Midas Letter: Greentank True-Taste Technology Premium Vaporizers

Greentank Featured On Midas Letter

Greentank CFO, Jeremy Stepak, featured on Midas Letter to talk about the future of vaping, and the cannabis industry as a whole.

Greentank designs, develops, and manufactures high-quality premium vaporization hardware. CFO Jeremy Stepak anticipates that Phase II of Canada’s legalization timeline, when concentrates and vapes are expected to be legalized, will be a huge catalyst for Greentank. However, Greentank’s existing client base in the US recreational market protects the company against any delays in the Canadian legalization roll out. Stepak describes how the vape market has grown in the past two years and that Greentank aims to provide a premium vape experience to ensure the company’s profitability. Greentank vapes utilize True-Taste Ceramic Core Technology, which gently warms the oil until it vaporizes without damaging the terpene THC profile.

Transcript:

James West:   Hey, welcome back to Midas Letter live. My guest in this segment is Jeremy Stepak, is that correct?

Jeremy Stepak: That’s right.

James West:   He’s the CFO of Greentank. Jeremy, welcome to the show.

Jeremy Stepak: Thanks for having me.

James West:   And tell me: what does Greentank do?

Jeremy Stepak: Yeah, so Greentank at its core is a, we design, develop and manufacture high-quality premium vaporization hardware for the cannabis space.

James West:   Did you bring any samples?

Jeremy Stepak: No.

James West:   Damn.

Jeremy Stepak: But I knew that was going to come up, and we talked about it. No, not on this segment, no.

James West:   Oh, I guess we’re just a little shy of October 17^th, so it’s probably a good idea that you didn’t. Plus, I tend to become much less conversational after I imbibe.

Jeremy Stepak: Well, I can’t speak to that; it depends on whatever you’re using. But we don’t touch the plant, we just make the hardware.

James West:   So you did a $4.3 million seed round back in March, and you have a sister company called WeCannect, spelled very cleverly. And so what is the nature of – oh, Casa Verde, that’s Snoop Dogg’s operation. I was up with Snoop Dogg in Smith’s Falls this past weekend, that’s great. And wow, okay, so you’ve got a real business developing here, I can tell just by the little Coles Notes here. So tell me, what are the big catalysts that are going to happen in 12, 24 months that launch your company into the stratosphere and take your investors with you?

Jeremy Stepak: That’s an ambitious – no, it’s a good little story we’ve built up. We’ve been really proud of the company so far. I think the next 12 to 24, you know, you see the landscape, you know how quickly it’s changing; it’s changing every day. So for us, we’ve been live for two years almost. It’s a young company, founded in 2016, private and growing. We’re working with over 100 brands in the US today. I think the biggest catalyst will be what happens, obviously, south of the border, state by state, as different states turn on rec. And then, you know, no surprise, what’s going to happen here come October, and then 12 months from October.

For our business, the big thing will be when vapes go live. So vapes don’t go live right away; first phase of recreational happens in October with flower and pre-rolled joints and other items, but Phase II with concentrates, and when vapes roll out live, that’s going to be a big catalyst for us.

James West:   How’d you get Casa Verde involved?

Jeremy Stepak: It just sort of, the way the power of the network, the power of the story. You know, the guys went out – I’ve only been with the company for just over three months; company was founded by two brothers, CEO and COO, and the company was self-funded, doing really, really well. It went out for about half a million dollars of growth capital, and the story was so well received on the street that it just started making its way to the right people. So had some notable investors that are cannabis investors in Toronto and then in Canada, then Green Acre Capital stepped up – I’m sure you know them.

James West:   Sure do.

Jeremy Stepak: And then through there it extended and found its way to the guys in California, and they just loved the story.

James West:   Interesting. Okay, so then, what are the big things that are going to happen in your timeline to really launch the thing?

Jeremy Stepak: Yeah, so I mean, you know, right now, you know, like I said: we raised the seed funding, we’ve barely touched it, which was really fortunate. Even before I came on board, the guys were really prudent about managing the capital but also growing the business. ’17 was a great year, ’18 is going to look to double that, so, like, it’s growing healthy, but with everything we’re seeing, oxygen, like in, you know, product innovation, where we have to be to power our LP brand partners and turn on their projects, we need to, you know, we need to keep an eye towards growth, so we’ll look to raise again; but right now the business is really managing, you know, in a healthy state.

James West:   So just to be devil’s advocate, and because you are sort of indirectly family related kind of, I do tend to beat up on the near and dear more because I like to challenge them. But so, is this a case where if the government never decides to legalize vapes, you don’t have a business? Or are you going to use the capital you’ve got to diversify and de-risk the whole strategy thereby? Or are you just going to focus on vapes and count on the fact that the government will, at some point, legalize vapes?

