BLOCKStrain Technology (TSXV:DNAX) CEO Robert Galarza that some of the key issues in the cannabis supply chain are tied to the lack of visibility into where product comes from and how it is produced.

With the upcoming launch of their platform, BLOCKStrain will offer an easily integrated blockchain solution that tracks cannabis through the supply chain.


In the interview below, Galarza discussed the company’s technology solution and how it will play a key role in the cannabis industry, servicing both licensed producers and micro cultivators alike. He also addressed the company’s partnerships with key players in the marketplace and how they will iwork with BLOCKStrain moving forward.

Below is a transcript of our interview with BLOCKStrain CEO Robert Galarza. It has been edited for clarity and brevity.

Investing News Network: Please give our investor audience an overview of BLOCKStrain and its proprietary blockchain technology for the Cannabis space.

BLOCKStrain CEO Robert Galarza: At BLOCKStrain we have developed a verification and supply chain management platform. We want to empower consumers with information regarding what they are getting in cannabis products.

We have been able to mirror our technology on the front end from an automation point of view, embedding it within laboratories conducting genetic and microbial chemistry testing. As such, we have essentially digitized the testing component, a crux point for the integrity of the cannabis industry.

Our goal is to build a framework for licensed producers (LPs) as well as micro cultivators that are entering into the newly legalized ecosystem, helping them to easily and inexpensively move their products through testing procedures. We then place that testing data on the blockchain for immutability and intellectual property protection, and then feed that information through the ecosystem for full visibility into the supply chain. This information remains available to consumers and regulators, so that they can see whether the product is clean, safe, pesticide-free and more.

INN: How can BLOCKStrain’s technology provide a solution for the growing cannabis market?

RG: When we started working with LPs and micro cultivators, we wanted to understand where the administrative roadblocks were, and to understand how we could automate and streamline the process. What emerged as an idea was a booking system that managed the back-end work for testing and expedited the production batch components required by Health Canada, for instance. We wanted to make it as digitized as possible and help with the storing and recording of information.

On the side of the laboratories, we are able to access the results, including identifiers for genetic sequences. That way someone looking at the product on our supply chain visibility platform can check when it was verified as a certain strain, for instance. Our platform can integrate with a number of other systems in the cannabis supply chain framework including track and trace solutions, ERP systems, point of sale solutions and inventory management tools. Our goal is to build integrity across the board.

LPs are starting to do their best in terms of maintaining a high level of integrity for their products. And we have realized that we need to help the craft market, with its array of genetics, into the LP ecosystem in a way that protects them and their intellectual property. Through our system, craft growers could register their proprietary strains and protect them from others claiming to have developed the same strain. This is particularly important as consumers are currently exposed to mislabeled products.

INN: Who makes up BLOCKStrain’s customer base? How does the company deploy its platform to its various customers?

RG: In Canada, the dominant players in the cannabis regulatory schema are the LPs, and they already have testing standards in place. We are also starting to see good manufacturing practices starting to take form, and we want to be a part of that. Any LP wanting to push their products through a testing and verification process is a potential customer for our platform. There is no real upfront cost for using the testing component. LPs also want to register and track their strains. There are fees associated with that, but we are aiming to not be burdensome to these companies as they face a growing market.

The other side of our customer base is micro cultivators. They are looking to bring their genetics into the framework and want to protect and track them as well. Our solution is also built to create product integrity so that regulatory bodies, law enforcement and drug administrations can evaluate and assess products.

Our target audience is anybody and everybody looking to protect their strains and product. From the individual grower developing hybrid strains using just four plants to the large-scale LPs with a vast genetic library.

INN: What partnerships has BLOCKStrain entered into to date? Are there any others in the making?

RG: We have been very fortunate to be introduced to a number of fantastic companies that are doing exciting things in the space and we are looking into opportunities to work together with them. We are trying to create a coalition of technology, hardware and consultation companies, as well as regulatory groups that will help set a higher standard for the industry.

With regards to our partnerships, we have an agreement with WeedMD (TSXV:WMD). WeedMD is a company growing in leaps and bounds within a global setting. They understand the needs to protect genetics because they are a big component of their business model. Their wholesale clone business combined with their global reach for moving that product is massively important.

