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Cannabis vape products, in particular, have been gaining traction as legalization of the recreational drug becomes more widespread in certain U.S. states.
Case in point, it is estimated that in states like California, Colorado, Nevada Oregon and Washington recreational marijuana vaper pen sales increased by 20 per cent, jumping from US$1.5 billion in 2019 to US$1.8 billion in 2020.
Meet
Orchid Ventures (CSE:ORCD,OTC Pink:ORVRD, Forum), a California-based cannabis innovation company, which is contributing to that growth in the states it has launched in, like Oregon and California.
Since 2017, the multi-state company has developed a mass-market brand and loyal consumer following thanks to its premium cannabis products and unique vape hardware system.
Stockhouse Editorial’s Jocelyn Aspa recently caught up with Orchid Ventures’ CEO, founder and chairman, Corey Mangold, to discuss the company’s vape products, recent partnerships and other milestones it has coming up that investors should be watching for.
TRANSCRIPT BELOW:
SH: Can we first start with you providing our audience with a little bit of an overview of yourself and Orchid Ventures?
CM: Yes. overview of myself. I'm a serial entrepreneur who started my first company at the age of 18 years old in the software space. My background is as a software engineer. I had a successful seven-figure exit at the age of 24 back in 2004. I started another company in 2008 called Giga savvy which became a nationally recognized advertising agency based in Irvine, California. Built that up over the last 13 years and successfully exited from that company a little over a month ago. I Started Orchid Ventures in 2017 after using cannabis vape products for my own personal use. I was very dissatisfied with the user experience that I was experiencing with those products. And I had traveled to every legal market in the United States and about every brand that was on the market and couldn't find one that I liked. So reached out to friends of mine that had a very large operation in China. And they actually invented the electronic cigarette with the blue cigarette back in 2010, 2011. I reached out to them and we engineered a unique piece of hardware, specifically designed around the viscosity and the use of cannabis oil.
So I built a consumer brand called The Orchid essentials took that to market and California and Oregon went public on the CSE and then continued to build that out. We got up to a point where we're in a little over 450 stores. And through that process, we realized that we were undercapitalized to really monetize that segment in the way that we would have needed to do it would be to vertically integrate, which is highly expensive. And we just didn't have the capital needs to even keep up with the demands of inventory. So over the last year we transitioned to the company. And we'll talk more about that here in a minute.
SH: So, what drew the company to launch in US states like Oregon and California?
CM: What drew us to launch in California and Oregon was that we were based in California. And so geographically speaking Oregon was a very easy state and we also wanted to enter into a state like Oregon that had regulations that were using the seed to sale tracking system called “Metric” that had all the laboratory testing in place at the time that we launched California and did not have Metric in place and did not have a lot of the regulations in place.
So, we wanted to operate in Oregon so that we could understand the regulations and the constraints and learn how to operate a business within those regulations. As we launched into California at the same time, we actually operated under Oregon's laws and standards. So even though a lot of the regulations didn't exist in California, we still tested all of our products. We still did everything that we would have been required to do in Oregon in California, that way when the regulations kicked in, we didn't have to modify our business at all. We were already set to go and operate within those regulations.
SH: Right, no, that makes sense. Orchid Ventures’ hardware manufacturing subsidiary is PurTec Delivery Systems, which is a delivery system technology company. What does PurTec do and how does it help Orchid Ventures’ meet its business goals?
CM: Yeah, PurTec is a wholly-owned subsidiary that we started about a year ago during a major transition in the company. Like I said earlier, we had the Orchid Essentials brand. We had difficulties with capital and vertically integrating. So we decided to license out the Orchid brand on an exclusive state by state and country by country basis, very similar to a franchise model where somebody gets the rights to the brand, they get in the packaging, the hardware or formulations in terpene, and we can prepare a company or arm them with what they need to launch a proven brand very quickly in any new state or country. At the same time we spun up PurTec. PurTec obviously it was our core competency, was the engineering and designing and manufacturing of hardware. And we still saw that after four years, no one had even come close to the Orchid hardware.
