#031 - Infusing Trust & Leadership into the Cannabis Supply Chain w/ Dr. Harold Han & Ben Larson of Vertosa

When passion meets innovation, magic happens. Just ask Dr. Harold Han, Ben's partner at Vertosa and the maestro behind some of the most pioneering infusion technologies in the cannabis space. This episode isn't just a peek into the lab where homogenous and stable infused products are born; it's a heart-to-heart with the man whose influence extends far beyond emulsion chemistry, touching the very fabric of our personal and professional lives with love and gratitude.

Navigating the cannabis industry isn't for the faint of heart, but with a story that spans from China to the cutting edge of cannabis emulsion technology in the U.S., Harold exemplifies the bold spirit needed to forge new paths. We track the serendipitous events that shifted his focus from ddPCR technology to perfecting cannabis emulsions, and how a meeting with Ben morphed into Vertosa, a cornerstone for cannabis-infused brands. As we recount tales of early failures and learning curves, we underscore the importance of trust and transparency with partners – values that have not only fostered growth but also cemented our reputation in a market that's as diverse as it is demanding.

The future is bright, and it's infused with a plethora of possibilities. We wrap up by casting a gaze into the horizon of THC beverages, discussing how brands like Keef are riding the wave of multi-state expansion, and how advancements like fast-acting nanoemulsions are elevating consumer experiences. We're not just talking trends; we're living them, as Vertosa continues to craft wellness-focused, plant-derived emulsions that resonate with the health-conscious consumer. So, pour yourself a glass of innovation, tune-in, and keep your spirits high!

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High Spirits is brought to you by Vertosa and Wolf Meyer.

Your hosts are Ben Larson and AnnaRae Grabstein.

Follow High Spirits on LinkedIn.

We'd love to hear your thoughts. Who would you like to see on the show? What topics would you like to have us cover?

Visit our website www.highspirits.media and listen to all of our past shows.

THANK YOU to our audience. Your engagement encourages us to keep bringing you these thought-provoking conversations.

Remember to always stay curious, stay informed, and most importantly, keep your spirits high.

Transcript

Speaker 1: 0:00

Hey everybody, welcome to High Spirit. It's episode 31. We're recording Thursday, february 15th 2024. As always, I'm joined by my partner in crime, nra Grabstein, and today we're talking about infusion technology and ingredient companies. How convenient, because I feel weird introducing this. So, nra, I'm just going to kick it over to you and let you save me.

Speaker 2: 0:28

Yeah, that sounds great. So good morning Hi, ben. Great to see you.

Speaker 3: 0:34

You too.

Speaker 2: 0:35

You know, since we've been doing this podcast, we get lots of people on, but we haven't talked about ourselves. This much too much. And so this episode was my idea to say hey, ben, let's bring on your business partner and let's talk about what you do and the impact that you're making. So that's what we're going to do today. It's a bit of a special episode and I think that our listeners are going to get a behind-the-scenes understanding of how you spend your day when you're not making a podcast with me.

Speaker 1: 1:03

Well, you know I often refer to you as my partner in crime, but like, this is my actual like partner in crime, so to speak, depending on who you ask.

Speaker 1: 1:12

In this country, working with Dr Harold has been one of my greatest joys in life. He's just such an inspirational person to work with. I remember, you know I mentioned before I used to be on the other side of the table evaluating founders and companies and opportunities, and back in 2016, 2017, we were always looking for new talent coming into the space. And when looking for new talent coming into a new space, you're looking for both brilliance and humbleness and coachability, because that's what it takes. It takes that adaptability to really kind of succeed in this space. And when I met Harold, I found someone that was just incredibly happy happy to be here, curious about everything that was happening, wanting to make an impact in and this willingness to learn. And at that point, it was like I had met a unicorn not the billion dollar unicorn yet, unfortunately, but, you know, one that was not only worth investing in but putting in all my eggs into one basket, so to speak.

Speaker 2: 2:29

That's big, that's huge. Well, so before we dive into it, do we have a good check in How's the week been going?

Speaker 1: 2:35

Week's been good. It was Valentine's Day yesterday. I did I was a good husband. I woke up in the morning before everyone and got the living room all set up with flowers and chocolates and stuffed animals, because not only do I want to, you know, express my gratitude and love for my wife, but I also want to model that for my kids. My daughter, asha. She got these two little roses with a little plush red bear attached to them and she was so excited she took that bear to school and shared it with all her friends.

Speaker 1: 3:14

And then I gave my son a box of chocolates, but I told him it wasn't for him to eat all of them. Of course he could enjoy them, but he was in charge of making sure that he then spread the love and gratitude to everyone that he came in contact with that day. So you know it was fun. And then last night cooked you know I love to cook. So I got home as soon as I could not soon enough, but like I was able to get a really nice rack of lamb cooked for the family, pistachio crusted Just had a lovely day. So that's my sorry, that was a little long. I'm in a talkative mood.

Speaker 2: 3:55

That's very sweet and romantic, some good insight into your life.

Speaker 1: 3:58

How about you Were? You celebrated yesterday. Hopefully I'm not getting anyone in trouble.

