’re buying.
And especially on the supplement side, right, if like the supplements in United States are like, you have no idea what’s in these things like, they’re not regulated like, for example, with the food industry is.
So, being able to provide transparency and traceability is an incredibly significant, not only on the production side, but on the brand side. And so if we can marry in these already operating and successful companies as opposed to going, starting from scratch and launching internal brands, I think, that’s the quickest route to success. And we’re having – been having conversations with a lot of incredible companies.
But right now, it’s – I think, it’s a bit early for us. We need to continue growing this business and continue adding on to our leadership, which is all happening right now. But yes. And in the future and hopefully, the near future, we will be consolidating companies.
And I think that’s what’s attracted me to Exactus was, and they not just the team that’s in place already, but the opportunity of having a publicly traded vehicle and having our numbers, et cetera, and progress being so public that we have access to capital markets. And investors will be able to take a look at just how much progress we’re making, how quickly we’re making it, and hopefully, be fans of what we’re working on. And then that will help propel us and give us the ability to start making very significant acquisitions in the space.
RS: And then I’m curious in terms of like the other cannabinoids, with the Farm Bill, like once the FDA settles on a law or like the regulatory framework for how CBD gets manufactured and consumed, does that then extend itself to the other cannabinoids? Or is it a whole new process starts over again with each one?
DDC: Yes. So that’s a great question. Regarding the Farm Bill and the CBD guidance from the FDA, I was at the hearing and Washington and they think it was an attorney, he stood up and he said, “Here’s somebody from home and law.” But had suggested to the FDA that they create clear guidelines that encompasses all cannabinoids and other than THC, encompasses all cannabinoids, because if not, we’re going to be back.
They’re having open hearings and having all these different regulatory issues 100 times over for all these other cannabinoids. So I think, the FDA is very well aware of that. And we’re all in hopes that they will create some sort of blankets policy that covers all non-psychoactive cannabinoids.
RS: Well, here’s hoping they do that.
DDC: Absolutely. And I think, looking to like just the industry and hemp as a whole, right? So before, it was prohibited in the United States, I mean, the CBD and the cannabinoid and terpene, part of it is one very big sector kind of growth in the United States.
But you look at all the other applications for building material and like hempcrete and for food, for cattle feed, hemp plastics, the first Henry Ford, one of his first design was out of hemp plastics for cars, for fuel, for energy, sources, for grapheme. We recently discovered how to extract graphene out of hemp. And then, yes, just I think the industry as a whole is at its infancy, and we’re excited to be really focused on this part of it.
But we’re – I love to continue having conversations and learning more about all these other different incredible opportunities with these different sectors and different applications for the hemp plants and partnering with companies that are doing this things, for example, like our waste material, like that, that can be used for a multitude of different things.
And also just our current crops like, what are the right people out there? And then, obviously, one company can’t do everything, but there’s a lot of – there’s so many exciting things and there’s so many opportunities in the space that we’re very happy to be able to have these conversations with these different companies. And how the future looks? Nobody knows.
But I think this is just the beginning of the beginning of the industry in the United States. And we’re looking forward to being able to provide quality – hemp in quality raw materials for all different industries and all different applications.
RS: Yes. It’s definitely an exciting time to – because it’s in its infancy, but kind of in its professional infancy. So…
DDC: Yes, yes.
RS: …a lot to work with, yes?
DDC: Yes. But I mean, if you look at like in other countries, where they’ve been using hemp significantly for textile production, I mean, it’s just so fascinating to see that this plant not only out of the pharmacological benefits that it has, you’re looking at the variety of commercial and industrial products, right, including rope, textiles, clothing, shoes, food, paper, bio plastics, installation, biofuel, I mean, the list goes on. And it’s so incredible just the power, this natural resource natural plant has.
And so interesting that it’s been prohibited for so long and now it’s just like a lot of different things that are happening in the world with pollution and with carbon emissions, et cetera, that this is something that can have not only – right now, it’s making a tremendous impact on – in the healthcare sectors.
But I think that there’s so much more that this plant is going to do and we’re going to see happening in the near future. I mean, you see Levi’s, there are Wranglers that got put out. They’ve got a new hemp genes that came out, and we’re starting to see just so many cool things happening and I never imagined. Like I said, the industry would grow this rapidly. But it hasn’t and it’s just really, really exciting. really grateful to be a part of it.