And that was the innovation we had four years ago. So we spent the last year and a half not only conducting a safety study at the advanced research Institute in Switzerland. But we also began developing new technologies and vape because it really hasn't changed really in about 10 years, it really has not evolved on the cannabis side. So we began disrupting by making some pretty significant technological advancements. And we started a new company called PurTec delivery systems, which produces the cleanest vaporizers available on the market. We tested the highest standards. We had a news release go out about our emissions testing. So we test our products to AFNOR standards which are set by the European Union in the nicotine industry. And we actually test our hardware against those standards.
So what that means is we're actually testing the smoke that's coming out of it, not just the oil sitting at room temperature every compound has a boiling point. Some compounds can be safe at room temperature and can be lethal at 450 degrees. So that's our new business. That's where a huge focus of our growth is and where a lot of our investments are going, are into the growth of pure tech delivery systems. And we're getting new clients every day and we have something that's highly differentiated and different than all of our competitors. And I think the market is starting to realize that and take note.
SH: Awesome. Yeah. So last December the company announced two new vaporizer technologies Pure Core F-1 and Pure Core R-1— how do they differ from each other, and how do these compare to technologies that are already in the market?
CM: Yeah, there's a lot of big differences. So, I'll start off with the Pure Core R-1 technology. The Pure Core R-1 technology is a notch coil design that we designed to eliminate the use of adhesives and to provide a more even heating surface without having hotspots. So traditionally in a five-10 thread cartridge, which is your normal cylindrical cartridge that screws onto a battery, those cartridges have a cylindrical heating element. It's made out of ceramic and everybody else on the market has basically a thin metal wire that curls. And it goes up to the inside of that ceramic cylinder. And that is glued to the ceramic. So you have adhesives and glues, which are not good to be inhaling. And what we've designed is we designed a sleeve. That's basically almost like a fishnet. We call it our notch coil design, and it's a sleeve that encases the entire ceramic cylinder and provides even heating through all of the ceramic materials.
So you don't get hot spots and you get a much smoother draw, a better flavor cause you don't have these big in temperature throughout this very small little heating element. And the other big thing is we're using three 16 L medical-grade stainless steel which of course is an FDA-approved material and is much safer. And we use a novel centering process that allows us to adhere that coil the heating element to that ceramic cylinder without using any glues or adhesives. So we have something that is not doesn't have any other contaminants or anything that could be harmful in that cartridge. The F1 technology is quite different and very innovative. The F1 technology is a nano fusion film that we print on top of a ceramic plate. These are used in cartridges that are products that are either pod systems or disposable systems.
This is where you don't have a cylindrical coil, but you have a flat or a square rectangular coil. And on that coil same thing, it's a piece of ceramic, everybody glues a wire to it, and that's what heats up and vaporizes the oil we actually developed over the last year, a nano fusion film that is exactly what's used in the semiconductor wavering process. And with that, now we have the entire surface of the ceramic being actually conductive. So we can control the temperature with the battery and with the printed circuit board, so we can control that coil to an exact degree. So we can program devices and, and products for customers that want a certain degree for their oil to be consumed at. Also provides an unbelievably heating surface and increased flavor. And the reason for that is that you don't have these hot spots and you have a very even heating surface and you don't have any other contaminants.
There's no metal conducting, it's all this nanofilm, which has never been done. It's completely cotton-free a wicking system and is very, very differentiated from anything else out in the market. So that's our F1 technology and we're very proud of both technologies and they're both very disruptive. No one's ever done anything like that in coil manufacturing.
SH: Can you discuss the Orchid Brands licensing platform?
CM: Yeah, the Orchid Brands licensing platform is really the other kind of half of our business and what we do there being that we've built this very successful brand that has a very loyal consumer following and is unique and proprietary. We're able to take that now as a licensing platform, meaning we go and license it to a manufacturer or a distributor in another state or another country. They then get favored nations pricing on all of our products, pure tech and orchid.
We supply them with the hardware the terpene, our formulation, SOPs, and the hardware packaging, everything needed to create a retail-ready product. We train their staff; we train their production line on manufacturing. And then we support them with sales and marketing as they go out and sell this into retail. So, we're able to give somebody a turnkey brand that's proven that has support. That's been in the industry for four years and now is aggressively expanding worldwide. We're launching in Canada with a licensing partner throughout all of Canada. We have Oregon that's been up and running for almost a year now. And we're working on other deals throughout the world right now. We're in negotiations with groups in Latin America, in Europe and in about 17 other states throughout the country. So our goal in the next year is to be in over 30 jurisdictions worldwide.
