February 21, 2019

FluroTech Ltd (CVE:TEST) Cannabis Testing Device Must-Have for LPs

Midas Letter
Midas Letter
FluroTech Ltd (CVE:TEST) Cannabis Testing Device Must-Have for LPs

FluroTech Ltd (CVE:TEST) (OTCMKTS:FLURF) COO Rex H. Kary is thrilled with the company’s CompleteTest cannabis testing device. Kary believes FluroTech’s testing device is a must-have for cannabis LPs because it allows companies to test product on-site for impurities and throughout the plant’s growth cycle. Kary suggests testing will make up 5 percent of the global cannabis market and FluroTech’s margin for each device is over 200 percent, presenting a lucrative opportunity for investors. FluroTech provides full training and customer support for companies that purchase testing devices. FluroTech is designing value added services, including a product that biomarks plants, creating a unique signature that lets growers to track their products from seed-to-sale.


James West:   I’m joined now by Rex Kary. He’s the Chief Operating Officer of FluroTech Limited, trading on the TSX Venture under the symbol TEST. Rex, welcome back.

Rex Kary: Thank you for having me back, James.

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

James West:   Rex, you’ve made some great advances with the complete test device that your company has been developing; in fact, I understand I’ve got the first one available in Canada.

Rex Kary: It is the first one, and happy to bring it out and deliver it to you. It was fun going through the test with you.

James West:   It sure was, it sure was! Now, this device is geared towards LPs who want to measure cannabinoids and test for heavy metals in their product, is that right?

Rex Kary: That’s right. It’s designed so it’s an in-process test. So they could be testing through the growth cycle, and find that sweet spot for harvesting. It’ll allow early detection of heavy metals, to ensure that they don’t lose a room or a batch for the entire growth cycle; they can take a room out if it is contaminated.

James West:   Right. And so, is this testing designed to replace existing process?

Rex Kary: The testing is designed to bring a new way of cultivation to the producers. Canadian producers right now, if they do want to test, they’ll send their samples out to a large lab. It takes three days to three weeks to get the results back. Often, about 10 days seems to be the norm.

This allows them to get the results within 30 minutes, so they can put some precision to the way that they are cultivating, and find a better way than guesswork.

James West:   So this is a device that any registered or licensed producer of cannabis would probably want to own?

Rex Kary: We think so.  As a matter of fact, we think a number of the producers will want to own several. When we’ve been out doing our market research, we’ve had betas out; many of them said We want this in our facility and have several, so they can be testing on the go at several different rooms.

James West:   Sure. So, do you have an idea on how big the market is for this device globally?

Rex Kary: Globally, the numbers get a little bit silly, actually. We’ve looked at the global market in cannabis in the order of $150 billion by 2025. Some forecasters have said testing is going to be 5 percent of that global market. That all won’t be in-house, but they expect at least half to two-thirds will be in-house testing.

James West:   Sure. Now currently, the configuration of the device is limited to testing dried flower?

Rex Kary: It’s testing dried flower at this point. We’re a consumer-driven company; all of our business development people work with the scientists side by side with them, work with the software developers, but they’re out talking to our customers. And the customers keep saying, We want to have a certain product. That’s the one that comes to the top of our list.

James West:   Sure.

Rex Kary: We’re in constant creation of additional tests. So one that we expect to be coming out in relatively short order will be THC and CBD for extracts.

James West:   Okay, so at some point, could this be used, for example, to test a gummi bear?

Rex Kary: Absolutely.

James West:   Really?

Rex Kary: Yes.

James West:   Huh, interesting. So, is there a limit to what this could test in terms of cannabinoid products currently available anywhere in the world?

Rex Kary: Is there a limit? You mean…

James West:   Is there anything it can’t test?

Rex Kary: No. The technology allows us to see very small things and detect it very well. When we’re detecting heavy metals, we’re measuring in parts per billion. So we can develop a test to test virtually whatever we want, it just takes a little bit of time, a little bit of money, to develop that test.