Speaker 2: 4:02

We're sort of in an anti camp in my house, to be honest. I think like every day should be a day that we're filled with love and gratitude, but we were on the on the spectrum of like rejecting Hallmark holidays as much, as as much as one might be. So we were. We were a sort of a sort of kind of Valentine's house. We did a family dinner. We drove out to where I love to go with my son pretty regularly, this awesome spot called Nick's Cove on the coast in Marshall, and just had fish and chips at the coast as a family. So it was like husband and kid and that was kind of it.

Speaker 1: 4:45

Oh, that's pretty hallmark, that's pretty good.

Speaker 2: 4:51

So it was great though. I mean, it was a lovely day, and I try to just make sure that I feel gratitude and love all the days.

Speaker 1: 4:57

So I love it. I love it.

Speaker 2: 5:00

Yeah. So anyway, to bring us back to the episode and the conversation today, I think that I should just do my intro for Harold and bring them on and let's get this conversation going. How does that sound?

Speaker 1: 5:13

Let's do that and I'm going to, I'm going to update my header, so it's. It's acknowledges Harold.

Speaker 2: 5:19

And to folks that are listening and not tuning in on video we are going to have. Harold and Ben are in studio together, which is really fun and a little different for us. But I want to welcome Dr Harold Hahn, known famously as the happy chemist, but he's technically the chief science officer at Virtosa, ben's business partner, and a PhD in emulsion chemistry. He previously worked in biotech doing emulsion chemistry and Dr Harold's rear heads the development of industry leading active ingredients for infused products, offering pre suspended aqueous solutions to create incredibly homogenous, stable products.

Speaker 1: 6:06

Wow For candidates.

Speaker 2: 6:10

Also holds 12 patents as the inventor in the emulsion chemistry field. So super pumped to have you here, harold, welcome.

Speaker 3: 6:19

Thank you, happy to join here, yeah. What a lovely night you had.

Speaker 1: 6:22

Thank you, that's awesome. Yeah, yeah, it was good.

Speaker 3: 6:25

Especially the part educating the kid above the essence.

Speaker 1: 6:29

Yeah, it's important, well, you know to, to bring it back to to you and us. Like another model for for my son, alistair, has been you. He talks about Uncle Harold all the time and Harold has bottom chemistry books and all the stuff he has chemistry sets at home. And still, one of his, one of his more prideful moments is when he came into the lab and did an orange soda with you, right Using solar screen. Yeah, yeah, just a couple of days ago he was actually asked has anyone else at Vertosa made an orange soda like I did? And I'm like no, no, not quite like you, he likes sweet.

Speaker 2: 7:12

He likes the very sweet Well. So, aside from inspiring children in chemistry, harold, I want to hear from you about what it is that you guys are doing at Vertosa as an ingredient company, and really what it means to be doing emulsion chemistry for cannabinoids.

Speaker 3: 7:33

All right, where should I start? From the very beginning?

Speaker 1: 7:37

Go ahead, yeah, wherever, wherever is natural.

Speaker 3: 7:39

Okay, so let's start from the very beginning, nra. I was born in China. That was the very beginning. I received my early education in China and I came to the States to pursue higher education and eventually I obtained my PhD degrees in New York University in Emotion Chemistry. So in the PhD work I focused on making the natural emulsifiers and evaluate their emulsification properties. And I was very lucky. My first job out of school brought me here to Silicon Valley and I worked for a company called BioRed. I have been an Emotion chemist there.

Speaker 3: 8:20

So in BioRed our job is to work on this new instrument called digital job-led PCR and, with COVID, covid, educate everybody by PCR. Right, you do PCR to tell if you have COVID or not. But regular PCR cannot tell you how many COVID genes you have. And in situations especially, to count how many DNA and RNA you have, especially at low concentration, is very critical, for example early mutation of cancer. Usually the machine cannot detect it right. So the digital job-led PCR is a revolutionary tool to help researchers' hospitals to identify and count the target DNAs. So the basic mechanism is you put all the genes into thousands of Emotion job-lets and then you do the job-lets. Who has the cancer gene will have a signal amplified and then in the end you count how many of the job-lets have this signal so you can calculate how many target genes either COVID or cancer are from this patient right. So I worked there for seven years and I had a great time, you know, working with people and learning. That's my first job and a lovely colleague gives, he was in California.

Speaker 3: 9:40

In California. Yes, a lovely colleague, a gift to me, a bag of cannabis and this butterfly effect lead me to sit here today, talk to you, all of you, and you know, in the beginning I was scared because my early Asian education clearly warned me don't touch cannabis because it is drug and the drug will ruin your life and you will never be the same and you'll be gone. But at the same time, the state starts to legalize cannabis as a movement and this is a big question mark in my head emerging. My government will legalize something that is so bad for people, allow millions of people to use it. This doesn't make sense.

Speaker 3: 10:25

So this triggered me to do my own education right. I start reading books, watching documentaries, talking to people like Ben and my self-education. The conclusion was this seems to be pretty safe. So I started my trial and then at the same time, actually, I was running a startup called Sprimo, and Sprimo produced and designs air purifier and air quality sensors. So by doing Sprimo I get to know a lot of tech founders in Silicon Valley. I was exposed to technology like Internet of Things, big data, self-driving cars. So one night I was smoking.

Speaker 2: 11:07

Let me jump in here. Let me jump in here because what I really want to hear about is cannabinoid emulsion, and so what you do now is you're working on creating emotions at Vertosa.

