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Jonah Barber is the co-founder of MRX Xtractors. Learn how profitable cannabis oil extraction can be and the different business models available to those in the business or entering this business. Key Takeaways:– From lab testing flower to extraction company – A lot of oil on the market is not good, here's why – The profit margin on a gram of extracted cannabis oil – Throughput from different extraction machines – The different business models in extraction Learn more at http://mrxxtractors.com/ Transcript: As the cannabis market continues to grow around the world, there's an increased focus on extraction, and for good reason. Extracted cannabis oil is arguably the most profitable and integral ingredient for cannabis companies. Here to tell us more about the extraction industry and his extraction solutions is Jonah Barber from MRX Xtractors. Jonah, welcome to CannaInsider. Jonah: Thanks, Matt. It's great to be here. Really excited to speak with you today. Matthew: Give us a sense of geography. Where are you in the world today? Jonah: In the beautiful green state of Oregon. Specifically, Canby, Oregon, which is located about 20 miles south of Downtown Portland. Matthew: Thanks for getting up so early to do this interview. I should tell everybody, it's about [7:00] your time. So thank you. Jonah: Absolutely. Glad to do it. Matthew: So what is MRX at a high level? Jonah: So MRX is an OEM that makes super-critical CO2 and ethanol extraction systems, and we bring kinda complete turnkey solutions for our customers all the way through the whole entire extraction process. Matthew: Okay. And give us a little bit of a sense about your background and journey, and how you got to this point, and why you started MRX? Jonah: You know, the cannabis and hemp industry is something I've always been incredibly passionate about. You know, they always say, "Do what you love," which I always thought was cliché until I actually got to work in this industry. And, you know, how we actually got started was, you know, we looked...You know, Oregon's always been a leading state, as far as a medical cannabis program, you know, having a strong medical program for over 20 years. And when we saw that Colorado went legal, you know, Oregon had almost passed a couple times going legal, and we knew it'd be a matter of time. And we wanted to get in the industry, but we wanted to get into it in a way we thought would utilize our skill sets. We weren't, you know, master growers like a lot of your listeners are and we didn't have any retail experience, and so our background is very technology. And so we wanted to fit in on the technology side on cannabis, and we saw that there was gonna be the need for standardization and quality control when it came to analytical testing laboratories. And when we looked at the landscape about 4 years, we didn't see a lot of that. And so we felt like we had the opportunity to kinda set the standard for what an analytical testing laboratory should be with quality controls, transparency, new state-of-the-art equipment, qualified staff with degrees. It was really kind of the Wild West there for a while, with a lot of people just pumping out high-potency numbers and kinda everything getting a pass for pesticides. And then we really wanted to help set the standard, so we opened up...MRX Labs is actually how we started in the industry. Matthew: Okay. Yeah. It's almost, it can be a huge advantage sometimes to just come in as an outsider because you don't have any concept of the way things should be done. And if you come to the market with skills, you can just start fresh. Whereas people in the industry already can only make kind of iterative changes, where you can start where you wanna start and not have to worry about any kinda legacy. Is that how you felt when you were getting into it? Jonah: We did. We really felt like we had the opportunity to really, I mean, develop a lot of the new methods and technologies, and stuff that just hadn't been developed before. And a lot of that wasn't because someone necessarily couldn't do it, you know, skill set-wise. But it was just because they really didn't have the access or ability to freely work with, you know, cannabis in a research and development capacity. And so we felt very fortunate to be kind of the forefront, to help develop a lot of those, you know, methodologies and things like that, when it came to standardizing testing. Matthew: Okay. Okay. And how many customers have you helped so far? Jonah: You know, from the...Well, there's two different answers. I guess, you know, when we started the lab in 2014, we grew to one of the largest cannabis/hemp testing labs in the U.S. And we ended up working with, you know, thousands of customers here in Oregon. And then on the MRX Xtractors side, where we're the OEM and build all the equipment, we've helped place about 80 different machines in about 10 different states and a couple different countries now. Yeah. So we have about 80 different customers on the extraction side. Matthew: Okay. Okay. Now, the thing I kinda wanna help listeners understand is how you and your partner approach the extraction