hey guys it's rob from rect radio i have the distinct pleasure today of sitting down with precision extraction nick has a huge operation going in terms of its influence in helping companies that are trying to get into the extraction space so they can create marijuana products with a consistent amount of dosing and is really doing a lot in the space for marijuana making it more easy for companies that want to jump in to do so with a certain level of expertise and experience so nick how you doing i'm doing great man thanks for having me it's a pleasure to be here i think one of the most interesting areas that people outside of blockchain have been requesting an interview on or some sort of primer on has been marijuana i was telling you before the show that there's a lot of overlap like vc funds that are in blockchain are also heavily a lot of times medical marijuana here in southern california like getting either distribution or processing or manufacturing how did you come into first blockchain and then marijuana in terms of as a career path sure so i've been in blockchain since 2016 and i guess you would kind of characterize me always as a technology enthusiast right like any sort of disruptive technology i've always gravitate towards and i i just try to understand as much as i can about why it's disruptive why the technology is going to change the future state of the world and kind of run through scenarios in my head about if this then this and how will this progress and proceed and what's the the likely paths and the likely outcomes and i think when you run through that thought process it leads you to understand the future state of the world and blockchain was one of those things that obviously with bitcoin back then with the financial system set up the way that it is and we can go into all that long-winded conversation of course there but just really saw the future state of the world being integrated with blockchain and being integrated with decentralized technologies and and independent currency right like this parallel monetary system that's being built next to this old system that has many flaws of course and lived through the the 2017 boom watched ethereum go from seven bucks all the way up to 1400 or thereabouts and all the way back down and made some good trades some bad trades and the whole time i was still running our company in the cannabis space and so trying to kind of follow both paths we obviously went into the crypto winter there 2018 2019 uh but i was still building everything in the cannabis space and not full time in crypto i'm full time in cannabis but still follow the technology invest and and really have my ear to the ground and what's happening you're so right like there's a lot of um carryover in both spaces where you've seen a huge shift i worked in private equity for about a year and the guy that actually led my tech department went to go work for canopy and he kind of helped usher some huge investments into marijuana right about the same time that a lot of blockchain projects were scaling and i wonder from your point of view it seems like during the early stages of blockchain you had people that were coming in as a hobbyist or the seriousness wasn't quite there sans a few projects uh here and there and then the perception at least in southern california like with marijuana that the seriousness wasn't quite there like real scientists wouldn't get into it and then as the legalization came and you know bigger and bigger scientists and influencers and celebrities got in like the seriousness started to make a real shift did you see that shift in your own life like interacting with other kind of marijuana companies and scaling things yeah definitely i mean i think that there's a parallel path here because what you have to understand is they both came from a taboo sort of social interpretation right like blockchain or bitcoin being used on silk road cannabis being an illicit drug right they both had these these social interpretations of being taboo or negative or whatever it was and so naturally the paths were somewhat similar at least from like a socio-economic perspective in the way that people interpreted them so really in the early days of cannabis you were worried how far you could stick your arm out because it might get chopped off and i think that a lot of the same held true in the early days of blockchain right i mean like the mount gox hack and all these crazy things that happen but as the infrastructure started developing as it became socially and societally normalized whether it's the use of blockchain technologies and cryptocurrencies or it's the use of cannabis right it's becoming more widestream more adopted and and obviously any person that really studies the space they come to the logical conclusion that it's only going to grow bigger stronger wider faster and as that happens i think that the the original players in the space or the people in the space whether you're an investor whether you own a business you know it's all positive right you've got this the 70 mile an hour tailwind so to speak the whole way through in either industry and i think that a lot of people from cannabis were gravitated towards cryptocurrency and blockchain technologies and a lot of people from blockchain are gravitated towards cannabis and a thing to understand too is in cannabis the banking sector's been extremely precarious right so you have this entire industry that's been sort of stifled by lack of funding lack of free regulated banking having bank accounts shut down left and right so enter this parallel decentralized financial system i think that you almost have a pre-ordained group of people in an industry that are ready to adapt and integrate these types of technologies and i think that a lot of people in the cannabis space are very well educated in the blockchain space also do you see a lot of the cannabis ceos say like cut of a similar cloth are there people that have just grown an appreciation for it in their own use and they're like well this is being inefficiently done in my experience and they're trying to bring something to the space you know i think that we're still very early right like it's just so early i mean yes there are definitely business leaders there's companies in our space that accept cryptocurrency as payment we're obviously one of them there's innovative