Speaker 3: 11:20

And.

Speaker 2: 11:21

I want to hear a little bit about what it is that you're doing at Vertosa with the emulsions, taking this incredible background that you've had doing emulsion technology, and what the impact is now. What are the products? What is it exactly?

Speaker 3: 11:36

What are these ingredients? Right, so I'm leading to that. But I realized we just had too much technology but too little happiness. I realized we have too much data but too little wisdom. So that is the night. I start to realize this joint is actually what society needs, not all those technologies. And then, where I met Ben in his incubator, you know, indicate me that there is a huge demand for palatable, stable and scalable cannabis emulsion right For the whole industry to grow on. And that is the moment I decide to jump into the industry and you know, working on Vertosa. So that's how we started. But five years into the journey, you know, cannabis emulsion is our flagship product right now and we help infuse a lot of beverages. That's our main product. But also we can apply the emotion into different product form factors, like gummies, edibles. So that's that yeah.

Speaker 2: 12:39

So, ben, so you meet this happy chemist, the emotion chemist, who has this idea and this hypothesis to create emotions with cannabinoids. What was the business idea that came from that? What did you see as the challenge or the opportunity that existed in cannabis?

Speaker 1: 13:02

Yeah. So if we rewind the clock back to it was like 2017, 2018, when we really started getting talking about this and the beverage category was getting a lot of attention. You know, constellation had invested something like $4 billion into canopy growth. Canopy growth had purchased Ebu, a Colorado company, for like $300 million. You know I might be getting these numbers off by a hundred million or a billion dollars at a time, but you know it's like big money. But when Ebu was purchased, like infused beverages were just getting going Like I remember, like House of Saka was there, there's these like infused wine brands.

Speaker 1: 13:51

But when that company got purchased, it left a void because they weren't allowed to sell ingredients to a number of brands. In fact, I think they only had one licensing agreement with one company that wasn't canopy growth. And at that time, as an investor, I was scouring the market with all these different ingredient technologies and it just wasn't quite there. And when we did find the ingredient, there was this moment where it was like, do we build a product company, do we build beverages, or do we democratize, like this ingredient, and create a platform that allows all the companies and all the brands to grow on? And the more I talked to other investors, there was a lot of hesitancy to invest in any single brand. Like Cannes was just coming online.

Speaker 1: 14:44

You know, dixie and Keef and Cannabis Quenture were kind of like the known brands, but there was this fury that was happening, and so it kind of created this thesis of like well, we're not going to bet on one brand, we are going to power as many brands as possible and just have a little piece in all of them and also allow them to come to market faster, because what everyone was doing at the time was vertically integrating, having to own the supply chain, because there was a void of trust in the space. And so what I always tell the team and everyone that will listen is that, yes, we make nano-emulsions, but what we're also creating every day is trust. And so in the last six years, we haven't launched our own products because that would threaten the trust of our customers, and we just continually invest in creating a more hefty support system for the brands that we do work with.

Speaker 2: 15:46

Well, I can certainly understand wearing that investor hat and thinking about these different business channels that you could go into, of creating your own brand or being able to be a part of every brand, and I can see why the idea of getting to be a part of all the brands or many of the brands in the market is a lot more appealing. Except that at that time when you guys were getting started, there weren't that many brands. You mentioned a few, but it wasn't that, there just weren't that many brands. The traction for beverage just didn't exist. I mean, people were laughing the beverage space out of the cannabis industry and saying that it was never going to catch?

Speaker 2: 16:25

on I think it was less than 1% at that point, and maybe even less than a half a percent.

Speaker 1: 16:32

It was so small. Yeah, it was. I remember like we'd go into dispensaries. There wouldn't be refrigerators. There would be like three cans on a glass shelf, like sitting next to vapes and gummies, and we just we believed that there would be refrigerators in all the space and we had enough touch points with consumers where we knew the opportunities there. We just had to build it. And that's what venture capital is for. You know, I see a lot of chatter on LinkedIn sometimes about like, oh, like, just go build it yourself, do you don't need to raise money? We needed to raise money because we weren't going to make money for a while and I told the team time, time in, time out, like just, we're going to do a lot of irrational stuff in the belief that this category is going to exist, and it really wasn't until a little over a year ago where we really started making revenues that could support the business. So it was a good four years of hard work to ensure that the category existed so that we could effectively run this business Exactly.

Speaker 2: 17:42

So I guess the question then is for Harold so you're, you're hearing Ben where this investor hat pitched this business opportunity and you're kind of the brains behind the product for lack of another perspective, You're you're driving the vision of like the thing you guys are actually just sell and bring to market and he's telling you we got to raise all this money, we're going to not going to make money right away, but we can be in all the brands, or at least a whole bunch of them.

Speaker 2: 18:09

Were you just like absolutely yes, or did you think that he was a little crazy? How did it feel to be a part of this completely undefined startup vision?

Speaker 3: 18:19

Yeah, I think it's like a family. You have to trust each other, right? I'm best at doing science on the bench and I'm not good at analyzing. You know where should we go, which partners should we work with, but you know. But I found my happy zone, right. I trust this person to, to, and we discuss and we align and we make a decision and go. And you have, sometimes you have to take a bet to trust someone you know and and and do it. So that's simple as that, right? But then I I feel the freedom to be expressed my own ideas in the emotion science and keep innovating, keep helping clients. I find most joy in there and I, like Ben and our business team, lead us to get to more business and it take time. It's not how much you push, is timing, right. So we know that and we know we have to be stable, we have to keep the belief and inspire the team, and we did all that.

