China Tariffs & The Next Era of Vapes: Impact on Supply Chains & Brands ft. Nick Kovacevich

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Bryan Fields: What's up, guys? Welcome back to another episode of The Dime. I'm Bryan Fields — with me, as always, is Kellen Finney. And this week we've got a very special guest, Nick Kovacevich, C-Cell's corporate relations director. Nick, thanks for taking the time. How are you doing today? Nick Kovacevich: I'm doing great. I appreciate you making me a very special guest — I'm honored to be here and excited to have this conversation. Bryan Fields: Excited to dive in. Kellen, how are you doing? Kellen Finney: Doing really well. Really looking forward to talking to Nick and diving into all the nuances of the vape pen industry. Kellen Finney: I'm honestly just really grateful that we have another West Coaster — I think he's out there right now, super loyal to the West Coast, so I'm just grateful. How are you doing today, Bryan? Bryan Fields: Yeah, I'm stoked. I think there are a lot of topics — from a macro perspective, before we hopped on we were diving into the president, the tariffs, and understanding the impact from a supply chain standpoint, so I'm excited to dive in. But I think the most important element as we get into all this is the capital markets, and given your background, it's really important to understand where your loyalty lies — obviously there's an East Coast/West Coast battle, and one market tends to be more favorable than the other from a capital markets standpoint. So Nick, if you had to declare a loyalty, East or West Coast, which one would you take? Nick Kovacevich: Hey, look, you guys have really split me here, because my loyalty is on the West Coast. California's my state — I grew up here, I served here, I love it, I never want to leave. But the reality is, if you want to fund a business, if you want to make it big time, you've got to go pay homage to the Big Apple, New York, right? That's where — that's where financial transactions get done. I love New York City, it's my favorite city. So please don't pit me against good and good, or great and great, because I love them both. Bryan Fields: I love it — a very neutral, partisan answer. So Nick, for our listeners who aren't familiar with you, can you give a little background about yourself and how you found your way into cannabis? Nick Kovacevich: Yeah, you know, look — I grew up in California, as I mentioned. I went to school in the Midwest, played college basketball, found my way back to California, and really had no idea about cannabis at all. I was never a consumer. At that point in my life I was twenty-two, twenty-three, and I heard about medical cannabis and didn't know anything about it. Of course, I went in with all my doctor's records and my knee surgeries just to make sure the doctor was able to prescribe me this medicine. And obviously, the inside joke there — for anyone who's done it in California — is you really don't need much to get a medical card. So I got it, and I got into it. I started to learn, and I actually started to see that this was a real medical product that actually cured people and helped people dealing with different neurological issues — I saw firsthand people consume it and instantly perform life better. That was very eye-opening. And I wanted to look for a way to participate in the cannabis industry without taking as much risk as a lot of people participating in the cannabis industry at that time — this was 2010. And that's when I came across packaging as an avenue, sort of the picks-and-shovels play, right? And the same is true for vape here today. So my journey was essentially starting Kush Bottles, a packaging business selling certified child-resistant packaging, which ended up becoming a nationwide trend in almost every single state when they fully legalized for adult use or even medical use — they incorporated some sort of regulation around how product is packaged. That became very valuable, being in the middle of that supply chain for operators. We dealt with operators in every emerging state, and it was exciting seeing each state open up with different regulations, different players, different trends. And it was around 2014, 2015, but really it was 2016 when vapes took off, and C-Cell came in with the ceramic core, and that changed the game. We were just getting into the vape business — we'd acquired a vape distribution company — and we saw the writing on the wall, saw that C-Cell's products were far superior. So in late 2017 we worked out an agreement to become a distributor. This was while I was still at Kush Bottles. There were other distributors that are still distributing today — Kush Bottles ended up selling to Greenlane, so Greenlane is still a distributor, but 3Win and Jupiter were the original distributors, still very big in the C-Cell distribution business, as well as CannaBrands out of Washington. This whole network was built through these distributors to make C-Cell the number-one player. C-Cell was selling — still sells — hundreds of millions of units across all the different legal markets. Now you've got the hemp market too, which has changed since I was a distributor, but it was a lot of fun. I got to see this built out firsthand and worked with my friends at C-Cell, which at the time was mostly based in China — we were the ones on the ground here in the U.S. And it's an honor for me that, after the company was sold to Greenlane, I took a little bit of time off and was then able to rejoin C-Cell and continue the mission I feel like I've been part of from the beginning: making vaporization the cleanest and safest it can possibly be, and the most mainstream in the industry. That's where we're at today. Bryan Fields: So for those who are unfamiliar with C-Cell, can you give us a high-level overview of the size of C-Cell and some of the industries it operates in, and then we can dive into some of the details? Nick Kovacevich: Yeah, so what most people — and we were talking about this pre-show — don't think as much about is the underlying supply chain. They think more about the brand that's on there, which makes sense, right? But for every brand — for every computer there are chips that power that computer — for every vape