We started our relationship by focusing on licensed production as they have an incredible team including Bruce Dawson-Scully, Keith Merker and Michael Kraft, who’s on our board. They also have Derek Pedro leading their grow management team. Together, they have been instrumental in giving us insight into their problem points and that has allowed us to use our expertise in technology development and enterprise software to help the growing side of the business.

We are working with Abattis Bioceuticals (CSE:ATT,OTCMKTS:ATTBF), which is a company doing really exciting stuff on the laboratory side. We also have a long-standing relationship with the CEO of National Green Biomed, Justin Dhaliwal and his father, Herb Dhaliwal. They are a late-stage applicant and we’ve become involved in the process of bringing them to the market. We know that we can provide solutions to both the experienced LPs as well as those that are just coming online.

INN: What is next for BLOCKStrain and how does that fit into the company’s goals moving forward?

RG: In the next three to four weeks, our platform will be live. A huge step for a technology company.

Since our public listing, we have all the funding we need to accomplish our goals without needing to conduct further capital raises. We’re just getting started. The platform is about to go live with a multitude of solutions alongside a number of potential partners that we are looking to integrate with in the next few months.

When it comes to micro cultivators, we are going to have to work with them as the legal marketplace opens up to them. We have been fortunate enough to work with a consortium of growers working towards regulatory compliance and helping to transition the MMAR craft space towards micro cultivation, licensed production and a full-fledged retail distribution model.

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Cannabis Market Update: Q3 2020 in Review

Click here to read the previous cannabis market update.

During the first few months of investment time in 2021, cannabis faced some volatility alongside optimism about federal changes in the most important market for the drug.

The cannabis business found its stride during Q1 thanks to policy change signals and consolidation.

To find out more, the Investing News Network (INN) asked experts about progress in the market during the first major period of the new year, and which developments investors should watch out for.

 

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Cannabis market update: New York and US potential boost operations

New York state’s legalization of recreational cannabis was a huge Q1 announcement that added pressure to the US federal government when it comes to cannabis policy, said George Mancheril, co-founder and CEO of Bespoke Financial, a debt financing business with a particular focus on servicing cannabis businesses.

“It’s going to add to the chorus of voices in the federal scene to basically move sooner rather than later,” he explained to INN.

Following the US election in 2020, the momentum for cannabis businesses went on the upswing, as did company valuations, with the idea of expansion at the heart of it all, according to Mancheril.

Before starting Bespoke Financial, Mancheril learned from traditional investment banks, working in the lending, fixed income and debt markets with Goldman Sachs (NYSE:GS) and Guggenheim Partners.

Nawan Butt, portfolio manager with Purpose Investments, agrees with Mancheril. The financial expert told INN the ongoing legalization process seen in the US market is leading to expansion.

“It’s becoming more of a national move, then small pockets of proliferation. That’s very exciting about cannabis right now,” said Butt, who co-manages the Purpose Marijuana Opportunities Fund (NEO:MJJ).

This proliferation effect is causing a change in valuations and enthusiasm for US-based operations. Mancheril told INN that by the end of Q1, multi-state operators (MSOs) had raised approximately US$3.3 billion.

The cannabis lender said he sees the industry as having grown from the woes of 2019; it is now undergoing a return to form as excitement about the US opening up increases.

The expert explained that there is likely to be a windfall of capital in the wake of major federal changes in US cannabis policy, although the timeline for these changes is becoming increasingly hard to predict.

Leading up to that capital influx, Mancheril said he wants to see operators really drill down on the value of desired assets and whether they make sense.

“What I’d hope is that we continue to see bullish sentiment, but with some measure of responsibility, and let’s not just get over ahead of ourselves,” Mancheril told INN. “The idea is let’s minimize the volatility and continue growing responsibly.”

 

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As far as struggles go, Butt explained that the cannabis industry has cemented itself as a growth-type sector, and as such there are macro pressures affecting the way these assets operate.

“We’ve seen this preference for cash flows at growth in the current or in the near future, rather than in the far future, and that’s what we’re seeing as far as valuations go in the broad market,” Butt said.