and forward-thinking business leaders but man i got to tell you it's just like everything else while we may have a greater percentage of that pie so to speak in terms of people that have actually adopted some form of commercial cryptocurrency most of the business leaders in the space are still kind i mean they've heard of blockchain they've heard of bitcoin but they don't really fully understand it they don't really get it they don't understand you know why decentralized technologies are going to eat the future of everything and i think that the more that it becomes adopted the more you're going to see this change one of the huge things i saw a lot of the ceos in the space questioning themselves and and trying to understand why they shouldn't be taking cryptocurrency or bitcoin is payments after the whole elon musk thing after he did all the tweets and they're like okay well this ceo of this multi-billion dollar one of arguably the largest and most notable companies in the world is accepting bitcoin as payment why shouldn't we and i think that most of people whether it's through their own choice or through just circumstance don't really have the time or or the aptitude to independently research these types of things and and it requires a lot of foresight it requires a lot of just time and critical thinking so it's very hard to understand an alternative space when you're running a business full time right like our business consumes a lot of brain power a lot of time and it's very hard to you know understand every single nuance of what's going on and everything for example i'm seeing this nft thing going on i really wish i was better educated on it because people are just making insane money but i have to just take that one on the chin and say hey i missed it i'm learning as much as i can but there's just not enough time in the day and when you're running a business i think it's hard for these ceos to really become ultra forward thinking and be able to adapt uh the technologies in front of everybody i remember back when i first got into crypto in 2014 that same year they had a launch of a few coins pot coin cannabis coin and dope coin yeah and a hemp coin i remember and it was the first movers were thinking that using those coins would be the way of the future but i know that some providers are using like bitpay and it seems like some are using onboarding kind of solutions is there a consensus in the way that marijuana users would use is it like a specific type of coin or what's the thinking in terms of how to kind of get fiat yeah i mean it's going to depend on what sector of the cannabis market you're in because retail dispensaries have large volume low monetary transactions somebody like our business has less volume but our sale may be half a million dollars to a million dollars something that we use like coinbase commerce is pretty easy because we're only sending out a handful of invoices a week but it's hard to say man it's so early and then how do you get that intermediary settlement layer because i don't think that most of these companies the issue is is that if you're running a dispensary or a large crew operation you've got cost of goods sold you've got payroll you've got all sorts of things that you have to pay for and your vendors uh or your subsidiaries that you're paying they're not going to take crypto so where does that intermediary come in and then how do you bridge between already something that's looked upon unfavorably right which is cannabis okay then you have cannabis in the normal banking sector that's hard enough then you have cannabis in the normal banking sector that's taking crypto payments converting those crypto payments to a centralized exchange and a centralized exchange dumping them into a traditional fiat bank account it's going to give the regulators a heart attack right so that has to be figured out and i think when that gets figured out or there's a parallel financial system or there's wide enough adoption of cryptocurrency by the vendors and service providers within the industry then we could have a complete parallel path to the traditional banking system that cannabis can operate on and that's obviously the goal with the whole world right but it's going to be a battle it's going to i mean you know what the central bankers and the regulators are doing it's going to be a very big battle and yeah it's going to be a precarious one we'll see how it comes out we definitely will it seems like both there's institutions that are antithetical to both getting the banking accounts going when the federal charters are still what categorizing it as a schedule one elicit drug and accounts and with blockchain you know people are still shutting down accounts for buying crypto on coinbase and it's a whole problem i know that in my neck of the woods i've gone several years to la blockchain week and on the exhibition room floor they'll have like one or two marijuana people that are trying to figure out kind of the interplay to get something done on blockchain and they always tell me that the hardest thing is getting a consistent dose so that when you see like 100 milligrams on a particular product that it's a spectrum it's not an exact science but it seems like what you guys are doing is more of an exact science can you talk a little bit about the extraction and kind of how you work with businesses absolutely 100 so what we do as a business obviously we're an end-to-end integrator so we'll start there right you can come to us with a pile of soil and say hey i want to start an extracts company i want to make candy bars and vape pens i want to do 20 000 units of each one a week and and give me everything that i need to to build it so we can actually design your space build your building help you with permits integrate all the equipment stand up your production line and ultimately train your staff integrate sops make sure that your gmp compliant so that you're making these products and the quantity and quality and the fashion that you want but in terms of how we're creating these products we have to think about is we have this magical plant and this plant grows these molecules right they grow cannabinoids whether it's thc cbd you've got some of the other minor cannabinoids cbn cbc cbg right there's about 120 of them that are identified to this day then you also have your terpenes your