business. I guess, perhaps, maybe if you could just talk about, you know, frame how other extraction companies look at extraction and how to provide extraction solutions, and then how you and your partner approach it and perhaps how it's a little bit different or better? Jonah: Yeah. So, you know, we do approach it quite differently, how we even came into the extraction industry. And with my partner's background, we've always looked at industries and found deficiencies or bottlenecks and came up with, you know, a better mousetrap, if you will. And so how we got really started on the extraction side was actually based off analytical test results. And so, you know, we started testing everything coming into our lab, and we started seeing all this oil about really flood into our lab. It was really almost overnight. You know, it went from like a lot of flower, then about 3 1/2 years ago, it just started flooding into our lab. And at the time, it was still all medical. And so when we looked at the quality of the oil, you know, it didn't look good, it didn't smell good from an analytical standpoint. When we did, like, a terpene test, it was nonexistent. When we did a solvents test, a lot of it still either had some hydrocarbons left in it or there was a lot of ethanol left in the oil. We actually saw a lot of products coming in in [sounds like] propylene glycol as well. And, you know, it was really concerning from our standpoint. You know, being an analytical testing laboratory, our job is to keep the public safe. And a lot of the products and a lot of the stuff we saw in the products, what people were using for medical purposes, were concerning in the fact that they could potentially cause, you know, some additional damage to whatever ailments they were treating. And I even remember the very first time, you know, I tried CO2 oil. I so badly wanted to like it because I loved the concept, I loved the fact that CO2 was used as the solvent. And to be honest, I absolutely hated it when I first tried it. It tasted kinda like a burnt popcorn to me. And also, after the fact, when I looked at the test results, which it wasn't tested by us, it was like 35% cannabinoids, which meant 50% of it was propylene glycol as well. Matthew: Ooh. Jonah: Yeah. And it just wasn't a pleasant experience. But at the same time, it was flying off the shelves. Like people could not make enough of it. You know, people really like the accessibility and discreteness of vape pens. But at the same time, it was like, "Okay, there's a market for this. But this isn't what we'd consider safe or a high-quality product." Matthew: So Jonah, it sounds like being in kinda the testing part of the cannabis industry, you're in a unique vantage point. You're kind of like the hub where companies that are sending you extracted material or flower are coming to you and talking to you, and you're kinda getting the lay of the land of how this whole extraction business works. Can you talk a little bit about that and what you learned? Jonah: Yeah. We really had a unique perspective because, coming from the testing side, we're kinda like Switzerland. We worked with everybody in the industry. And so we got a chance to talk to all of our customers that were using other extraction technologies and techniques, and kinda got together a list of what they didn't like, what could be improved. And really, kind of our three hallmarks that we came up with was that there was really no repeatability. And so a lot of people were relying upon an extraction artist or the one person that knew how to make the secret sauce or, you know, someone that knew how to stand in front of a machine and adjust 12 different knobs and try to keep it in a tight zone for temperature and pressure. And we just knew that wasn't commercially scalable from that side. You know, we knew that the industry, the way it was growing, had to have repeatability, no matter who ran the machine, that they could follow SLPs, and put the same product in there and get the same high-quality oil coming out. And we just weren't seeing that. And just because they also didn't have control over their process, a lot of people were destroying terpenes. And that's actually where CO2 had gotten the knock on it about 4 or 5 years ago. That just kinda produced an inferior product because it stripped the product of the terpenes. And I'd say, rightfully so, at the time, it got that knock because, you know, people were destroying a lot of the terpenes. Matthew: Yeah. Jonah: And then the third thing is the engineering, and a lot of the equipment we saw just wasn't safe and it would never be permitted and approved by fire marshals in a regulated market. And so that was kind of our three hallmarks was we wanted repeatability, we wanted control of your process to produce the highest quality product, and we wanted safe equipment that would be permitted by fire marshals. And that's how we set out to build Xtractors from that side. Matthew: Okay. That makes sense. Yeah. I could see why being dependent on an extraction artist would be...you know, it's problem. Because then, you're at the whims of that person instead of having a process or, you know, some kind