brand, there's hardware that powers that vape brand. And you want the best: before you wanted Intel chips, now you want Nvidia chips, right? And C-Cell really is the best of the best. It all started with the ceramic core, again, kind of moving the market to the ceramic core as the industry standard. But what's not known is that everybody else really sources their cores from a third party, whereas C-Cell produces theirs in-house. So when you think about the size of C-Cell, think about a factory with tens of thousands of employees, multiple factories, not just one, in China, other parts of Asia, Indonesia as well. Huge R&D budget. And of course, this is all possible because C-Cell and its parent company, Smoore, is the largest producer of hardware not only for cannabis but also for the traditional nicotine industry, working with big companies globally. So we're supplying hardware around the world and complying with regulations that are much more stringent than what we face here in cannabis. And having the infrastructure to support that on a global scale, having the R&D budget required to be a leader and innovator in that space, and then being able to bring the fruits of that and apply it to what's still a relatively small legal U.S. cannabis market — that's been a big differentiator and has allowed C-Cell to hold the dominant market position we've had since we launched the ceramic core back in 2016. Bryan Fields: That ceramic core — did it come out of a lot of their R&D work in the vape industry? Essentially, because the two industries are just turning different chemicals from a liquid into a vapor you can consume, right? So there are a lot of similarities from nicotine to cannabis. So was that ceramic core something they'd been developing on the nicotine side and then deployed into cannabis? Or was it more like, cannabis requires a little different touch? Nick Kovacevich: Yeah, exactly — a little bit of both. The underlying technology was being utilized for the broader platform. Actually, Mark Scatterday, a friend of Smoore's from his nicotine days, was back here in the U.S., in Arizona, and saw this market emerging. He had the idea of going back and saying, look, there are already some vapes on the market, and they're all being produced by these fly-by-night factories — but I have a relationship with the leading factory on the nicotine side, which has very large infrastructure and cutting-edge technology. So it was really his idea to bring this to them, and they were able to work together to formulate it. So it was adopting some existing technology but applying it specifically for cannabis. The key was having, in this case, Mark and his team — but also somebody here in the U.S. who knew the market, because for a lot of years it was an interesting dynamic. It was essentially R&D, production, everything, technology, all coming out of China, where you literally can't have any cannabis oil — you'd go to prison for the smallest amount — trying to perfect devices for these burgeoning markets here in Colorado and California, where oil is plentiful everywhere. So how do you do that? That was the struggle. And that ultimately led — jumping ahead a bit — to a major investment C-Cell made in Arizona a few years ago, in a research facility called SDR. C-Cell has put over ten million dollars into that facility. It's phenomenal — we actually invite clients to tour it so they can see the R&D infrastructure we have here stateside, which is unparalleled. You won't find that with any of the competition — to be honest, the competition doesn't even have their own factories, they just use various factories over in Asia. So to have that here stateside, and to have those experts — it's incredible. And it's key, I think, because we can actually touch the cannabis here in Arizona and the U.S. So to be formulating the products with the actual substance is the ultimate trump card, so to speak — you don't have to do this overseas where you don't have access. It's a critical separator. Bryan Fields: And I can only imagine, from a budgetary standpoint, having an industry where you have diversification, where you have all the nicotine revenue you can put into R&D for these new emerging markets, that's a big separator, because one of the challenges here in cannabis is that when sales are down, you might not have the capital to invest in R&D, which just continues to plague the industry. So take us through it — were you part of that conversation of, hey, we need to invest capital stateside to work directly with the product, because I think that's a huge moment in the evolution of the company as a whole? Nick Kovacevich: Yeah, exactly, you hit the nail on the head. I think this industry is so unique in that sense — it's a hyper-growth industry, so much potential, we're just scratching the surface — yet the companies, even the leaders in the space, don't have the budget to make those long-term investments in R&D. And I was a company in the space — I ran a company that was publicly traded, that was growing fast, and we were actually seeing good amounts of capital at one time. I wanted to have that long-term mindset of, where is this going to be in ten years, and how do we make those investments? And unfortunately the market shifted, stocks got beat up, access to capital wasn't there, and I had to shift my mindset as a CEO to short-term thinking too — how do we get through this year, how do we get through this quarter, what do we cut so we can sustain? And it was frustrating. Here you have this generational opportunity to build a brand-new industry from the ground up that's going to be massive — it's going to overtake alcohol — and you're like, nobody even wants to give me the ability to make those investments. So, living through it myself, I really enjoy working with C-Cell. The chairman and CEO of Smoore, Alan Chen — it starts at the top. This man is visionary, an incredible leader, with an incredible ability to think long-term. I always take the opportunity to meet with him when I can, whether over in China or when he's here on a trip, just to talk to him and let some of that rub off on me in terms of how he thinks so long-term. And it starts with investment in technology, innovation. His mindset is that no matter how much opportunity