SH: Speaking of that a little bit more. The company did announce earlier this year that it had entered into the exclusive licensing agreement with Weedbox to launch the Orchid Brands across Canada. When will the products be available in Canada and how significant is this partnership for the company?
CM: Yeah, the product should be available — we're targeting right now in early July. The products are going through Health Canada submission right now; inventory is being delivered to the licensee. The manufacturing process should begin in the next 30 days. And then we'll roll that out into Canada. It's a good piece of business. It's definitely a significant piece of business based on minimum order quantities. It does equate to several million dollars a year to revenue for Orchid, mind you that they at least maintain those minimum requirements to maintain exclusivity. And it's a good market. I think the California market is a lot stronger and easier to navigate. We're working on a licensing deal in California right now and hope to have that wrapped up pretty soon.
We think that that deal, in particular, I think will be significantly larger than Canada as well as deals that we're working on in Europe right now, and in Latin America that I think are going to be quite significant as well. So it plays an important part and an important role. It's definitely not the biggest, but it is a market that we're excited to enter into. And we look forward to having the Orchid brand and dispensaries throughout all provinces of Canada.
SH: We just talked — or you just mentioned this a little bit — but does Orchid Ventures have plans to expand this licensing model into other jurisdictions other than the ones that you've already mentioned?
CM: Yes, our goal with the work it is to expand into every legal cannabis market in the world. So right now we're building out a sales team. We just finished fundraising. And so now that we have capital, we are expanding our sales team and our marketing efforts and are keenly focused on international expansion. Right now our biggest target is Latin America. Being that Latin America is moving very quickly as well as Mexico on not only recreational legalization but vape consumption down there is very prominent. And cannabis consumption per capita is very, very high. So the Latin American markets we see as a very good opportunity and something that we're very focused on along with Europe and the other obvious zones for cannabis. But yes, our goal is to expand that licensing model throughout the world.
And to that, we brought on a new president about a year and a half ago as we started to build this out. Who's been doing licensing models and franchising for the last 30 years with some of the biggest companies in the world. He was formerly the president of H&R Block which is a licensing or franchise model, before that was a C-level executive at Burger King before that Taco Bell, before that Unilever. So he's an executive that is very, very experienced versed in the licensing and franchising model. And he has spearheaded this effort. He has built out the licensing platform and has helped sell most of the licensing deals that we have to date. So we're very fortunate to have brought Rick Brown on as president with this very unique set of skills that he's kind of flexing his muscles with right now. And we're really happy to see it.
SH: What does the company have planned for the rest of the year that investors might want to know about? Or if there's anything you can speak to, that would be great for our audience to know?
Our focus over the next year is to expand the Orchid licensing model into several new markets and on the Purtech side, it's continuing innovation. We have a couple of new technology platforms that we intend to launch in the next couple of months that we think will be highly disruptive in regard to consumer safety and a few other things that I can't disclose right now. I don't want to let the cat out of the bag and let our competitors know what we're doing, but really, it's continuing our steadfast effort on creating the cleanest and safest technologies available. So, we have some new things that are going to be coming out on that side that we feel will be highly disruptive and will allow us to lobby and work with regulatory bodies to help create more strict consumer safety guidelines and protocols throughout the world.
SH: If there is anything I’ve missed, please feel free to elaborate.
CM: No, I mean, I think you have covered most of it. It's really, you know the orchid brand licensing taken a proven brand expanding that with sales and marketing and taking that to new markets where again, we don't have to touch cannabis. We don't have to be licensed. We're just delivering the materials and goods needed for a manufacturer to launch a high-quality vape line and Purtech continually innovating and trying to develop the technology. That's not only disruptive but is highly differentiated and protects consumers at the end of the day.
People use cannabis in most cases thinking it's healthy and it's something that could be beneficial for their health or as a good alternative to other drugs and pharmaceuticals. And we should be sure that we're keeping them safe and that we don't have things that they're smoking that could get them sick or cause cancers or different things we need to ensure that consumer safety is at the forefront of this industry. Otherwise, none of us will enjoy what happens when the FDA comes in.
FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.