Jeremy Stepak: Yeah, I think it’s a good question. I mean, vapes are a huge part of the market, right? So we don’t foresee it, but you always have to play devil’s advocate and you have to be prudent. We’re live right now with, like I said, over 100 brands in the US in the 9 rec states that are in the US. So our core business is in the United States today, and you know, a lot of people will ask us, are you going to be a global business? Are you going to go here, are you going to go there? The beauty of what we do, we don’t touch the plant, and the hardware is really usable in any market where cannabis is taking hold, right?

So it can be used medicinally. The big use is recreational; and as the States grows, we’ll grow with it. We don’t foresee Canada not turning it on, but you’re right, we have to keep an eye on that, and so if it doesn’t happen, we go for the low-hanging fruit, which is in the US, and keep an eye on other markets.

James West:   I just see the notice that somebody put a list of questions in front of me, here. I’m wondering where they came from, like, is somebody new here? I don’t do lists of questions.

Jeremy Stepak: It came from me, I slid them across the desk when you weren’t looking.

James West:   [laughter] Okay, that’s hilarious. I’m like, oh, who are these questions for? Oh, they look like questions that I’m supposed to ask. That’ll never happen. Anyways, okay, so WeCannect: what’s the relationship there?

Jeremy Stepak: Yes, a sister company 100 percent owned by the top co. It’s a media platform, basically. So you know, as the company was forming up, you know, as you can imagine, young company getting a great product into the market, a big part of our business is trade shows. So we’re out in the market, telling people about the product and about the story, and the more we get into the market, we notice there’s a bit of a gap. There’s a gap for a company that can connect, you know, basically on a business-to-business level. There’s a big demand to know who’s out there and who’s doing what, but there’s no one platform that synthesizes it all, puts it all in one place, really kind of brings everybody together. So WeCannect was designed to be sort of the, I want to say the LinkedIn of, but as a platform, really bring together, you know, the cannabis industry on more of a B2B side.

James West:   Oh, that’s interesting. And so, is that a subscription-based model?

Jeremy Stepak: Today it’s free. You know, the view, as you would imagine with any media company, get out there, build the name, build the – let people know, get awareness growing. The reception to it has been great; I think there’s over 1,200 active users today. Like, the user base is bigger, but just, you know, actively engaged users who are really on the platform. But the anecdote – you know, we go out to these shows and you talk to the user base, the anecdotal reception has been, like, just tremendous, right? And we’ve got everybody on there from, you know, big LPs to small dispensaries, right. It’s a whole spectrum.

James West:   So what do the economics of the vape business typically look like, and how do you differentiate yourself within that matrix?

Jeremy Stepak: Yeah, so I mean, there is now more competition in it than there was even two years ago, right? There’s only, I think, a couple of companies that are out there really putting out a premium quality product, and we’d like to count ourselves in that category. There is also a lot of sort of knock-off, manufactured in Asia with not the emphasis on quality control that we put. So there’s healthy margins on the business; they’re not, you know, crazy, you have to keep an eye on it. We manufacture in Asia, you know, there’s currency, there’s a few different variables. But because the demand has been strong, because particularly in the US we’ve been lucky that way, we’re able to manage the business and get some foresight into it. But to run the business like any other young company, you keep an eye on healthy gross margin and we keep an eye on OpEx as we go.

James West:   Okay. So what is your, what was your last financial statement like in terms of your profit?

Jeremy Stepak: No, I can’t do that.

James West:   No?

Jeremy Stepak: No. I keep those ones close to the chest.

James West:   Oh, okay, so you’re not a public company yet?

Jeremy Stepak: No, we’re private.

James West:   Oh. A private company. Well, that’s really interesting.

Jeremy Stepak: I almost like – I definitely share that, but no, that’s the beauty of being on the private side in cannabis.

James West:   Oh, okay, so I’m looking at the information here like, oh, so this is an operating company; why aren’t there financials in front of me? But that makes sense, you’re a private company. Okay, so are you going public?

Jeremy Stepak: Can’t say how many times people have asked me that. And we’ve definitely had the overtures, of course, you see what’s happening in the space. I wouldn’t rule it out of the plan for sure, like sort of the more mid-to-long-term plan, but right now, I think we do what our investors like to hear we do, which is, we’re private, we’re going to say that way just so we can focus on building the business really, really well.

James West:   Are you making money?