there is today, how much profit there is to make today, if we're not making investments for tomorrow — particularly five, ten, fifteen years down the road — eventually we're going to end up faltering as a company. So he's building this company to be around for the long haul, and I just love that. You don't see that as much today in general, because everybody traded publicly is measured more on a short-term basis, quarterly earnings. And this is a company that has said, look, we've found a lot of success, we've recognized a lot of value, but we're not going to operate based on what's going to move the needle in the short term — we're going to keep our focus on where we want to be in the long term. So that's great. And then, of course, having the budget — being able to have a highly profitable business on the global nicotine front allows for a nine-figure R&D budget. It's incredible, and putting that to the right use as well. You see some huge companies, even Apple — there hasn't been a lot of innovation out of Apple lately, even though it's a phenomenal, highly profitable company. So you've got to get it all right — you have to have the resources, you have to have the mindset to make those investments, and then you've also got to bring some real innovation to market that sticks. That's why we're also so excited about some of the new stuff we have going on — the 3.0 technology we announced at MJBizCon — because we think years and years of this investment has now yielded what we think will be the next big trend in vape for this space. Kellen Finney: You don't think AirPods are super innovative? Hold on, though — Nick, the new iPhones do have better cameras, right? Nick Kovacevich: Hey, I hear you, I hear you, I hear you. By no means am I defending Apple's evolution from a hardware standpoint, but they do spend an exorbitant amount on R&D — it's just that a lot of those projects they try to bring to the finish line, and they realize it's just not there. So they have to be willing to invest in failures in order to figure out which one is the end result — which, again, I think is part of the challenge for cannabis as a whole, because a lot of companies don't have the capital to have nine failures, where that tenth one is the moonshot that sends it to the next iteration. Bryan Fields: Yeah. No, look, and the other thing — and certainly I'm not bagging on Apple, it's a phenomenal company — the other challenge they have, which is a problem none of us will likely ever have, is they could bring a product to market that's a multi-billion-dollar product, like Apple TV, and it doesn't move the needle for them whatsoever. Apple TV — a couple billion bucks — doesn't matter, they've got another problem. If they bring something to market and invest in it, it has to actually move the needle for them, and for them that means hundreds of billions of dollars, not a couple billion. So that's a problem I'm sure you'd love to have. Nick Kovacevich: So that's a good problem to have — personally, I'm sure you guys would take it too. Kellen Finney: Yeah, no, I didn't mean to derail the conversation — getting back to it, I did have a question. Why Arizona, when you guys were looking at deploying capital? I know it's weird — you mentioned chips earlier, right, like Nvidia's building a huge facility in Arizona. I don't know if there's some sort of tax benefit for Arizona, I know there's legal cannabis there, of course, but I didn't know if there was another reason you chose Arizona. Nick Kovacevich: Yeah, I mentioned the distribution partner network — two of the largest distribution partners, 3Win and Jupiter, are based in the Phoenix area. And I think Arizona is pretty unique in that it's a very business-friendly state. It does have legal cannabis, and not like, say, Ohio — I mean this is a fairly developed, robust market, all the MSOs are there. So it's a good market for cannabis, and it's a good talent pool for the particular scientists and engineers we need. Also, it's a good cost of living — you go to LA, obviously a ton of talent, but cost of living is very high. So it checks a lot of different boxes, and that was the rationale for making that investment. Kellen Finney: From an investment side, is it what's most beneficial for the cannabis industry based on what C-Cell thinks? Is it based on what consumers think? Or is it more of a moonshot chance of, okay, if we can figure this out for tobacco, this could be beneficial for cannabis? What's the breakdown there? Nick Kovacevich: Yeah, phenomenal question, and it's great to be able to dissect the different parts of that. So, of course, what's also unique — I think — about our cannabis industry being so new and emerging is there isn't a lot of consumer data, and there aren't companies with the budget to really go get that data. C-Cell is committed to that and is always focused on the consumer. Another thing I love is that they're willing to make those investments to do the different consumer studies, and essentially have that be a big part of the driving force behind where they make investments and where they look to innovate. So that's number one. Number two, of course, is an interesting situation, where C-Cell is again that sort of behind-the-scenes provider of hardware that powers the brand. So we have the brands saying, here's where we think we want to go, or here's where we think the market's going to go, and, of course, being able to utilize the brand's input — if the brands want to invest in specific types of form factors or specific types of technology based on what types of products they want to bring to market, or different oil consistencies they're investing in, that's a key data point we want to bring into the fold as well. But the third thing you mentioned is the relationship we have with the nicotine side of the business. This is a good example of something that's taken off globally — a massive market: heat-not-burn technology. Smoore was able to announce new proprietary technology that's now being rolled out with a partner — I think it's BAT — and that's going extremely well. We have that sitting there for cannabis. Is cannabis ready for that? No, not right now. So we've got to look at where the market is today, what consumers want, what brands want, and