February 8, 2019

BLOCKStrain Technology Corp (CVE:DNAX) Cannabis Testing and Tracking Blockchain Platform

Midas Letter
Midas Letter
BLOCKStrain Technology Corp (CVE:DNAX) Cannabis Testing and Tracking Blockchain Platform

BLOCKStrain Technology Corp (CVE:DNAX) (OTCMKTS:BKKSF) uses a blockchain platform to test, register, and track cannabis. CEO Robert Galarza describes his company as “23andMe for the cannabis industry.” He emphasizes the importance of product consistency and establishing consistent strain identities, especially in the medical cannabis space. BLOCKStrain’s technology can help LPs achieve product consistency and the company offers value added services such as providing LPs with genetic data to track plant evolution. By creating a cannabis registry, BLOCKStrain technology helps distinguish legal cannabis from illicit sources. BLOCKStrain generates revenue through its cannabis testing program.


here with me. He is the CEO of BLOCKStrain Technology. Robert, welcome.

Robert Galarza:    Thank you for having me.

[stock_chart symbol=”DNAX:TSV” align=”left” range=”1M”]

James West:   Yeah, Robert, so I actually caught a couple of seconds of your speech at Cantech, and then I had some guy walk up to me and start just yammering in my ear and I was like, ‘No, I want to hear this!’ But I was lost because of my unfortunate social proclivities.

Robert Galarza:    It happens. When you’re popular, it happens. It’s not a problem.

James West:   [Laughter] Well it’s more due to infamy at that point. Um, so Robert, tell me about BLOCKStrain Technology; what does it do?

Robert Galarza:    Yeah, really at the core, we’re, like the 23andMe for the cannabis industry. So we have an extensive background in the space, we’ve been in it for eight years on the tech side; California-based, initially, and we moved to Canada in 2015. We’ve been part of the crazy boom there and then the crazy boom here. Really at the core, we understood that testing and the integrity of the product was consistently an issue we were running into, right? How can you really track and trace, how can you really find your cannabis – you know, the concept behind the WeedMaps.

James West:   You’re speaking about a subject that is near and dear to my heart.

Robert Galarza:    Yeah, unless you know what it is, right? So the great part about in the technology and science, that advanced; genomics really advanced over the past few years. We were able to marry genomics science with technology and then integrate Blockchain specifically from, you know, the immutability perspective, right, and really focusing on areas where integrity is an issue and testing is an issue, and you know, product identity is an issue. Strain names, the old street names kind of need to change and evolve away from, not necessarily that we want to get rid of strain names –

James West:   Granddaddy Purps?

Robert Galarza:    You just need to know that Granddaddy Purps is actually Granddaddy Purps, and that’s what our mission has been.

James West:   Okay. So how do you – do you insert biomarkers into the plants at the growing level, or how do you establish an identity for a plant?

Robert Galarza:    Yeah, it’s actually a lot simpler than that. I mean, we’ve seen a lot of these platforms come online or companies discussing, you know, putting biomarkers and trackers and stuff in your cannabis, and I am always one of those where I’m like, you know, let’s, we just started as an industry; let’s, you know, before we start Frankencannabising this thing up, let’s maybe start to understand what we currently have.

The beautiful part is, like, genomics allow us to do a full, whole genome sequence, full identification of what that genetic strain is, right? So with cannabis, you have, you know, mother plants, and then the lineage of that mother is supposed to be what is created in a clone-based infrastructure. You know, obviously you can grow from seeds, but then you’re getting brothers and sisters, and we all know brothers and sisters are very different from one another. Some are good, some are bad –

James West:   Especially when they breed together.

Robert Galarza:    Exactly. That gets really weird. [laughter] So what we really try to focus on more than anything else is saying look, we have the tools right now to be able to say, if these are the 10 or 20 or 30 strains with which you’re propagating and growing, we can identify those. And then beyond that we can implement rapid genetic verification tests, right? So now, when you’re testing for chemistry and microbial pesticide screenings, which we also are empowering laboratories to do rapidly and quickly, we can take all that testing data, all that validation data, and put it into, you know, the Blockchain there for immutability but really push it into track and trace systems so that we’re really, at the end of the day, providing a QR code for consumers to say, Hey, look: this has been tested, it’s valid, it’s been screened, and genetically it’s what it’s supposed to be.

And that’s, you know, for people like myself who love the industry and have been a part of it for so long, we don’t want to see commoditization. I will gladly buy $20 grams of cannabis, like gladly, if I know what it is. I just want to know if it’s going to be consistent, I want to know it’s going to make me feel a certain way.

James West:   Right. Well that’s fascinating. So you’re able to identify the plants genetically, and follow, and deliver a test result to a consumer so the consumer can be 100 percent certain that this is the exact same strain that they got the last time.

Robert Galarza:    Exactly.

James West:   This is really important, and I know it’s important because I’ve interviewed at length a cancer patient in California whose medicine had stopped working, despite the fact that it was the same strain. And the chemist who was brought in to analyze what was going on and figure out why this strain had suddenly stopped working, realized that there had been a genetic mutation due to a biological contamination that caused the strain to mutate somehow, some way. And there’s one of the myriad CBDs, or cannabidiols, or THC elements that had become absent.

And it turned out to be the one thing that needed to be there for the entire entourage effect that was causing some cancer regression, I guess, to be effective.

So he suddenly found himself in a position where now he wants to measure all the cannabis that comes through his sort of universe to ensure that this is exactly got everything he needs in it, and he’s not wasting his time and his life counting on something that maybe doesn’t work.