terpenes are what give you your flavors smells aromas and things like that so what we're trying to really do when we extract is we're trying to capture these essential molecules these desirable molecules in the purest fashion that we can so whether that's actually doing a wide spectrum extract where we're getting the native ratio of all those molecules or are we trying to isolate a single molecule like thc or cbd so when we isolate singular molecules we can take it to a 99.99999 purity and then that can obviously be weighed that can be dosed into whether it's edibles or whatever it is topicals lotions tinctures that can be dosed to an exact dosing right and this is how we create for these large brands we create a replicatable scalable product that's consistent it tastes the same every time it has the same effect every time and it has exactly the traceability and the safety aspects that one would want when consuming a mind-altering substance do you find that people will come in you know with oh i want to sativa to a certain degree or i want to cross-strain and i i wanted this as an end result and then essentially they're designing marketing around that or do people just come to you usually and say i want to get involved in the space i have such an influencer here and here they want to promote i'm thinking of i think george clooney with his alcohol companies you know he sold it for nine figures ten figures whatever it is and you're seeing like a lot of celebrities getting into the wheat space obviously seth rogen and they're seeing that as an alternative to alcohol to get involved with do you see people coming with a business plan or do people just kind of throw up their hands and come to you and say like how can i with this land get something as an end product it's both um i think that the quality of the preparedness of the individual or the business is a pretty wide spectrum i would just equate that to that's kind of just how people operate in life so but our client base we have new entrants we have almost every single one of the multi-state operators whether you know it's the big boys they have a publicly traded symbol i won't name any names but almost all of them are our clients about 95 of them are our clients so those guys they have a product plan they know exactly what they're selling exactly what they're manufacturing exactly at what ratios and what volumes and which state it's going to go into in which individual jurisdiction has better sales volumes of a certain product than others and then you have people that are completely just starting out like people that need guidance people that we need to mentor and that's a large part of what we do it's very much a consultative sale it's very much a sale that we work extremely closely with our clients whether they're a new entrant or they're a large multi-state operator or just a seasoned operator either way it's very much a dialogue kind of like we're talking right now what do the sales look like how do we think the sales of a certain product are going to trend in a given region do we think it's wise to add extra production for a certain product like vape pens because we see the trend going there is there another means or method of production like live resin vape pens or you know like the thca crystals or the sauces that are really popular and how is that going to trend so we're constantly with our ear to the ground we're constantly advising our clients and we're always trying to make sure that our clients have successful businesses and profitable ones also in colorado and california here we see companies that you know go public first on pink and then upgrade but they're getting pretty nice evaluations do you see the some of these companies hitting the public markets and getting some capital from that or from vcs willing to jump in after a few ones have already put their toes in and have gotten some sizable returns is it like concentrated in the east coast southeast the west or is it now like more across the country do you deal with b2b clients yeah our operation is actually global so we we do a majority of our business in north america nice chunk in canada but eu's coming online but in terms of the investment space and the market space wow i think maybe crypto is probably one of the only places that you can probably get a better roi than cannabis and that may not always be true because crypto has these crazy boom bust cycles when you think about cannabis you've got a industry that's growing at a 40 keger year over year and the best businesses within that industry are drastically outpacing that kegger so you can look at somebody like true leave or verano and look at how they've grown revenue and profitability and it's just it's really insane these companies are doing some of them over a billion dollars in revenue now at this point and we're only about 20 25 tapped into north america these companies have obviously plans to go global and look at what that's going to do over the next decade in terms of the investability of the cannabis space that's why you're seeing these narratives and these expectations of growth in the cannabis space and you see some of these companies just getting crazy valuations i know we've had a quite a bit of a pullback things got quite overheated but i mean some of these stocks if you were in early 2020 you were doing a 10 banger easily and it doesn't mean that it's right like i think that the market generally right now is a little bit frantic and overheated but these companies the underlying fundamentals of the industry and the underlying fundamentals of their balance sheet and profitability it's very nice they look very good and the opportunity for growth is not going to stop people are only going to consume more cannabis there's only going to be more jurisdictions that come online so it's one of the spaces obviously with me being really deeply entrenched but it's one of the other spaces where uh i have quite a bit of capital to work you know i love crypto but you know diversity is key and i think that there's absolutely a tremendous opportunity and which also makes a tremendous opportunity to build a business in the space so the same way that you can launch a crypto technology or decentralize technology and go to an ido i think that building a business in the cannabis space is just as good perhaps a little bit more