then also, in the back of our minds, think about some of these things that could be game-changers down the road. If they're trending in global markets like Europe in that direction, there could be a time where that fits really well, or a modification of that technology could be a better fit for the cannabis industry. So we've got to use all those different data points. And again, that goes to the point — if you're going to spend this type of investment, there has to be a return at some point, and you're going to have some things that don't pan out. Maybe there's technology that could be used on one side of the business but doesn't transfer to the other — but I'm sure there are things relevant to both sides. Given the scale we have on the nicotine side, that could allow us to provide products to the cannabis industry at a much cheaper price point than folks focused only on this industry could otherwise achieve. Kellen Finney: What about the balance between the brands, the oil, and the hardware? Just from a consumer standpoint, sometimes it can be confusing — if you have an off-putting experience, which one do you blame? So when you're having these conversations with the MSOs or big brands, how do you establish who influences what, or who makes those decisions? Because it's kind of a unified package, but eventually one of them has to be responsible for the outcome. Nick Kovacevich: Exactly. And that's why — look, I was in the vape distribution business back in 2017, when some of this new technology was coming out all over the place and none of it was proven. We had massive failures. The worst thing you can possibly go through is getting calls from customers who've filled tens of thousands of these products with oil that's pretty expensive in some of these newer markets, and they're basically like, look, these are failing left and right, I've got a ten-percent return rate, I've got to kill this whole project, and you owe me not only for the hardware but for the oil I put in. That's the last call you want as a distributor. So why we enjoyed being a partner with C-Cell so much as a distributor — and now, obviously, being at C-Cell — is that that's never been an issue. We've always had top-of-industry failure rates. People say less than one percent — we're talking far less than one percent. It's just a non-issue — you take the issue off the table. If a brand is having returns, that ends up affecting their brand reputation and ultimately their P&L, and that's going to come back on the supplier at some point. We've really negated that issue entirely — it's a non-issue. So when people think of C-Cell, that's something that never gets brought up — this idea of, oh, is this product going to fail and tarnish my brand? So we essentially won that battle. Obviously we have to stay diligent going forward so that never happens with our products. Where we do see issues is more with folks getting products that maybe don't fail, don't leak, but just don't provide a great customer experience. So you're a brand, you put a lot of care into the oil and the flavoring of that oil, and you want the consumer to actually experience what you'd expect them to experience. And they might perform — they might be able to vape and get high — but they're not getting the full experience of what that product should provide. They're not going to say, hey, this brand's product cut out on me, or return it — they're just going to buy something different, and they don't even realize that's what's happening. That's the thing — it could be happening on a batch-by-batch or device-by-device basis, and sometimes the brands don't even know it. They wonder, why isn't our sales growing? And it's like, well, people don't like the product — but is it the product, is it your oil and you need to go back to your lab and fix it, or is it your hardware? A lot of times that data — again, there are a lot of different points along the supply chain in this industry — that dialogue directly with the consumer isn't happening as well as it does in other industries. So this is an important dynamic for brands to be aware of. Hopefully consumers can become aware of it too, but I think it's going to be more on the radar for brands to make sure they're getting that performance right. And that's one of the things we highlighted with some of the new technology we're bringing out — the 3.0 technology, which is, I think, really the next big leap in vape technology since the ceramic core was invented by C-Cell back in 2016. This is post-less, right — other factories are also producing post-less products, so that's not necessarily the innovation itself, but it's in the core itself, and the way the core is set up: it's a system, auto-designed, and completely uniform. What we see with even our ceramic cores that are made in-house, which are best-of-best, is that they're still not uniform, because just the nature of the material creates an essentially unique overlay of where the cavities and holes end up, and that can add variability. So the fact that these were designed to be specifically uniform is a game-changer. And the fact that it sits below the core now allows for full drain of the oil. So you don't have oil getting stuck around the core, and the consumer who bought a full gram didn't get the full gram — now you're going to get the full amount. So that's a good start. But the key piece of this technology is in the heating elements. With this heating element, we can make sure the device stays on track when it comes to heat. You have a spike in heat as you're starting to vaporize. Now, what can happen — especially if somebody's doing a longer hit, or a blinker hit — is it keeps running, and it's actually exponential, because once you heat the oil, the oil gets so hot that it heats up the heating element, and the two work together to really spike the temperature. To a consumer, that might not even be noticeable — they just think, I don't like the flavor, or I'm not getting the flavor, when really they're getting the full spectrum of the terpenes burning off. Whereas with our technology, by ensuring the heat rises and then flattens out — even if you're doing a longer hit, you're not spiking the heat and burning off certain terpenes. That's going to deliver the exact