Robert Galarza:    And that’s a heavy burden to place upon consumers and patients, right? I mean, it should be incumbent upon us in the industry. You know, we have the resources, we have the capabilities with which to do this right now, and really, you know, the nice part for our as a business, we met with growers, and they want to understand, right? You don’t want to be able to say look, I’ve been growing the same strain for five years; why is it changing? Right? And that’s the one thing that we don’t really tackle as much in the industry, right, is that none of these cannabis strains genetically have a history in Canada, right? So now when we say, ok, well now we’re going to grow them in a greenhouse in Ontario, that’s all good and well, but you know, they have a 10,000 years or 20,000 years of genetic predisposition to certain things around the environment in which they grew up in.

I mean, they – cannabis plants have, the genome is a third the size of the human genome, so they are very unique plants in that way. And so because of those characteristics, if we can analyze them over a period of time, you know, part of our value that we want to add to our customers is providing that genetic data back so they can really be empowered by it, right; to be able to say, look, you know, wow, I’m studying my genetic library, here’s the distribution, here’s the supply chain aspect of it.

But you know what, over three to five years, these clones that we’re mothering out, we keep genetically testing them, and we’re finding genetic markers that are, you know, evolving or changing or not being as receptive, because maybe the epigenetics associated with those plants could be changing and evolving as well. That was a scary thing I actually heard today on a podcast where they said it’s not really our genetics that are causing our problems in aging; it’s our epigenetics, it’s like, the CD player doesn’t read the CD as well. And you know, I just turned 40, so I’m like, oh, where am I on that scale?

James West:   No doubt. So what is epigenetics?

Robert Galarza:    From what I understand, and again, I’m not an epigeneticist, so this is a little bit out of my wheelhouse, but from what I understand, it is the ability of the organism to be able to respond to the actual DNA, right? And when you’re younger you’re able to read it better than as when you get older, and that could be very similar in cannabis. But it’s affected by various environmental things. So in human beings, they say X-rays is something you shouldn’t be doing, because it has a significantly horrible effect on your epigenetic makeup.

James West:   Interesting.

Robert Galarza:    So with cannabis strains, maybe certain lighting, maybe certain environmental factors, but how could we really know that unless we start to, you know, index it and really start to, you know, create a real registry where we can really understand it.

James West:   Yeah. I had the experience while growing cannabis from clones was the default route, for a couple of decades, that a mother that was a particularly reliable producer and prolific producer, meaning that it just kept getting bushier and bushier and more cloning points, we found that over time, that the strains were, the clones, after a couple of years of taking clones from the same mother, were starting to exhibit undesirable characteristic. And so ultimately, even our favourite mothers ultimately had to be put to death unceremoniously, and we had to regenerate the strain from seed, which of course, because we’ve been breeding plants with no seeds, we had to go get the seeds. And invariably we’re finding ourselves incapable of producing the same phenotype. So when I hear about all these cannabis producers saying that this is going to be phenotyped and so genetically identical to its previous, you know, compliant or origin source, I think to myself, well: unless you know something that 20 years of growing this stuff didn’t teach me, then good luck with that, but I think there’s gonna be a problem here.

And I think that, you know, much like cloning or any kind of reproductive process that relies on the same source over time, you’re just going to get variation as a result of natural mutation inclination, other aspects like that. So I think it’s really important, especially for those who are relying on a certain medical combination of CBD/THC from a plant, to be able to identify that, to be able to carry that and make it immutable, I think is a service to the industry that probably is going to be very much a part of it, as it evolves.

So tell me, how do you make money?

Robert Galarza:    So, you know, part of being a software company, there’s two routes you can always take, right? Which is, you come in, try to sell your services, hard costs up front; or, you can basically implement yourself as part of the transaction. We are, we just chose the latter. We come into our production partners, we provide the software for free, lab partners same way, but we make money on the testing. So as testing moves through, we’ve coined ourselves the Expedia of the testing world. We want to be able to come in, onboard as many laboratories from both the genetic perspective and a chemistry and microbial and pesticide screening perspective; figure out who’s running the most efficiently. Be able to push as much product as we can through those pipes, because that’s the other side of the bottleneck in the industry, too, right? How do we get all this product through?

But I just – there was a huge skating study that just came out of Oregon today, the Secretary of State’s basically like, our medical program is failing, abject failure, because a lot of the cannabis is not being screened for heavy metals, right? And so the testing is a really difficult thing, and then diversion is an incredibly difficult thing that they’re trying to combat down there in California and Washington as well.

Well, how in the world do you even distinguish between black market product and green market product unless you can identify the two, right? So the concept of a registry that Health Canada discusses, and that we’re definitely pushing behind, you’ve gotta, whether it’s through us or partners like ours, you’ve got to be able to create that registry from a genetics perspective. You can’t – you have to make it actionable, right? And so we’ve tried to do that from a private perspective first, right, like allow the stakeholders to come in and say, look, I’m buying product from other LPs, right? I want to know that I’m getting what I pay for, even at this non-commercial level of the retail, so that I can really put a stamp on it and say, Look, consumers, this is what it is, at the end of the day, from a sales perspective.

James West:   Interesting. So cool. All right, Robert, we’re going to leave it there for now; we’re going to follow the story closely because I’m really interested in what you’re doing. Thank you very much for joining me today.

Robert Galarza:    Thank you for having me.


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