of standard mode with your equipment where you can just repeat it over and over again independent of different people or personalities. And actually, I've met a lot of people that are in that exact case, where they're dependent on a specific employee and they really don't know how the sausage is made. So I'm glad you brought that up. Okay. So let's get into a little bit about throughput and what people talk about with throughput. Actually, before we talk about throughput, can you mention why you didn't like the flavor of the CO2 oil when you first tried it? Did you prefer, like, butane extraction or something? Jonah: You know, it wasn't so much that I preferred something over the other. It was really just, the primary reason was that the people, or the equipment that was making that extract, they didn't have control over their process and they destroyed a lot of the terpenes and overcooked the product in there. And so it almost had like, the best way I could describe it was like a burnt popcorn kinda taste. And it just wasn't even a really pleasant experience, just even like kinda agitating the throat and things like that too. Matthew: Okay. Actually, before we talk about throughput, let's talk a little bit about what the different kind of outputs are from the MRX machines, what you can actually extract and make and do. Jonah: Yeah. So, you know, about 90% of all of our customers wanna make as many full-spectrum vape oil pens as they can. They just cannot make enough to satisfy the market. Matthew: Okay. Jonah: And so that's what the majority of our customers wanna do. However, the more we've gotten into the industry here, the more diverse kinda the product lines are, and the more specialized and unique they are. And people have some really interesting ideas that they like to make. And so one of the things we always do is like talk to our customers about, "Okay, what's your goals? What's your throughput, and how much do you wanna do a day? What kind of products do you wanna make?" Then, we're able to actually bring kind of a complete turnkey solution. Matthew: Jonah, tell us, just give us a sense of what kind of products can be created, what the most popular ones are, and what customers are asking for. So we can get a sense of the different things that your extraction equipment can do and just where the extraction market is at, in general. Jonah: Yeah. Well, the majority of our customers are really going after one of the largest market segments, which really is the vape pens, the cartridges for the vape pens, and making some full-spectrum oil, which is a very high desirable product for that. And so that's about 90% of our customers just make as many vape pens as they can. But what's been interesting is there's been a lot more, you know, development, product development as well, too, with all of our customers coming with really unique products. And so, you know, what we usually always like to do is actually talk to our customers and identify, before they even start, you know, "What kind of products do you wanna make? What kind of throughput do you want to do per day?" And then put together a kind of complete and tailored package with all the equipment they need to achieve their goals. And so what's unique about the CO2 side is that you can really stop it just about anywhere along the way. And so, you know, from going to a full-spectrum oil, or you can do further refinement or post-processing into like a distillate or then [inaudible [00:14:06] distillate, you can turn it into an isolate. And so you really have a lot of variety in [inaudible [00:14:15] different products you can make with it, is how we approach it and what a lot of our customers are making. Matthew: Okay. So just to review, can you review, and can you just tell us what you mean when you say "full-spectrum oil," "isolate," and "distillate," so everybody's on the same page? Jonah: Yeah. So full-spectrum oil is going to be an oil that preserves the majority of the original plant. Obviously, you're not pulling out, like, the plant material and the chlorophylls, and you're removing all the waxes and fats and lipids. So what you're left with is a cannabinoid oil that has, not just your THC or your CBD, but also minor cannabinoids as well. And then, also having good terpene preservation, and that's where all that kinda works together, is what a lot of people call or is known as like the "entourage effect." Which those cannabinoids and terpenes working together make for a much more pleasant high, or a lot more therapeutic or medicinal benefits, all that stuff working together in, like, a full-spectrum oil. And that's a very desirable product for a vape pen. And something like that, if you're doing a cannabinoid potency percentage, would test typically somewhere in like the 60% to 75% cannabinoids. And then [what a lot of our customers will do] then too is, you know, distillate is a popular product as well too, for...It's very popular such as like the edible makers. Because with edibles, you typically don't want to taste the terpenes. And it's a more higher concentrated dosage, and so that is easier to control in y…
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