flavor the brand intended to deliver to the customer. So now the customer's experience can be based on whether they like the oil or not, not this extra variable that a lot of brands don't necessarily account for. Kellen Finney: I think that's really cool. I have a question on how you guys navigate the battery aspect associated with that, because the input is going to be the electricity from the battery. Is there internal conversation where you guys were like, we don't want to sell cartridges without batteries anymore, because that's a variable you can't control — and all those things you just mentioned in terms of, it's kind of your neck on the line if a brand takes a hit. So how did that conversation progress in terms of continuing to just sell the vape cartridge without hardware? Nick Kovacevich: Yeah, well, that's a good point. Look, there is a trend in the industry, as you guys know, toward more of these all-in-one devices — the designs of them being more boxy, these kinds of things are cool. It's what we've seen on the nicotine side with those kinds of products. So it's no surprise that cannabis consumers are gravitating toward those. So obviously now you're controlling the whole system — it's all in one. On the cartridge side, which is still a very big part of the market, and 510-thread specifically, that's going to be more universal. Of course, we do sell batteries, we do recommend our batteries, but the key is in the design — making sure we know these products are going to be used with other batteries, and we want them to still have that same level of performance. So making sure that if somebody puts on a cheaper battery, they're still going to get a good hit, a good flow. That's key. Now, with our technology, where the temperature doesn't spike — even with a lower-quality battery, obviously you're going to have more issues with a souped-up battery — but our technology prevents that. So, look, it's not perfect. We'd prefer, obviously, that people use our batteries, but we've got it pretty darn good, to where the customer experience is going to be consistent no matter what battery they use. So yeah, it's a good point to bring up. And again, I think it's a point that if you're a brand, you've got to worry about — you can sell the consumer your product, it's built well, it's got instructions on there, but they could buy the wrong battery and not have a good experience with your brand. It's a factor everyone needs to be aware of. There are lines of responsibility, and then there's this massive gray area of, okay, whose fault is it — the consumer, the brand, the hardware, the device? It all kind of gets blended together. Kellen Finney: Has C-Cell looked into, or considered investing in, the supply chain to try to stabilize the oil-filling side — maybe some technology there to ensure that when it gets to the next step, it's hit certain QA/QC? Nick Kovacevich: Absolutely. Yeah, I think we talked a little bit about some of the investments we're making in essentially the filling — and this is the supply chain piece that's critical, because, as you know, in the cannabis industry costs are very important, and people have down-traded hardware. It's like, hey, we know C-Cell's the best, we'll take the second- or third-best because it works almost as good, and it's significantly cheaper. So one of the things we're doing is making investments in bringing our U.S. infrastructure, bringing product stateside, so we can get costs lower and be more competitive on cost, because we know that's important. We want people to have the best product, but also at a great price, so there's not this desire to trade down simply over cost. That's one of the things we're solving there. Bryan Fields: You know, essentially — actually, I forget the question I was going to ask, I went off on a tangent there. Could you repeat that? Kellen Finney: Sure — it was more about the supply-chain aspect, specifically on the extraction side, your team. Nick Kovacevich: Yeah, so where I was going with that was the automation on the fulfillment side. This is something we saw a lot of as a distributor — we'd run into issues like, this isn't working, I'm having issues with their hardware. And, I mean, nine point eight out of ten times, we'd get our guy — actually the guy we used at Kush, his name is Jeremiah Howden, he's actually at C-Cell now, so he's one of our guys at C-Cell, he was my guy back then — we'd get him out there, and we had a few guys that were really good, but we'd bring the team out, and it was almost always a filling issue. It was almost always a filling issue. And we've resolved that. Now, with C-Cell — which is great, again, having that bigger budget is nice — as a distributor we had a couple of guys, but now we've got a full team here at C-Cell. We've got a whole tech team, and they're mobile, so they'll go on-site and make sure they're helping with the filling process, because that's an important element in getting the overall consumer experience right. Now, the investments we're making — we've talked about this a bit — is actually bringing automated technology to do this, to make it foolproof, so it works every time, but also to lower costs for the brand. Now, this can be done through co-packers, and it can also be done directly with vertically integrated operators, especially MSOs. A lot of them don't have — it's not the highest priority on their list to spend money on, when it comes to investing in the automation behind their filling — it's lower on the list, and everyone's tight on cash. So C-Cell has the budget, great, we'll do it. We have to be experts in technology and automation — we do a lot of automation at our factories. Let us figure out how to help you fill this in the most efficient manner. We never want to compete with our customers — we want to enhance their ability to be more competitive in the marketplace. So we've got a little test facility set up here in California. We're working on it, doing some filling for people — this is really to learn and perfect it. But if you're a co-packer for a larger vertically integrated operator, we'll work directly with you to help enhance your production facility to fill our products. We want our products going through those machines, but we want them to be the