Speaker 2: 19:22

So, on that trust side, you guys created this business hypothesis about how you are going to be a participant in many of the products that we're coming to market. But from the emotion perspective, from the product creation perspective, harold that you were leading, what were the key elements? When you guys talk about infusing trust, like, what did that mean in terms of what you were trying to create with the product?

Speaker 3: 19:47

Well, keeping the trust. From the external point that means for clients to get the emotion either in Berkeley, california or or Michigan or Illinois. They should get the same ingredients that will help them to build the same product to the consumers Right, so that's easy for them to perceive as the product they get. But for us that's a lot of work to really ensure the consistency of production equipment, stuff, training, right inactive ingredients. And also you know the internal side. For when you talk about the emotion science, we we start to analyze. You know there are different pillars. Well, to a lot of people emotion may seem, seem to be easy, right, you just blend all your water and you homogenize it, you can have some sort of emotion. But now we realize when you are changing any ingredients within the emotion the emulsifier amount, the MCT oil amount you know you are actually changing the sensory, the effect, the stability and the manufacturability. So they're all organically connected. So I think that the true mastery for understanding the cannabis emotion is to understand how each factor change of the four pillars.

Speaker 1: 21:09

So I want to add on to that just from a business strategy perspective and bringing trust back back into it. Right, there was a lot that we didn't know in the end, like we talked about working, how awesome it would be to be a little part of all these different brands. What came along with that is a realization that every SKU that we infused like created new challenges and new learning opportunities, and we, in a way, became this like research partner right, where every time we encountered a new manufacturing process, we had to make sure that the, the ingredients were going to be efficacious and stable and all this kind of stuff. And we always brought it back to trust. Like our entire first year of business, we had one core value and that was trust. So every decision we made, every interaction we had, it had to deliver trust internally. Externally, everything I was a drill sergeant. About it I would call like emergency all hands meetings at 9 pm on a Monday night because I felt someone was breaking trust and it came down to how we talked about our ingredients.

Speaker 1: 22:20

I believe we were the first ones in the market to really just be completely transparent. Here's all the ingredients that we use in our product. This is how we make it. Here's the equipment. If you wanna go try to reverse engineer, go ahead. Like it's so much more than the ingredients, and I think it was that mindset that really attracted us to our first big customers.

Speaker 1: 22:40

You know, in 2019, we started working with Vidicoco and, you know, talk about learning opportunities. They introduced us to their quality department and started asking us questions and I think we had five of us on Google for like five days straight just trying to figure out how to answer all these questions. But it was that rigor that we built the confidence that we were going to learn faster than anyone else that was gonna be doing what we were doing, and we wore our limitations on our sleeve, which was also kind of a first. You know, it's like we were the anti-snake oil. It's like, oh, it's like we've tested in this environment, but we haven't tested in that environment, and so we just kind of kept putting it out there and that attracted, you know, research partners like Tetra Pak, ball, ppg, you know a number of different universities, and so that really kind of became our ethos.

Speaker 2: 23:36

Well, so, when you ran up against challenges and you had this philosophy and approach with trust and I know one of the things that's happened with beverages is that there's been challenges with beverages in terms of cans versus glass bottles- and. I'm sure there's other challenges, but, like, can you share a time when you ran up against a challenge that kind of pushed up against the limit of trust, and how you guys solved it and dealt with it?

Speaker 3: 24:05

Do you wanna go first? Those cases are every day, even today. Yeah, yeah.

Speaker 3: 24:09

So I think, to continue with Ben's how to build a trust, I feel people trust you when they hear from you. I don't know If they perceive everything that is actually not the truth. So I think our curiosity allows us to be humble and be ourself. If we haven't infused the skill, if we haven't done the test, if we don't have the data, we say we don't know. But we wanna test with you, right, spend some time and efforts. So I think by doing this, essentially we really didn't know, right, so we are telling the truth. But now we know a lot, but still we don't know a lot. So even today, the case, like the proliferation of the hand beverages, introduced a lot of exciting, innovative ingredients like electrolytes, vitamins, proteins, amino acids. Those ingredients, under different pH and different temperature, may interact differently with our emotion and this is a black box right. This is something, again, we don't know and this is again a theme for 2024 for our RD team to tackle. Right. We need to introduce mainstream knowledge of how to formulate and stabilize a beverage.

Speaker 1: 25:21

Yeah, it's funny. I wanna bring it back to actually an early anecdote, because as an entrepreneur, you have this site, especially one that comes out of Silicon Valley. You have this idea that you can take this formula and scale it and just put it in everything. And I remember I was doing. We used to meet at restaurants and coffee shops and we'd bring out our pipette and just do a quick dosing right at the table. I've only been kicked out of a few bars and restaurants, but there's this particular time where we had these wine folk come down from Napa and we were at a restaurant in Berkeley and they brought out a red wine. I'm like great, let's go ahead and pour a glass. And I took one of our early formulas and just squirted it in and it just disassembled right in front of my eyes and it started to look like a sangria and I'm like just started sweating profusely.