stable a little bit more well received obviously you can get into the public markets fairly easily so tremendous tremendous opportunity extremely bullish for the next decade if not longer i'm a huge fan of value investing and i love peter lynch's suggestion to invest in what you know and i i remember doing the interview yeah i was like 2017 for canopy and the guy sitting across from me interviewing me you know was like you chicago and he was saying that a bunch of the guys over there are like mbas and just talking to him i thought i knew a lot about marijuana coming in and this guy was smarter than me and better informed than me and i think at that point i had that epiphany like whoa some seriously high level people are entering the space do you have an idea like if you looked at a marijuana business and said this is a really well run business or this is really clicking off is there common themes between well-run marijuana businesses that you see and ones that essentially have some difficulty kind of getting their footing yeah i mean i think that you can look at the business fundamentals the same way you would look at any other business right so doing a management consulting mckinsey type of analysis of the business looking at the profitability looking at the free cash flows the p l their opportunity for growth looking at the corporate presentation looking at their foothold in terms of technology or products or customer loyalty like these are just all the same fundamentals looking at the management team what's the management team's track record what's their history how are they operating their business can they clearly articulate their vision it's just like investing in any other space and if you get it right the risk reward ratio is pretty awesome it's a very very large asymmetric bet because you have again that 70 mile an hour tailwind in the cannabis industry the same way you do like in a crypto bull market except cannabis is going to be a decade-long bull market if not longer right oh there's such a demand and then the easing the different states that are kind of taking the lead of colorado and california and the positioning by a lot of politicians relative to alcohol has been effective also the hippie generation getting older um i know people that were such counter culture and they would tell me that it's an eventuality that when the hippies got more political power that it was going to flip so it seems like a cool time to be involved in this industry are you seeing people doing things in hemp and cbd as well or do you think the big push or that a lot of what you do is more in the thc market well so in 2018 you know we passed the the farm bill the federal farm bill which made him federally legal and really what that did man is it set off like a powder keg in the hemp industry i mean it was just a boom and it was the point where like 60 of our business was from hemp processors but that was when cbd was like eight to nine thousand dollars a kilo the price is less than 500 bucks a kilo so the people got the scale very fast and then eroded out all the margins the demand was met and it went away so today as we stand about 95 of our business is cannabis related and only about 5 is hemp so i think that cbd's become commoditized and i think that from a technology standpoint when we step back like precision is really a technology company we make technologies and innovative technologies at that to extract these high-value molecules from this plant and these high-value molecules we keep identifying more and more whether like again i alluded to before whether it's thc or cbd or cbg or cbn or cbc and then you've got all these other isomers and derivatives of these individual molecules there's hundreds of them and these molecules are going to continue to pop up and as they pop up people are going to find new and innovative uses for the ability for them to treat or alleviate disease-like conditions or ailments of disease and as these become more medically prevalent and better studied there's going to be new businesses that pop up surrounding the isolation of these individual molecules so i think cbd was probably just one of the first and i think that for example like cbn right now you're seeing sleep products coming out left and right with cbn you're seeing cbg at about 30 thousand dollars a kilo because it's a highly sought after molecule so in the future state you're going to have all these different cannabinoids all these different cannabinoids are going to be like different commodities and each commodity is going to be extracted in a slightly different manner isolated in a slightly different manner and they're all going to be recombined in different products whether that's a medicine or whether that's a recreational product and each one of these molecules each one of these cannabinoids they bind to your endocannabinoid system differently and they produce a different effect which is why they have the different use cases but with that all being said the technology the very early stages of this industry that's where we're at right now it's going to continue to develop so you've got this technology curve that's coming you've got this wide adoption curve that's coming you have more people consuming cannabis than ever you've got more and more people passing cannabis legislation and it's just this snowball effect that keeps rolling downhill and it's going to continue to get bigger stronger and faster from what i've seen that's spot on i remember in 2008 i was working with a bunch of spaniards that were over here to do research in la jolla san diego area and casual conversation with them like oh what are you here to do and they're all fellows and they were all doing marijuana research to find out how the cannabinoids enact interact with the brain and they're working with blue chip pharmaceutical companies and remember these european guys were saying like you don't understand this is such a big market and then they're gobbling up so much phds or like the the best and the brightest for marijuana that you don't understand and i remember at the dinner party everyone's like oh did you get it you know take samples to work and study at home or whatever it's still kind of laughed off but they're like the smartest biomedical phds are jumping into this space so it seems like for the full market to be tapped there's still