Jeremy Stepak: Yeah. I mean, I don’t want to share too much, but we’re revenue-ing, there’s good cash flow. But again, you know, young company. You’ve got to balance cash flow positivity with design and the desires for growth. So you know, we look at both lenses, but the company is in a really good spot.

James West:   Okay. Your relationship with Hiku brands: are you sort of because of this inter-connectivity, are you basically plugged into all their locations, potentially?

Jeremy Stepak: As of now, that has not, you know, that has not come up. We know the guys well; we’ve got good relationships with a number of people in the space, including some people at Hiku, but from a partnership perspective, you know, nothing’s been examined down that path just yet.

James West:   Okay. So there’s really not an opportunity for our viewers to participate in this at this point?

Jeremy Stepak: From a financing perspective?

James West:   Yeah.

Jeremy Stepak: Not yet, no. No, we’d love to get the support, but as of right now, just being where we are, no.

James West:   Okay. Then, you’ve got what looks like to me a differentiated core technology: in fact, it’s called True-Taste Ceramic Core Technology, and I’m judging – and this is my willing opportunity to run gladly to humiliation, which is a philosophical concept I support – True-Taste Ceramic Core Technology sounds like, the whole idea with a great vape is not to burn the oil but to warm it gently until it vaporizes without destroying any of the terpene THC profile bits and pieces.

Jeremy Stepak: So if this job doesn’t work out, you can come work on our product team.

James West:   [laughter]

Jeremy Stepak: Which is fine, you know more than most. Yeah, the basics of what you’re saying is exactly what the company was built on. The company was actually founded – so like I said, two brothers: the CEO is our hardware guru originally, you know, he comes from six years of e-cigarette technology experience. So he actually founded the company on the moment of being, he was at a wedding in Aspen, in Colorado, and Colorado had just gone live with rec. And he saw all these Boomers on the dance floor vaping, but they’re vaping with poor, you know, sort of outdated e-cigarette technology, they’re trying to vape cannabis oils. It’s leaking, it’s a bad experience, burnt oil, all that. So that’s exactly what I think we bring to the table. That’s how the company got started; that was the genesis of it, right?

James West:   That’s interesting. So the analog for this company, and perhaps the analog for the growth trajectory, would be Namaste Vapes, or Namaste Technologies now, who started off exclusively as actually a vendor of vapes online and not a manufacturer of vapes. So I mean, if we’re to look at the sort of progress of that company, and where you guys are at now, it looks like a pretty likely proposition.

Jeremy Stepak: Yeah, I mean, we know the Namaste guys well. Have a relationship with them.

James West:   Oh, great.

Jeremy Stepak: Yeah, they’re great. And you know, we’ve been –

James West:   Do you sell your vapes on their platform?

Jeremy Stepak: I think we do have one device on their platform, yeah, we do. But I mean, our model is B2B, so the core of what we do is working with brands. Now in the US we’re turning on LP supply agreements in Canada as well –

James West:   The pre-loaded vapes?

Jeremy Stepak: Yeah, exactly, for rec. But the core of what we do is powering our brand partners’ brands on our hardware.

James West:   Interesting. So are you going to, are you committed philosophically as a company to remain divorced from touching the plant?

Jeremy Stepak: I mean, listen, this industry changes all the time; you wouldn’t commit to anything, you know, it’s a changing landscape. But I think in the short to mid term, we’re not married to being, you know, we’re not married to being divorced from the plant or not plant-touching, but we want to focus on what we do best, right?

James West:   Wow, there are so many puns in that last sentence.

Jeremy Stepak: I know, as I was saying them, I’m like, oh, he’s going to jump all over this.

James West:   Married to being divorced, married, Mary, well…never mind. Anyways, it sounds like a really interesting idea. I wish that somebody had sent me an invitation to the seed investment round, because I would have participated just based on this conversation.

Jeremy Stepak: Well, the good news for you is that the Series A is on its way. Like I said, the capital is being managed well, but because of the opportunity in the industry, because of, you know, the product innovation pipeline that we’re staring at, there’s just some things that are coming up that are going to be great; because of the growth prospects, because of the capital in the space as well, it’s a good time. So we’re going to be heading out to do our Series A kind of in the back half, back quarter of the year.

James West:   Perfect.

Jeremy Stepak: So you will be now on the list of people that we reach out to.

James West:   Excellent! I’m on the CFO’s list.

Jeremy Stepak: Exactly. A very, very short list.

James West:   Okay, awesome! All right, Jeremy, well, that’s a great introduction to the company. Sounds like you guys really have it put together. We’re going to follow with interest and wish you the best of luck. Thanks for joining me today.

Jeremy Stepak: Thanks a lot, man.

SOURCE: MIDAS LETTER LIVE