Speaker 1: 26:24

That's when we learned about polyphenols and this particular type of emulsifier and that we then developed some new IP around emulsifiers that are stable in polyphenols. But I see a lot of not a lot. I have some interactions online where people and we admit it. It's like emulsion isn't rocket science, the creation of an emulsion isn't rocket science, but it is everything that goes around. It's the scientific rigor, the time, the body of knowledge that we've built over the last six years. So, yeah, it's constant learning opportunities.

Speaker 2: 27:06

Well, and what you're touching on and is almost taking it back to the whole concept of what is an ingredient company and what is its place in the supply chain overall and outside of cannabis, just in in CPG, in food products in general, we have lots of examples of ingredient companies whether they're flavor houses or specific types of ingredients.

Speaker 2: 27:30

like you make flour, you make sugar, you make whatever. It's all of these different ingredient companies that come together in a manufacturing process to create something that consumers can depend on in lots of different markets, right? And so, while you're saying that, maybe what you're doing is rocket science, what it's doing is creating a pathway to consistency and to formulation that could be repeatable in many markets, and we've been talking a little bit more about your founding story. You did start in California, but very quickly it made sense, as the market started to evolve and grow over state lines, for you to do that as well, and it really seems like it proves the hypothesis of being able to use a product that's created in different markets to make sure that you're getting the same beverage in different places. So I'd like to hear about that and kind of how you forade into production out of your home state what that was like. And then I think that the you know feel free to start giving us some infusing the audience with your perspective on hemp as part of that, as a growth path.

Speaker 1: 28:45

Yeah, we mentioned timing earlier. Timing is funny, you know. So we launched in 2018 and we really kind of started selling in 2019, 2020. We're like, all right, we need to do multi-market. California is only gonna be so big for us. We it took time to grow the category, so we need to prove that we could create the same ingredients in different key markets. And we decided it's like all right, let's start with the three C's California, canada, colorado. Colorado is a different story, but Canada, we really focused on it. We started going up there. And what else happened in 2020? Covid, covid. So like in the middle of COVID, harold is trying to get up and across the border and help launch our partner in Canada.

Speaker 3: 29:42

That was a long kind of expensive process Right Four months.

Speaker 1: 29:46

Yeah, he broke the rules. He got in trouble for that at one point.

Speaker 2: 29:50

Right the tourist visa expired.

Speaker 3: 29:54

I worked. I break the quarantine so I work in the lab, that I should stay in the hotel for 14 days. Well, I start working on day 10 for clients, because clients need the emotion. Yeah.

Speaker 1: 30:07

And the Gestapo got them. But all of us to say late 2020, we launched in Canada and have been working hard there ever since to kind of create that continuity. We do serve brands, both that have kind of crossed the border. Now Keef operates in both the US and Canada. Cannes operates in both the US and Canada.

Speaker 1: 30:30

Sweet Justice has come from Canada down into the US, and so it's a big opportunity for us to say these are going to be the first real nationwide brands and it's really showing in beverage In addition to providing the ingredients, because we've had this purview now, I think, in over 20 US states as well.

Speaker 1: 30:56

We have kind of an understanding of the way things work in all these different markets and so we become an important, just partner to our customers, to the point where I receive text messages from some of the biggest brands Boston Beer Company or Likes and they're often strategy calls Like what states should we be considering if we do come into the illegal US market and what partners do we need to work with? What labs do we need to work with to get our products tested? And so if you can imagine doing that on your own and having to forge all those relationships on your own. It could take you years to go into multi markets, but there's a number of brands Uncle Arnie's that we've worked with, where four markets in a matter of six months is totally achievable.

Speaker 3: 31:45

And then to have one point regarding our ingredients and regular ingredient companies, like sugar or flour. So I see cannabis. Emotion is merging food with pharmaceuticals, so it's in a hybrid. So we need to maintain the sensory stability, manufacturability, but we also have to ensure the potency, so the compatibility, the accuracy of the potency, as close to a pharmaceutical level, so of each can you have to maintain a target potency. So emotion is only a small part of that. But in order for all of us to be succeed, we have to be paying more attention other than just emotion. So the input, the emotion, the co packing and the ingredient compatibility and the testing lab, they all has to work. If anyone failed, even product failed, we don't have a sale, consumer won't have it. So we have to. That's how we build this deep roots with connections to every single operator along the chain.

Speaker 2: 32:56

It makes so much sense what you're saying and I really like the idea of this coming together of food and pharmaceutical. I get it and I think that we've been in this really interesting place in cannabis, in that we've got manufactured non inhalable products, that there is a consumer demand for them to be very repeatable and experience and predictable and consistent dosage that's transparent.

Speaker 2: 33:21

And then we've got these inhalable products with flour and infused pre rolls and and vapes and the desire there is for them to be as potent as possible. And so we've talked about on the show before kind of the challenges of with lab testing and and getting that, getting that dependability in the supply chain that you can feel really consistent about those results being trustworthy. But it occurs to me throughout that that the manufactured product companies have had a much larger incentive to to ensure that quality control is consistent, because if the other, the inhalable products, are just trying to drive up potency, they don't care as much about that quality. They're just looking for high numbers. But you want to make sure that that your product is coming back with the same testing all the time because that's what your customers demand of you, so that those consumers at the end know that they're going to drink that beverage and it's going to be five milligrams if that's what it says on on the label.