most efficient, and that's going to lower your overall costs. So even if you're paying slightly more for a higher-quality C-Cell product, you're able to fill and cap them at a lower rate, so your all-in cost is competitive with the marketplace. So the value, though, is that C-Cell gets to sell their product, but upstream and downstream there's also added value for the customer, because the consumer gets a good experience, they continue to repurchase the product, and this failure point that happens internally — which is probably a bigger one than most want to admit — gets eliminated. Now you've got continuity across the chain, which is a massive advantage compared to your peers. Bryan Fields: Boom — we're going to clip that and put it on our website as a marketing piece, because you said it exactly right. Nick Kovacevich: And that's what we aim to do here — we think production all the way to consumption, so where are the variables in between? We can perfect the hardware, we can perfect the technology, we can perfect the core now, we can make that perfect — incredible — but if you're not doing the other parts, you could still end up with a bad consumer outcome. So we're focused on it all. And some of our customers really get it, and they're leaning into these partnerships with the bigger brands. So I'm curious, as an industry OG, I guess — somebody who's seen a lot of these brands and been in the market for a long time as a consumer — how do you see these brands really utilizing partnership with C-Cell to win in the marketplace? I'd like to see success there — it really validates the investments we're making. Bryan Fields: Tariffs. Talk to us about that perspective — obviously, with the new president coming in, tariffs being a big element, and your headquarters in China, how does your team think about that? And is it a one-month, three-month, six-month, ten-month plan? How are you game-planning for this? Nick Kovacevich: Yeah, you know, look, it's an interesting time. We've got a lot of change at the political helm with Trump coming back into office, and everything's up in the air. I don't think any investment is safe right now. I was talking to some of my friends in packaging — like, what are you doing? I don't want — okay, I'll build a factory in Mexico, or I'll build a factory — that could get tariffed too. The safest thing right now is obviously making investments in the U.S., but currently it just doesn't pencil out to produce these products in the U.S. You've got the whole component supply chain too, because these components are coming from overseas, right, and everyone needs the same components. That's why production of these devices is all done over there. I think the biggest thing — and this is another thing about C-Cell making these investments here in the U.S., and part of why I came on board — is to help make sure we're set up here in the U.S. to be more than — we're obviously a very big company, actually the biggest company in the cannabis industry — I can't think of anyone bigger. I mean, Scotts, because they're combined, but I heard now they're spinning out their cannabis business. Big companies are slower, right — it's harder to turn a big ship than a little watercraft. So we recognize we're in cannabis, one of the fastest, most nimble and agile industries there is. So making investments in setting C-Cell up here in the U.S., bringing resources here, bringing inventory here, bringing R&D here — all of that is going to help us be more nimble. So when we think about tariffs or political policy, the same logic applies — we need to be prepared. What I love about what we've already done is we've made investments in Indonesia and other parts of Asia to diversify, because we know China is sort of the big target when it comes to some of these tariffs. We just saw another ten percent tariff being implemented. For us, we have the balance sheet, we can absorb some of these impacts, but for our customers it's much more challenging. So we have to think through how we minimize the impact to our customers. One of the big things we unlock by setting up our own infrastructure here in the U.S. is an advantage when it comes to tariff importing. Yes, we're still paying tariffs, but we can pay them at the manufacturer basis. All of our competition is essentially distributors — they're buying from existing factories they don't own, so they don't have that advantage. They can underreport their tariffs, but they risk getting caught. They can't bring in the tariffs at the manufacturing basis, at the component basis, because they're not doing the assembly here. But we produce those products ourselves, so we can actually import them at our cost. So even if there is a tariff, it's going to end up being a lower amount. Those are the different ways you can plan ahead of the curve. But there's obviously an unknown component to what's going to happen. So that's something we'll have to address as change comes. I do know the new administration is very pro-American-business. I think all of us have been very disenchanted with the previous administration and the lack of progress on legalization for our industry. I'm hoping for a big change. We're recording this less than twenty-four hours before Robert F. Kennedy Jr. becomes the new head of HHS — I think that's a game-changer, personally. I think, obviously, he's pro-cannabis — he mentioned when he was running for president that he would legalize it. So with this position he's going into, I expect some very positive change here at some point. Obviously it's not the top item on their priority list, but I think it will happen. I think the industry has to mobilize — I like what's been happening, where the industry groups have all banded together under one banner to push a common message to D.C. So we need that big unlock, and then that can carry all the way up the supply chain, because when the federal government starts to look at the cannabis industry as an American industry — putting unnecessary costs into the supply chain, all the way back to the vape — that's detrimental to American consumers and American jobs. So I think, in a perfect world, we can get this resolved over the next few years with a common-sense approach, and I think the new administration is trying