a lot of research that needs to be done is there a lot of research being done that you're seeing a ton okay a ton so so we serve a lot of universities a lot of prestigious universities provide them equipment so there's there's on the academic level a lot going on but moreover oh boy last i checked i don't know if i'd get this number right because it's probably skewed now but the last i checked there was 189 clinical studies going on for cannabinoids and alternative cannabinoids in the pharmaceutical space so these are traditional pharmaceutical studies like the same way they would validate any other drug and whether that's a good thing or a bad thing i think that that's a whole nother discussion but they definitely are putting forth a substantial amount of research a substantial amount of resources because there is a tremendous amount of promise on how again these cannabinoids can treat cure alleviate human disease and other debilitating conditions i remember that during that also same time period they had a bunch of university case studies where they would in this case you would partake in an edible and then they wanted to check for response time playing uh e-games that were particularly demanding of your mental energy i think it was cs go and they wanted to kind of see how the brain responded you know while high and then test that and i think there was 10 spots and they had a thousand applications but this stuff is being really directly put into application in large pharmaceutical companies i mean those studies are bought up it seems like on a yearly basis do you see like the next iteration of this space just like the broadening in terms of the scope or is it pretty fragmented as far as you can see are you getting like a few businesses that are getting huge orders and then you're on boarding or is it like a smaller companies that are trying to kind of dip their toe in so it's actually a great question we talk about this a lot cannabis you have to remember man that it's like cannabis is an organic plant and whenever there's an organic plant put here by the universe people are naturally going to gravitate towards the organic natural state of that plant and because of that you know there's so many different strains each strain has unique attributes flavors unique effect etc so you can think of it like the wine industry or you can think of it even like the micro brew and craft brew industry there's always going to be the large-scale producers there's always going to be the big boys that are just pumping out the budweiser the coors the kendall jacksons of the world but the majority of the industry is going to remain in some sort of scaled craft concentrates and you can think of these like the micro brews or individual vineyards i think you're going to see the same thing with cannabis another thing that we can compare it to would even be food and artisanal food or farm-based food a lot of people will just eat commercially farmed i'm not one of them you know i will go to whole foods and i'll pay more for the local organic artisanal food i think you're going to see the same thing with cannabis and probably more to a larger scale on the artisanal side because people that consume cannabis there's something magical about the plant whether they're using it recreationally or to treat a medical condition people that use the plant they feel a certain connection to it a certain connection that it's put here by the universe and it's put here for a reason and to adulter the natural state of it is not the way that it's perceived to be in intended to be used that sort of belief structure holds true with the majority of cannabis consumers and i don't think that you're going to see really a trend in shift in that and i think that it's going to continue to hold true i know that at la blockchain week i get a bunch of people that are interested in this space and they want a partnership up with someone and in their mind at least that's the way they explain to me over dinner they're like i have this number of followers i'm making content in this space i have devotees in this space and i want to be able to curate what i put my name on and stamp on do you work with influencers or do they work with their pr firms or are you kind of b2b or how could how would someone come at you if they wanted to kind of get a business relationship going with with precision extraction well yeah we're a b2b right so we we're an equipment solutions and an integrator provider of of services but you have to understand that you know i've been in the space now for 18 years most of our staff has been in the space for over a decade so our tentacles and our roots within the space are extremely deep oftentimes you know if if we're not the right fit for somebody we can point them in the right direction we know everybody in the industry you know i do a ton of speaking engagements we have a very wide reach on all of our social platforms so you know by all means we always appreciate referrals and generally when we refer people out we do it on just a positive sort of vibe and and it always comes back around to us in positive karma and something that we believe in in terms of the way we run our business and our morals and something that we believe in our philosophy for life also so we're happy to help wherever we can if it's just a couple minutes of our day and if it's if it's a client then and somebody that wants to make extracts and produce actual products then absolutely we're the best company in the world to help them envision and create their dream amazing nick i got two introductions that i want to make too on linkedin i think you uh would be a huge resource for them i'd like to thank everyone listening today to rector radio and if you are not subscribed to go ahead and subscribe on sub stack altcoins.substack.com or linkedinphi and if you have additional questions for nick or forthcoming speakers or ones that you want to hear with go ahead and put it in the comments below nick want to appreciate you coming on today and really shining a really informative light on this space and bringing some seriousness and professionalism to an area that's i think getting their footing you know absolutely well we've got a raging bull market for everybody so everybody's welcome and thank you guys for your time and anything you need just please reach out
2021-09-04