Speaker 1: 34:19

And it's, it's. It's not even just the five milligrams, it's, it's every sip, right, Like when we, when we have taste testing meetings. Like you are sipping on this product over time and you might get halfway through and you're already starting to experience it, so you want that first half to be the exact same as that last half, because if you pour it out and share it with someone, like you want this, you. It's like an extreme consistency. And it wasn't that long ago where you know we would talk about the crazy variance and experiences that you would have through through gummies and and other products.

Speaker 2: 34:55

Yeah, that's a good point. I didn't think about the top of the can versus the bottom of the can, but you're right, obviously it needs to stay. Stay the same. That's why people come and work with you guys. Well, so you didn't. You didn't give us any info on on hemp, but what I know from all these weeks and talking with you, ben, is that that Vertosa operates in both regulated cannabis and hemp, and I want to hear about the decision to do that. And then I also want to hear about the science of that and and if hemp is different than cannabis from the manufacturing perspective.

Speaker 1: 35:30

Yeah, okay, so you start first.

Speaker 2: 35:34

Me first.

Speaker 1: 35:36

I've been approached a number of times over the last year and being like people saying, ben, I thought you were super against hemp or like against hemp D nine, and I can honestly say that I was never against it. I was certainly. I struggled with what the legality was, what was ethically correct, you know what the interpretations of the laws were. It's been a long journey. That the 2018 Farm Bill was, you know, six years ago, right? So it's like everything that has transpired over the last six years. A lot of it happened in the last two years and so it's like what changed and I guess what finally finally got me to the point of really considering getting into the space was in late 2022, minnesota legalized hemp and it was very quick and we spoke with with some of the those influential, with those with those laws. The ladies have blunt strategies and you know it wasn't an accident, but it was sure, surely a surprise.

Speaker 1: 36:49

And at that point in time, you know our customers started coming to us and being like are you guys going to get in on this, are you going to help us? And if you don't, we're going to have to go find another supplier. So I really had to ask is like, what's most important to us, is it serving our customers? Is it following what we think is the law? And we had a lot, a lot of conversation about this and a couple of things came out. One we're all breaking the law in some fashion, depending on who you ask.

Speaker 1: 37:20

I hate to admit it, but I guess I'm on air saying it live on LinkedIn. There you go, but at the end of the day, it came down to like, we're talking about access to the plant, we're talking about consumer safety and we're talking about serving our customers. And if we can check all those boxes, then we should do that. And so that's when I really gave Harold the assignment of like, how do we trust that we're using the cleanest ingredients and how do we stand behind our ingredients? And so we threw a great deal of science behind it in a rather quick fashion to try to catch up and serve the market. So, harold, I'll kick it over to you for that part, right?

Speaker 3: 38:06

Especially the input part. The input from the hemp D9 can be coming either from a synthetic version or coming from a natural derived version. And for a synthetic version, the main concern is they can produce byproducts that is not natural occurring and they don't show up on the COA. So you may have a 90% pure THC D9 synthetic, but the other 10% could be other byproducts which you don't know the toxicology. So for our emotion, our emotion boosts the bioavailability. So we boost a good part. You also boost the bad part, Right. So that's why we don't want to use any synthetic material that has this byproducts. If the COA doesn't tell us we have to use other tools. So luckily we have university collaborations. We collaborate with Professor Adam Mosey from Lake Superior University and he's using MMR technology to see the peaks, what is.

Speaker 3: 39:05

MMR, nuclear resonance, magnetic resonance, thank you. And so we evaluate a lot of suppliers, who has this synthetic D9? And using MMR and COA, each HPLC, to find who has the cleanest, lowest purity of the lowest input byproduct. So that is the conversion route, but also over time there is this route from Mother Liquor, which is a name for the leftover of the CBD isolation, and the Mother Liquor route is actually natural route. But now I think a majority of our clients is using the Mother Liquor D9 that we're supplying.

Speaker 2: 39:54

So how have you found the hemp supply chain to be different than the cannabis supply chain when you've gone out to source these ingredients for your emotions?

Speaker 1: 40:05

That's a good question. So there's a lot of people that are supplied and it takes a great amount of rigor to really evaluate all of them and really, when it comes down to it, similar to the cannabis industry. We've really focused on two to three suppliers that we really trust, and that's because we've put them through a battery of tests consistently over time and they continue to pass, and so we've built really strong relationships with them. We're always willing to source or test new sources, but it's also interesting because there are a number of different cannabinoids and different ways to extract those cannabinoids or create them, and so where we might source THC could be very different from where we source CBD or THCV, cbg, cbc, cbn, and so we might have a different supplier for each one of those.

Speaker 1: 41:10

But that started a long time ago because, depending on what market you're in, you might have already been using hemp cannabinoids. There are certain state markets where you can use CBG from hemp and incorporate with cannabis from THC. So it's been really interesting and I think this is only going to accelerate throughout this year. We might have talked about this on previous episodes. It's like the fragmentation that we've always talked about in cannabis, I think is gaining a third dimension as hemp finds its way, because every state is starting to create legal frameworks for hemp not every state, but a lot of them and so what's happening in Minnesota is different than Tennessee, is different than Florida, new York, connecticut, so on and so forth.