to remain common-sense on a lot of these issues. Now, you've got legacy politicians who are totally against cannabis on both sides of the aisle, but a lot of them are on the Republican side. So we've got to navigate that. But I think with the Trump administration and some of the appointees, this isn't a very legacy group — these are new folks who I think are thinking about things in a more common-sense way. One of the things I think has always been the case is that cannabis has been less of a partisan issue and more of a generational issue. So just having younger people coming into positions of power, I think, is positive. Again, it's a long-winded answer about the macro political dynamics involving the supply chain, but I think they're all kind of interconnected. If we look at cannabis as an American industry — the next great American industry, which it is, just look at the data — forty billion dollars now across legal regulated cannabis and legal hemp. I think there's an opportunity to bind the industry under a common-sense legal structure. There's no sense in us fighting two different sides of this industry. Somebody who looks at this like RFK possibly could say, let's put this together, let's put common-sense regulations in place that significantly deregulate. I think we're overregulated on one side, underregulated on the other, but put those together with common-sense regulations, show that we're going to create a great American industry with American jobs, and we're going to benefit consumers — veterans, right, who need this product. It could be a recipe for success that ultimately solves some of these uncertainties in the supply chain too. That's my goal, and I want to manifest that — so I'm bringing it here to you guys and getting it out to the world. Bryan Fields: One of the things RFK definitely wants is more research. So given the R&D budgets your team has put in — as one of the leaders, maybe the largest company, like you said — is your team also taking the stance of ensuring the safety of the technology and making sure consumers who are vaping have all those safeguards? Is the research there that you can share, or plans for those elements? Nick Kovacevich: Yeah, great question. We've very much been focused on doing that for the consumer. I think the reality is the government hasn't been too interested in cooperating with the private sector to accomplish that for the greater good, and hopefully that will change. We'd certainly be open to shifting our resources to align with that initiative and being part of the solution that could unlock value for our entire industry. And we have the budget to do that, and that's, again, kind of the whole theme here — C-Cell 2.0, what we're doing here is aligning more with the industry. I think, traditionally, what you see across the space is these vape companies essentially buying vape products produced by Chinese factories that are totally disconnected from the cannabis industry. And, of course, there are good companies here that are essentially distributors that have branded themselves as vape companies that are deep in the cannabis industry, but their supply chain is disconnected from the cannabis industry — it's just a widget. So I think I have the opportunity here at C-Cell to be the first company to do end-to-end. We're highly technical and involved in the manufacturing itself — we produce a lot of our own components, including the ceramic cores — and now bringing boots on the ground, research and development, here in the United States. So connecting that supply chain, and with that unique standpoint — how we look at the industry from that perspective — that could bring a lot of value to an inquisitive federal government that wants to get it right. The federal government's attitude changing from, hey, we just want to ban this because it's bad, or because it goes against Big Pharma, to, what can this really do for veterans suffering from PTSD, for people on SSRIs — I think that perspective is going to change. And who's in a better position to help support that from an R&D standpoint, given our connection end to end? And again, we're only on the vape side — there's so much cannabis science that needs to be done. But I love thinking about a world where we're investigating that as a country, asking the right questions, and turning plant medicine from the boogeyman into something that can be very positive and actually get people off hard pharma drugs. This could be really — we've all kind of been waiting many, many years for this. Kellen Finney: I think it's really wild that it's never spoken about — the existence of e-juice and nicotine vaporizers is solely to be a safer alternative to smoking cigarettes. Right? My mom smoked cigarettes her whole life, moved to Nicorette and nicotine vapes, and she's a way healthier human being. She looks healthier, she has a better life. And that conversation never happens in cannabis — we just forget that there's a bunch of people still smoking flower, and a safer way to inhale your medicine is via a vape pen. So has there ever been any conversation at C-Cell about funding a study showing that exact benefit — not lighting something on fire and inhaling a flaming plant, versus inhaling vapor at a specific, controlled temperature through this kind of technology platform? Nick Kovacevich: Yeah, look, you mentioned a great point — the adjacency to what's happening here in the U.S. on the nicotine vaping side. And it's actually twofold. On one hand, there's this PMTA process that a lot of the larger companies have gone through, which requires extensive research — they're actually looking at the safety of these products. Unfortunately, that's been undermined and undercut by illegal nicotine products — they're bringing in everything like these Elf Bars and stuff that comes over completely unregulated, completely untested, and ends up in smoke shops and head shops. And this stuff that these kids, unfortunately — a lot of them younger — are sucking down, we don't know what's in it, we don't know if it's healthy or not. So I think it's a great question — more research needs to be done on the nicotine side in terms of the additives being added. And nobody's talking about it on the cannabis front either. Part of it is