RS: Yes, I remember. I mean, I’ve said this before on the show, but I remember being in Virginia visiting family and going to where George Washington used to live and seen like these great giant hemp fields. And it’s like that thing where you go and people are still dressed and look like how they used to look. And this guy that looked like he stepped out of the 1700s explaining to us about hemp and all the benefits. And this was like a couple of years ago and it’s so wild to see how far we’ve come and kind of like going back to our roots. It’s a – it’s great to see.
And we had a grower on the other day, Danny Murr-Sloat, who was talking about the global borders opening up, both for cannabis, but also for hemp. And kind of being in talk with other countries that have been growing this for years and years and kind of sharing best practices and kind of opening up that mind share in that regard, I think, is a little bit of what you’re talking about, too. And I think it only furthers the industry?
DDC: Yes, absolutely. And the fact that, that they are so cool. You got to visit that. It was Mount Vernon?
RS: Yes, exactly, Mount Vernon.
DDC: Yes, yes. So legally, that’s so cool they’re growing and harvesting hemp there again. Yes, if you look at our founding fathers, George Washington and Abraham Lincoln, et cetera, I mean, back then, in the United States, it was made for paper or if you go and look at old Sears, Roebuck catalogs. And from the – even like the 20s, you see photos of every medicine and the majority of them you see cannabis leaves on it.
DDC: And it’s so fascinating. I remember, I quote from Abraham Lincoln is, what was it, like two of my favorite things are sitting on my front porch smoking a pipe of sweet hemp and playing my harmonica. And it was just like a normal part of society. And for a good reason because of the benefits that I brought as a cash crop and textiles, et cetera, pharmacological, et cetera.
So now, it’s just really, really incredible seeing, especially with today’s technologies, right? And the talent that’s able to develop these different kinds of uses for it is phenomenal seeing how quickly and rapidly these products are coming out and scaling.
The – now that, we’re in a place where in a situation where finally members of Congress have stopped buying the Drug War era rhetoric thinking about, they stop thinking about cannabis plant in a very uniform way and understanding the difference between marijuana and hemp.
And obviously, there’s tremendous benefits for marijuana, but it’s just a different thing. And now that – like that differential, the 2018 Farm Bill is set up that differentiation. It’s – yes, it’s just really, really exciting stuff. And hemp is one of the oldest domesticated crops known to man tuned to Benny’s throughout our history for thousands of years.
I think, the oldest – dating back the oldest relic, the human industry is a scrap of hemp fabric. They dated back to – this Columbia University dated back to approximately 8000 B.C. So it’s been around for a long time. It’s just this weird like 100-year prohibition that, that happened in the United States. But now, it’s been incorporated thousands of products and whether it’s the seeds or the flowers that are being used for nutraceuticals, foods, body hair, et cetera.
But the stocks are clothing, construction materials, plastics, it’s just really incredible what hemp can do. And, yes, I mean, it was, I think it was 1937 that it was prohibited. And so seeing how quickly it’s made a comeback is with the first – the first Farm Bill that came back was like 2014.
But even that was only – it was only Kentucky, Colorado, and Oregon with their hemp pilot programs. But 2018 just opened up the floodgates and obviously, each state had to release their own guidelines for it, but yes, it was, I mean, just so remarkable, so exciting to see how far it’s come, how quickly it’s come and what the future holds. Nobody knows.
But I can tell you, I feel so much better about it now than I did two years ago when we didn’t know. Tomorrow, the FDA was going to come out and say or the DEA, you have so many different… regulatory agencies affecting. So you don’t know the Department of Health or the DEA or the FDA, or whoever is going to come out and say, no more CBD. But I think, now, we’re to a point where the cats out of the bag and kind of a point of no return to where it’s here to stay. And I think we’re very fortunate to be and I’m very fortunate to be in a position to even though, I’ve only been in this industry for handful of years.
It’s such a new industry that I’m considered a veteran and to be able to provide value to companies that want to incorporate CBD into their different cannabinoids into their products. So I’m very, very happy to be doing what I’m doing and to be able to expand the consumer education and help companies grow.
RS: Yes, definitely. And now, you have me thinking about how nice it would be to have a President or a leader that likes to smoke a hemp pipe and play his harmonica and…
DDC: Yes, a little different than our current President. Yes.