Speaker 2: 42:03

Well, so you're talking about these different dynamics in the states and it's really interesting to hear about the sourcing and I know that you guys can manufacture in one place and send around the country in hemp, which is so different than having to manufacture state by state for regulated cannabis.

Speaker 1: 42:19

That might change as well. Right, because there are. It could be overnight where certain states start saying it's like, oh, this has to be locally derived hemp, right, which is fine for us, because we've been dealing with that on the cannabis side of the business and, in fact, one of the benefits that we bring is this relatively behind the scenes but fairly complicated logistics system that we've set up to deliver to these smaller markets. It doesn't make sense for us to set up a new facility every time we want to serve a new market. So we do have this kind of mobile lab set up. Well, mobile is kind of a misnomer. It's like we have a created system, multiple that are kind of always in circulation around the states.

Speaker 2: 43:04

Yeah, Well, so you talked about your clients, your B2B brand product clients, growing and changing their strategy and getting into hemp and asking you to continue to be their partner, which pushed you to think about hemp, to expand into hemp so you could continue to be the infusion partner for those brands. As I've been talking with more and more THC beverages, it seems like there's almost no one left in the regulated cannabis side. I wouldn't say no one, but there's. Is that wrong? Is that just what it feels like? And the reality is that there's still robust regulated THC beverages in market, or is it really all going to hemp?

Speaker 1: 43:50

I would say it certainly still exists, and it exists in a number of ways. One of the biggest brands remains one of the biggest brands and that's Keef, and they remain very active, and credit to Eric Knudsen and the team. They're OGs in the space and they're really trying their hardest to respect the intents of the laws and really follow the regulated markets but also capitalize on the opportunity that's at hand on the hemp side of the space. So it's a really complicated conversation where we still see beverage really kicking butt in the regulated spaces in the high dose category. In California you have Uncle Arne's, sain Eids and a number of other different brands, cq and these brands are actually going multi-state now as well through the regulated system, and so I hate to keep focusing on Minnesota. I don't hate it.

Speaker 1: 44:52

Actually, minnesota is great. They have this multi-tiered system where you have high dose products in a heavily regulated system and then you have this open free market via the low dose hemp market. I still think it's silly that we're differentiating between cannabis and hemp, but at least it's creating this opportunity where you have mainstream access to relatively safe products and then you have the higher dose, more extreme products in regulated space. We've seen this before. We've seen it in alcohol. There's no reason why we can't do it in cannabis. Awesome.

Speaker 2: 45:32

Well, another thing because we're getting close to having to wrap that we haven't touched on, but that, while we have Harold on the show, it feels really important to talk about is fast acting. And what emotion. Nanoemulsion these are all these terms that I'm hearing, and the other day, when I saw you, harold, you gave me a sample for R&D and told me you should feel this in five minutes. Tell me what you think I want to understand about the pathway to innovation in the space, how it's changed since you've been in it and what?

Speaker 2: 46:08

you're hoping to see in the coming year or in the next three years? What are the innovations for you that you're chasing and what have you come up with so far?

Speaker 3: 46:19

Great, that's a great question. Let me think about it. I think the last five years we focus a lot on our formula Emulsifiers, droplet size, onset, taste sensory, how to produce them. So those are the basic of our business and we have learned a lot. We made nearly nine to 11 formulas now shrink to two formulas because we learned how can we combine a formula to share the same features.

Speaker 3: 46:51

Well, but now, like I said, the four pillars are really interesting Understanding what levels we can pull to determine the sensory effect, stability, manufacturability. That is very important. So now we're entering this I feel like entering into the mainstream that the innovation of the beverage start to outpace our innovation of emotion, right, because all those ingredients coming in and the conditions coming in and packaging, I think we need to go into the mainstream beverage formulation to gain more knowledge. But other than that, even if we achieve that, I think the next phase will be truly biology, right, it's not a flour you just digest and get out. It's an ingredient that will change your consciousness, right, and the liver, your small intestines, the mixed micelles, the fats, the food, the mood, the sudden setting, the age, the genetics, they all play into that final effect. So I think consumer pay for the effect. They don't pay for tasting good right For our product. We truly understand that effect and also the related impairment right For the society's safety right. I think those are the bigger topics we have to focus.

Speaker 2: 48:14

And then so when you say effect and you say that you have slimmed down to two formulations, those aren't formulation of actually the cannabinoid makeup, it's the formulation of the ingredients in the emulsion, right. And then people might choose to have different cannabinoids within that emulsion if people want more CVG or more CVN or whatever it is.

Speaker 3: 48:36

My metaphor is we're bus builders. We build bus, the shell, the deliverer, and the bus can have CVN as the passenger or TAC as a passenger. We can interchange them, but the bus, the job, is to deliver those passengers into the small intestines to be absorbed, so you can circulate in the blood.

Speaker 1: 48:55

So the marketer in me wants to pause a moment and talk about the bus a little bit. So the bus we've chosen thus far, and ready to get to your point about what's on the roadmap, has been nanoemulsions, and we find nanoemulsions incredibly dynamic and flexible and marketable to the end consumer, because we have certified organic emulsions that we've developed that allow us to have everything that we're putting into these beverages be plant derived, and we think that's important. We believe that's where the industry is going, and what we often investigate in the market and hear about new technologies coming to space is there are other ways. So if any of our competitors are watching, we see you. We acknowledge that there are other ways to put cannabinoids into products, but what we really want to do is stay true to the plant and bring ingredients to the market that are going to go into the health and wellness products that are in the mainstream, that people aren't going to be afraid to put on their labels, when they're actually labeling everything that they should be.