we're not even talking about what the issue is with combustion of flower, because it might not be the same as nicotine. So let's start there. Then we can go, okay, vaping is obviously a solution that's working for nicotine — we see it in the UK and other countries, they've done real research on this. But what do we want in the vape, what do we want to make sure is in the vape? Stuff like PG, propylene glycol — that's something the industry, luckily, has moved away from. We're using terpenes now, and studying the terpenes. We know some of these companies are making efforts to do that, but we need to look at it holistically. The other thing that I think could be big — when we think about legalization and public consumption — that was a big issue for nicotine, right? People smoking cigarettes, we used to allow it on planes and in restaurants, and that all got banned. I think that's been part of the pushback against cannabis — the smell. And you're in New York, where you're allowed to smoke on the street, and that's something people have used against our industry. So vaping is another way to reduce that. We saw an uptick in consumption when the pandemic hit, because people were stuck indoors — they weren't allowed to go outside, or if they have kids, they don't want to smell up their whole house. So people love the vape product for multiple reasons. I think we need to do more research on safety — how do we make it as safe as possible? We know there's already nicotine data suggesting it's safer than combustion, but what about the additives, what about all the other components? Great point — so much to be done, and that's what makes it exciting. Education of the consumer is a big piece — the consumers are all relatively new, this is a new category. I mean, vaping cannabis has barely been around ten years, so there's a lot to do, and it's still gaining popularity. So we definitely want to do more safety testing when something's this popular and only growing bigger. Bryan Fields: I love it. Hard pivot — last question. What question do you wish more people asked you? Nick Kovacevich: Look, I think we talked about a lot of it. I think the biggest one, selfishly from a C-Cell standpoint, is that people aren't asking deep-enough questions about the supply chain — about the components that go into the devices, who's producing the devices. People are buying brands, and probably the majority of consumers are oblivious to what's even in the hardware — they don't even think about the hardware being different. Just like if you buy an Apple computer, you might not necessarily think about whose chip is in that computer, but that's because Apple is such a trusted brand — you know they're going to buy quality chips. We're not there yet — these brands haven't established the level of trust that someone like Apple has with their consumers. So consumers, in my mind, should be asking this question. The other thing we also talked about was, not enough people are talking about what's possible here with this new administration. I think there's been too much of this idea that Republicans are bad for cannabis. Look, I was on that same line of thinking until we sat through four years of Democrats literally doing nothing and gaslighting us, pretending they were going to do stuff. So I think opening up the dialogue around RFK — this is a very unique opportunity, we've never had anyone like this in HHS, which is arguably the most important position for this. This is stuff the industry should be talking more about. I do see some people talking about it, but there's more tension between people — there's obviously a group that doesn't want to support Trump and is willing to continue buying into these old paradigms about Republicans being bad for cannabis. Let's shake that — let's see what can be done here with this new administration. I'm always an optimist, so no matter who's in power, I'm going to be optimistic. But there's no reason not to be optimistic when we've sat this long and gotten nothing done. The time could be now, certainly within the next few years. So I think that's a topic we need to be talking about. And the other thing, which we hit on, was R&D — where are these companies investing? I think, unfortunately, a lot of that's hamstrung because of the capital situation, but as that improves — and we need federal reform for it to improve — that's going to be a big topic: where does this industry go next? We see nicotine on a global level moving to heat-not-burn, moving to highly regulated vaporization. Is that what's going to be next for our cannabis industry? That's going to be an exciting topic, but maybe a little more challenging in today's environment to have that conversation. Bryan Fields: Love it. So with that, Nick, for our listeners who want to get in touch and learn more about C-Cell, where can they find you? Nick Kovacevich: Oh, well, our website is a great resource — ccell.com, check it out, we actually just revamped the website. Also, we're going to continue being active in the cannabis community — you'll see us in different cannabis publications, magazines, at trade shows. We mentioned the big 3.0 launch at MJBizCon. We're going to be at Benzinga. So part of putting boots on the ground is investing more in the cannabis community — Hall of Flowers, these types of things. And I'm the corporate relations director, so I'm the guy who's going to be talking about C-Cell at a lot of these industry events, and I appreciate the platform you guys have provided us here. This is a great podcast to be showcased on, and expect more of this from us. We're going to put information out on social media, on our website. We don't want to make everyone come to us — we want to come to you. So I want to be out there where cannabis consumers are consuming content, and make sure people are getting more aware of what's behind the scenes on the supply chain. And I think this will be a good episode to highlight, and I think we did a deep dive here that's really the message we've been trying to get out. It's only February, so we're starting the year off really well. Bryan Fields: I love it, I love it. We'll link it up in the show. Thanks for taking the time — this was a lot of fun. Nick Kovacevich: All right, guys. Thank you so much.