Sisu Extracts - John Figueiredo & Joe Wynne

an Humiston: [00:00:00] Welcome to another episode of Hemp Barons.

 

Dan Humiston: [00:00:09] I'm Dan Humiston. And on today's show we have another hemp first mover. These guys have really opened the bottleneck between the growers and the manufacturers and they've scaled their facility so that they can process all of California's harvest. Let's join my conversation with John figure Vito and Joe Wayne from who extract.

 

Dan Humiston: [00:00:38] Guys welcome to the show.

 

Joe Wynne: [00:00:40] Oh thank you so much.

 

Dan Humiston: [00:00:42] Hey. Well since the passing of the farm bill at the end of 2018 the demand for hemp derived products is off the charts. Unfortunately there just aren't enough crops to cover the demand. In just the nature of the crafts make it so that you can't use a lot of the pre-existing agriculture infrastructure. So even if there were enough crops there would still be a bottleneck because there just aren't enough processing facilities and that's where you guys come in. It's this you extracts. The way I understand it is that you handle all the steps from the farmers to the manufacturers sort of ensure you take the plant from the farmer and you give the process more materials to the manufacturers how it works.

 

Joe Wynne: [00:01:23] Yeah basically we're helping to move the farmer's material from one resource and value point further down the supply line to a more valuable product bringing more money back into the communities where the farmers live. We're here to serve farmers by helping them get more money off of their crop and then we're also here to serve manufacturers and wholesalers because their primary job is to make and sell fantastic product. And that job comes with an enormous number of issues and pain points as well. And if we can eliminate sourcing for your basic THC inputs it allows them time to focus on what really makes their brands great.

 

Dan Humiston: [00:01:56] You keep them farmers and the manufacturers doing what they do best. Farmers grow great crops and then you go right to their farm and pick the harvest product right up there.

 

Joe Wynne: [00:02:07] Absolutely. That's actually one of the best parts of our job is we get to drive around Humboldt Trinity Mendocino and the entire rest of California which is all more lovely than the average place you could drive around. Yeah we get to go to these amazing cultivation facilities. We get to see their you know amazing pets from giraffes to donkeys to giant wolf dogs. And we get to meet these amazing folks and walk through their fantastic gardens and see their beautiful homes they built out in these rural places and then we get to pick up these flowers that make everyone happy and we bring the magic down the mountain and pump it out to the cities and it really makes a difference for a lot of people it's not only the best job I've ever had.

 

Dan Humiston: [00:02:42] Oh it's so cool and you have a really really I think a fair way to share revenues with the farmers you want to explain maybe briefly how that works.

 

Joe Wynne: [00:02:51] Yeah absolutely. One of the big things we noticed when we got into the market was that trade is a pretty undervalued resource and I think a little bit later we'll be able to go into this more specifically but what we basically acknowledged was upfront there was a lot of room for us to pay farmers more for the trim and C grade material that they couldn't sell otherwise. And in doing so we helped supply and sustain the people who our business lived off of like last year. For example everyone else was coming to Humboldt meadow and offering you know anywhere from seventy five to one hundred and fifteen dollars a pound for trim. We offered farmers a 60 40 split where we actually taking their material produce oil sell the oil and then kick them back 60 percent of the profits from that. This year our machines have become more efficient. We've tripled our throughput capacity which means we've taken a full one quarter haircut on the percentage of the deal we keep. We've shifted it all the way to 70 30 so pretty much I believe we're the most aggressive offer in the market today for California biomass.

 

Joe Wynne: [00:03:45] So fair. You got a 3000 pound load going up to the warehouse and John's trapped in the corner of the parking lot with him.

 

Dan Humiston: [00:03:50] Well he's going to say is all right. I think that's very fair. Profit sharing arrangement but the way you do that is that you're selling in bulk to the manufacturers so you really have a finger right on the pulse of what the industry is paying for Process Materials. Is that right.

 

Joe Wynne: [00:04:09] Well not only do we get really great feedback from our customers on our price points we've also ended up in this weird position as a default price index for the industry. We send out every Monday our pricing sheet and we send it out with a list of our current inventory and what price for selling out and we send it out to every manufacturer and distributor in the state and we get phone calls from folks all the time who are more or less letting us know that we're setting the price for the for the industry because both use our email as a negotiating point to go either direction if the sale is higher than us. The customer says well I could go to see some buyer for this price and if the customer is asking for a price lower than what we offer the seller says we'll see who is selling it at this price because the truth is more than 80 percent of my inventory leaves this facility and hundred thousand Graham waters. We have very very very large customers placing very large orders and because of that we get to see a snapshot of what large sustainable at scale companies are doing. I mean it kind of evens out some of the volatility that we see from other operators who are either fudging the rules to make the numbers a little artificially low or are operating off of you know an excess of capital and so their margins aren't that great. So we get a very very good picture because of who we get to deal with.