Speaker 1: 50:06

And so is it going to be nanomotions forever? Maybe not, but anytime we hear about some of these new technologies, it's like, oh, you're creating a new ingredient that's going to have to go through like a new drug discovery. It's like that's going to be a very long process. Let's actually invest in that if we think that's the way. So I just wanted to kind of take time to explain why nanomotions and it could be a big and scary word sometimes but I mean we use some form of coconut oil, cannabis oil and then either a Kilaia extract, gamma, keisha or some other plant derived emulsifier.

Speaker 3: 50:43

Yeah, essentially we are combining all different plants extracts to make our product.

Speaker 2: 50:47

Yeah, and it's like a big milkshake machine based.

Speaker 1: 50:52

Essentially.

Speaker 2: 50:52

Stir it up, you whip it up.

Speaker 1: 50:56

We have some Vitamix's in the back here, yeah.

Speaker 2: 51:01

Yeah Well, so we're getting close to the hour. There's not too much more time left Before we go to last call. I guess I want to ask Ben about the potential of the cannabis beverage category and we talk a lot about policy on this show and I'd like to kind of hear from you of how you think of beverage as an entree to destigmatizing cannabinoids overall.

Speaker 1: 51:37

Oh man, and you want me to do this in the next two minutes?

Speaker 1: 51:44

Maybe one minute? No, beverage is not only the future form factor of which many people, most people will be consuming cannabis, not to say that they won't also smoke or eat gummies, but beverages will start being added to everybody's cannabis repertoire. In addition to that, it is our greatest opportunity to build acceptance and adoption for cannabis period, and so, as an industry regulated or hemp or whatever it is imperative that we start thinking about the opportunity of using beverage as a catalyst to spur legalization, and what I mean by that is let it go into the total wines as it is in Texas, in Connecticut and Minnesota. Let that keep happening. You don't have to keep shoving all the other cannabis products alongside it. That time will come. But in order for that time to come, we have to allow beverage to really flourish, and I think that is the next step for broader cannabis to get behind beverage, to allow it to get into the mainstream and to allow mainstream distributors, retailers, to start selling cannabis in the form of beverage.

Speaker 3: 53:02

That's great.

Speaker 2: 53:02

Yeah, thanks for sharing that, and I think what we're gonna do now is we're gonna move to last call, and this time we're gonna turn it over to Harold. Harold, we want to give you an opportunity to really take the mic and tell our audience what you want to leave them with today.

Speaker 3: 53:20

All right, last call, thank you. So I think our society is at this critical moment. Right On one side, you can feel this strong hatred between the parties, between the races and between nations. On the other hand, you feel this young generation. They are actively changing their habits right. They consume food that is more healing than damaging. They value life experience more than material possession. I think, down in their heart, they want a society to be more loving, sustaining and respective. But also, when I look at our top business leaders, what they are doing more iPhones, more cars, more robots, more rockets, more metaverse At some point I have to stop and ask them are all those things gonna liberate our young generation and lead them to become better humanities?

Speaker 3: 54:19

Very soon, I think, within the next couple of decades, our civilization will make some big decisions. I think you know you're gonna live in reality or you're gonna live online. You're gonna work with the robots or work for robots. You're gonna stay on Mars or stay on Earth or move on to Mars. So you know, I think if we have a strong consciousness, we can make those decisions wisely. They are technical decisions, but I worry that our collective consciousness is not improving as quickly as technology and I deeply worry that our business leaders still focus too much on the things but not enough on the minds.

Speaker 3: 55:05

So for me, my personal mission through the work of Vertosa is to introduce conscious altering plant medicine into consumer packaged goods to heal and liberate next generations. And prior to this, people only have options of alcohol and caffeine and but now a consumer can easily pick up a TUC beverage and get elevated and he may think you know, maybe I shouldn't talk to my mom like that, maybe I should give her a call tonight. I think thoughts like that really make us better. Lastly, I want to thank my partner, ben, you know, for believing in me and allow Harold to be Harold and, you know, coaching me also right over the last six years. I want to thank the team, the current team and also whoever joined Vertosa to get us here, because we all share the same vision and we put our heart into the work. And I want to thank the operators in the cannabis industry who loved and believed this plant. I think to all of you I say the job is not done yet. Let's heal and liberate humanity.

Speaker 2: 56:24

Amazing. Thank you, I got chills. Well, ben, are you going to read us out, or do you want me to?

Speaker 1: 56:32

Why don't you go for it? Yeah, this is your show.

Speaker 2: 56:35

All right. Well, as we wrap up, just remember that the dialogue doesn't have to end here. We invite you to continue to be a part of our conversations, reach out to us, tell us what you think and overall, we're just immensely grateful that anyone's listening and cares. But we're doing this for you and if you've enjoyed this episode, please like it, subscribe, share it with your colleagues and your friends, and remember folks. Stay curious, stay informed and, most importantly, keep your spirits high Until next time.