RS: how different it may be if that were the case.
RS: Yes. So, Derek, what – do you want to leave anything with our listeners before we leave each other?
DDC: Yes, I want to thank you so much for having me on the show. And now I want to thank everybody for taking the time to listen to our story and learn more, a little bit hopefully, about the industry as a whole.
I think something to reiterate is, if you’re a farmer make the investment in the drying and make the investment in the storing, because a lot of people were nuking their product and taking it from 15% material to 5% material and that’s not good. So make make that investment.
And for consumers be – stay away from these MLM kind of companies. If you just do some research online, you’ll see the crazy amount of things that have come out with these larger ones, at least, I’m sure there’s good ones out there with the ones that we’ve encountered or read stories about, they’re buying their CBD from who knows where, but it’s filled with heavy metals and toxins and synthetics and just be conscious and mindful about what you’re putting in your body.
And remember that this industry isn’t regulated to where it needs to be at. So it is up to the consumer to research where their products are coming from and having traceability in the supply chain. And a lot of these companies, it’s been a fringe tagline for these companies to say, we’re vertically integrated. We’re this or that. But the reality is, last year, we – I speak at a lot of these conferences and half of these companies that say, they’re vertically integrated. Now we’re – we were their supplier.
So just try and do your due diligence. I know it’s not a realistic thing to say, “Hey, go and send out your products for testing it at a lab.” But just try and make sure that any CBD product that you do buy, they do have a recent and current Certificate of Analysis, a full panel on their website, a COA that does show heavy metals, not just potency, because these products all have hopefully, have the CBD they’re saying. But it has the full panel testing for microbials heavy metals and pesticides, because that’s – those are all nasty things you don’t want to put in your body.
So just be very aware of that, and thank you for trying CBD products. And I get people that call me almost daily to say, “Hey, my grandma tried it for this. I gave it to my dog for that. It’s helped me with this.” And it’s just like this is why we – this is why we’re in this industry and this is why we do what we do, because we want to help people. We want to drive the price down to a $0.01 a seat.
So we can service these global markets and we want to drive the price of raw materials down so low to midpoint. It’s so – a good quality product is so affordable for the consumer that, that we’re able to expand the industry as a whole.
And I want to see it on the checkout counters of all these big box retailers for $5, $10 a bottle, not $200 a bottle, because most people that are similar to my mom’s situation, you’re sick for a long time and the money runs out and your Medicare or your insurance will cover your barbiturates, your opioids, antidepressants and all these other things. But when it comes to something like CBD, or other natural remedies, doesn’t cover it and it’s expensive.
DDC: So, just know that there are companies out there on the processing side, the farming side, on the brand side that our goal is to race to the bottom and get the price as low as possible for the consumer to grow overall access and make the world – provide the world with cannabinoids.
RS: Yes, yes. Really, really good. Useful advice. And first of all, very best to your mom, please.
DDC: Thank you. She is – I just spent a lot of time with her in quarantine. Recently, had like a fluke – had a gallbladder surgery, which is like a strange weird out of nowhere unexpected thing. But she’s so much better than she was years ago. Obviously, she is still on a handful of her medications and I’m in no way advocating, stop taking your medications, do not listen to anything I say for medical advice.
I was explicitly sharing my journey to discovering what CBD was. I’m not sure what of her illness that CBD did help. I just know that it did help her get off some of her medications and it did help her become a more functioning human being. So she is doing much better. She’s obviously still sick.
But thank you and I appreciate that. And very – with the issues with coronavirus, I think, it’s given a lot of people time to spend with their loved ones. And work has been so crazy for the last for years that I’m very grateful for the time that I got to go back home and spend with her.
RS: Yes, yes, very good. Very nice. Well, Derek, it’s really been great talking to you. Really, enjoyed our conversation. I think, you’ve given listeners and myself a wealth of information and a lot to think about. And I think you’ve interested a lot of people in Exactus.
Thanks so much for listening to the Cannabis Investing Podcast. Subscriber follow us on Seeking Alpha, Libsyn, Apple Podcasts, Spotify, Google Play or Stitcher and we’d really appreciate it if you could leave us a review on Apple Podcast. So we can help other investors find our show.
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