 

Joe Wynne: [00:05:21] And you're absolutely right. Yeah.

 

Joe Wynne: [00:05:23] It's nice to have all that info coming in you're kind of like Vegas setting the odds I mean you you set the price for the industry because you're doing such big volumes. Well let's jump ahead and talk to us about some of the finished products that you provide to manufacturers.

 

John Figueiredo: [00:05:38] Providing multiple sides. So as of right now you know we do sell to manufacturers but really the bulk of our business goes to large vape cartridges so concentrates are representing anywhere between 25 to 30 percent of the market. And as of right now we're so you know we're singlehandedly sourcing some of the largest companies in the world right now. So all the companies that you know the names of that are on the shelves of dispensaries that are. I went to David go last week and when I went to a dispensary I was looking there and just got a big smile on my face because 80 percent of the cartridges and all the concentrates we sell to on a regular basis.

 

Dan Humiston: [00:06:11] Holy cow. I mean when I think about your company I get that same feeling that I used to get when I was in a race where I feel like they're coming up behind me. You're first mover. You're in a great position right now. It's going to be hard to hold this position in this race because I mean I'm just seeing everybody wanting to get into this industry. Your sector of this industry I should say I'm assuming to expand your business is not going to be cheap. I'm assuming you're going to need to in order to stay competitive.

 

John Figueiredo: [00:06:42] The nature of the game is always expansion. So what we're looking at it you know we look at this like a commodity. There's kind of two ways to look at it one time I heard someone explain it interesting. They were basically saying that it kind of like the whole of industry. So you have really high end olives but then you also have olive oil which is a commodity. And so really we're focusing on the commodity side of the market and we're starting to get larger machines and as we get more operationally efficient we want to be able to pass on those savings just like an Amazon or something like that to our client and we want to make sure that our customers get the better end of the deal. And that's what we're focusing on on a regular basis.

 

Dan Humiston: [00:07:11] When you're in California so you're such a gigantic market there. One of the questions I have in my notes is how big of a of an area can you cover within the state. There are certain circumference that you have to stay within.

 

Joe Wynne: [00:07:24] I can very very happily cover everything from the Oregon border to the Mexican border. I've got pickups going on in Crescent City and I've got pickups going on all the way down to Calexico and everything in between that capability really comes with the quality my supply chain guys just absolute crushers and they run all over the state to bring everything in for us that we need because the truth is everyone out there is headed for this market segment. We're in a war for survival and there's gun store selling absolutely massive guns to everyone who's in this fight. And the real issue is who's got ammo to keep the gun battery running. And I know that margin of just trying harder for success won't last forever here but it's definitely here now and we're aggressively after it.

 

Dan Humiston: [00:08:03] I'm assuming you're going to need a lot more of the equipment and like I said earlier equipment probably isn't an expensive can you do it out of cash flow are you raising capital.

 

John Figueiredo: [00:08:12] That's a great question. So really you know where we're at right now is we had our battle just like everyone else and as of right now we're a very highly profitable company with minimal capital and we're just using those you know using our own profits as a way to expand our business. We're still very interested in working with the right strategic partners but as of as of right now we don't need any capital to to run our business currently and we can move forward but we would act as he would act to catalyze our business to have us move faster if we were to work with those partners.

 

Dan Humiston: [00:08:41] What would you look for in a strategic partner.

 

John Figueiredo: [00:08:43] I think that really what we're looking for right now is we're looking for people to where you know if you look at a vertical chain right. So everyone does something very well. So cultivation and manufacturing are in no way similar. They're incredibly different skill sets. And so because of that we want to focus on our skillset and really do that very very well. And ultimately we would work with other companies that have different skill sets to ultimately vertically integrated and create a much larger company.

 

Dan Humiston: [00:09:06] Yeah that makes a lot of sense especially now things are going so fast there's probably a lot of people out there that are looking for this for the same thing and only in a different sector. We've been speaking with John figure Rudo and Joe Wayne from Cisco extracts. And we have all their contact information in strategic partner information on the MJBulls website. I tell you there's so much about this space that investors love to ever decide to do a raise I'm sure you won't be long to get that thing funded so guys it's been great talking to you.

 

Joe Wynne: [00:09:39] Well yeah and absolutely. Thanks for taking the time and you're a hundred percent right. When we when we did our very first fundraiser we had folks so you would have never expected really refined guys from out in the Midwest so you'd have expected to have leanings headed the other direction really showed up for us. And like John said the business is super profitable and things are going incredibly well. But I have seen absolutely amazing deals going on out there. We were able to connect with the right people and able to set up a good deal that would allow our company to grow at a faster speed. I can assure you we would be curious to look into it.

 

Dan Humiston: [00:10:10] No that's good that's good. Keep your options open. Guys good luck. Yeah. Thank you so much for your time. Thank you.

 

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Dan Humiston