Cannabis market update: Volatility continues to rule as industry foundations build

Despite the industry’s potential and the growing pains it has gone through as a whole in both the US and Canada, volatility remains a key factor in the cannabis investment scene.

Butt explained that the current shareholder base, which is dominated by hedge funds and retail investors, still lacks enough institutional support to avoid the day-to-day volatility cannabis has come to be known for.

These two investor groups, Butt said, can be easily spooked and excited by the news of the day when it comes to their investments.

“A lot of these institutions’ strategies are not about short-term profits, but they’re about long-term sustainability of the businesses themselves,” Butt said.

“That’s why you see a lot of volatility in the space, and that’s essentially what we’ve seen over the past, I’d say, three to two months as well,” he added.

That means investors shouldn’t expect an end to volatility anytime soon.

“It’s not about whether we continue to expect volatility, because we do,” Butt said. “We really think that the volatility will be taken out when the shareholder base becomes more institutional, but it’s really about understanding why there is volatility in the first place.”

Cannabis market update: Canadians talk up US business, but questions remain

A surge of mergers and acquisitions has taken over the Canadian cannabis sector recently as more producers see potential in America.

One of the biggest announcements in this regard came when Organigram Holdings (NASDAQ:OGI,TSX:OGI) secured a C$221 million investment deal from British American Tobacco (NYSE:BTI,LSE:BATS).

Using the funds, the two will work in tandem to develop new branded products designed for the international stage, including in the US. Organigram CEO Greg Engel previously told INN that the US represents a critical opportunity for Canadian companies, but the entry point isn’t as clean as it could be.

 

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While the long-term potential may be exciting for investors, Butt told INN he’s still unsure how the approach will work for Canadian companies.

The Purpose Investments expert said there will be plenty of space for the biggest Canadian names to pursue US market entries, beyond the initial hemp-derived CBD moves some operators have mde, since the US represents the biggest market in the world.

“But there’s just way too many unknowns right now to say exactly what that participation is going to look like, or when that participation will happen,” he said.

“What we do know is that currently the US MSOs are in a wonderful sort of position to expand on their market leadership that they have. And it will be tough for Canadians to come in and compete with them,” Butt said.

Canadian players still retain the upper hand at times in terms of valuation, which is confusing for both Butt and Dan Ahrens, chief operating officer and portfolio manager at AdvisorShares.

“The performance in quarterly earnings of US companies has been rather spectacular. They’ve knocked it out of the park in most instances,” Ahrens told INN.

Butt praised the recent performance reports from MSOs across the board, pointing to year-over-year growth lines and projections for continued positive performance. In his view, share prices still don’t reflect company value. “Those are really being discounted at this point,” Butt told INN.

“We’ve seen the Canadian licensed producers be really hot stock performance-wise, outpacing the US (MSOs), and I’ll say it’s rather nonsensical to me,” said Ahrens, who oversees the AdvisorShares Pure Cannabis ETF (ARCA:YOLO) and the recently launched AdvisorShares Pure US Cannabis ETF (ARCA:MSOS).

Cannabis market update: Investor takeaway

The cannabis investment proposition finds itself at an interesting moment in time, as the entire sector eagerly awaits confirmation in the US at the federal level.

While for the Canadian companies waiting on the sidelines, this development may feel like a major necessity to address current financial struggles, for US-based operators, the heat around the corner could represent future positivity for already thriving operations.

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All interested parties can join the conference call by dialing 1-888-231-8191 or 1-647-427-7450, conference ID: 4880609. Please dial in 15 minutes prior to the call to secure a line. The conference call will be archived for replay until May 20, 2021 . To access the archived conference call, please dial 1-855-859-2056 and enter the encore code 4880609.

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Ayurcann has commenced trading on the Canadian Securities Exchange (” CSE “) on April 8, 2021 and subsequently announced a private placement of up to $500,000 (” Financing “), as per the Company’s press release dated April 12, 2021. The proceeds of the Financing are intended to be used to further pursue Phase 2 of the expansion of the production capacity of the Company’s Pickering facility.

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