James West:   Right. And so when is this going to be available for LPs to purchase?

Rex Kary: Now.

James West:   It’s ready now?

Rex Kary: It’s now.

James West:   Okay.

Rex Kary: We’ve come out into the market, we’re available. If you contact FluroTech, go to our website, there’s people that are available. What will occur is, we’ll come out, sit with the LP, train them; our staff will make sure that it is available, and their staff is trained properly from the get-go.

We are a relatively new company, so when you call, you won’t get a help line if you’re having a problem; you’ll get the customer representative, who will be right beside the software developer, who will be right beside the scientist, and they can walk you through any problem that may occur.

James West:   Oh, that’s great. How difficult is the process?

Rex Kary: It’s not difficult. It’s a very easy process to learn. It takes a little bit of practice, there is, it is a scientific instrument, so we do suggest that the training take place. And just care and attention. It is a quantitative test, so if there is a little mistake, will result in an inaccurate reading.

James West:   Right.

Rex Kary: But what we do recommend is just watch the test, and if it seems odd, run a second one.

James West:   Right. Okay, so this sounds like something that’s going to be pretty broad use in short order, here, because it sounds like something that we really shouldn’t be smoking cannabis without.

Rex Kary: Well, absolutely, and what it allows the producer to do is to be checking on the fly, and to be making sure that everything is good. As we develop additional tests, we see many, many different applications for this. We see consumers, actually, through dispensaries, checking, and dispensaries checking to make sure product is good.

James West:   Okay, and how much is this device owned for an LP?

Rex Kary: So right now, it comes in a couple of components. The base device is $18,000, and then we have a scope that goes into the device and allows you to measure THC and CBD; that’s $6,000. And then we make it easy. So everything you need to be able to test, we have in a package; we call it the starter lab kit, that’s $1,000. So all you have to do is show up with your cannabis, and everything else is there. $25,000 gets you in to be able to test THC/CBD, and then if you want to test heavy metals, it’s another $6,000 for that scope.

James West:   Mm-hmm. So FluroTech’s business is the construction and sale of these machines?

Rex Kary: FluroTech’s business is the research and development of tests; we do assemble the machines, and we market them as well.

James West:   What kind of margin does the company get off of these machines?

Rex Kary: Well over 200 percent.

James West:   Really? Wow. That’s great. How much money has gone into the development of the machine since the beginning?

Rex Kary: Since the beginning, when the company was first formed, there was about $3 million that was expended prior to the company raising, doing a capital raise. Then there was a friends and family round, as well as a offering memorandum; those two together put $11 million into the company. So, over the years, there’s been about $14 million.

James West:   14 million.

Rex Kary: Now, we have 5 million in the bank right now, so I’ll say 9 million.

James West:   Sure. How many shares out in the company?

Rex Kary: 50 million shares.

James West:   50 million. Well, that’s pretty tight. That’s interesting. So, how much more money do you have to raise before you get to profitability?

Rex Kary: To get to profitability? We will be profitable this year.

James West:   So you don’t need to raise any more right now?

Rex Kary: We will be raising some more money, and the reason that we’ll be raising the money is, we do have money in the bank, and we will be marketing our product this month, but to accelerate the growth and to go into other legal jurisdictions, we will be raising capital to do that.

James West:   Okay.

Rex Kary: The other part, and if I may expand – really within FluroTech, where we’ve talked about testing the plant, but there’s also, we have a device that will test the individual. And it tests saliva for different drugs. And then we have a third product, which is putting a biomarker on the plant. So what we do is, we put a unique signature for a grower so they can track their product from seed to sale.

As we develop all of these, we’re both really looking for strategic partners and raising some capital to accelerate the growth.

James West:   Wow, that’s fantastic. All right, let’s leave it there for now, Rex. We’ll come back to you in due course, and we’ll be using your machine on a weekly basis to test cannabis from the Ontario Cannabis Store. Thanks for joining me again!

Rex Kary: Thank you.


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