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🎙️ Prodigy Processing Solutions, CEO, Marc Beginin
After Agrify acquired the parent company of Precision Extraction Solutions for $50M ($30M cash/$20M stock) two years ago, Mark Beginin is back with a direct competitor, Prodigy Processing Solutions.
Marc Beginin discusses his journey from being a lawyer to entering the cannabis industry. He explained how he and his partner capitalized on the growing market by being the first to market with a closed-loop extraction system and focused on marketing, branding, and excellent customer service, which led to the rapid growth and success
Growth of his company and the merger with Cascade Sciences to form Sinclair Scientific. However, he was against the acquisition by Agrify due to what he perceived as a lower valuation and the majority of the consideration being in the form of restricted stock
Failures of the acquisition, which included not getting him to sign a non-compete
The birth of Prodigy as a competing company to Precision Extraction Solutions, which had better people, technology, and funding. Prodigy differentiates itself by being American-made, using higher-quality stainless steel, and offering equipment that is faster, safer, and more efficient
Customer payback period, which varies based on the cost of input materials and the volume of sales, and highlighted the cost savings and financing options available to customers through partnerships with XS Financial
Target customers for the company, which includes larger producers and MSOs who want to start right and grow into it
Transcript (lightly edited):
0:00 - Marc Beginin (Prodigy Processing Solutions)
I'm Marc Beginin. I am the founder, former CEO of Precision Extraction Solutions. I got into the cannabis industry in 2014 with Precision. I was formerly a lawyer and I partnered with a young gentleman who was very much into the cannabis extraction space. So we founded Precision Extraction Solutions together, and ultimately grew the business to become the largest in the space. And in 2021, we were definitely the largest company. We merged with what we believe is the second largest company in the extraction space, which was Cascade Sciences. That was in June of 2021 to create a much larger business to catch the attention of Wall Street. Ultimately, we did that because not even a month later, Agrify Corporation was courting our companies for an acquisition, which ultimately happened in October of 2021, which was in excess of $50 million for the merged companies.
1:20 - Dai Truong (Arlington Capital Advisors)
Let's go back to your career in law and how you made the jump. What gave you so much conviction to jump into space and build what you did?
1:32 - Marc Beginin (Prodigy Processing Solutions)
I don't know if it was conviction at the time. Michigan went medically legal in 2008. And most attorneys, me included, did not want to touch it with a 10-foot pole because of our concern of the illegality. We, particularly me, like my law license. I didn't want to step too close to it. I did a lot of work on the criminal defense side because the laws were really gray at the time. Flash forward 5+ years in 2013, it appeared the writing was on the wall and it was okay and the Feds were not going after people who were involved in state activities in the cannabis space so long as they were licensed and doing things by the book. That's when I started doing more consulting work in the industry. Along with that, I met my partner, who became my partner with Precision and he had this idea to start an extraction equipment company. At the time, I really didn't really didn’t know a lot about extraction, but everything in the industry seemed so promising and so new back then. I jumped in with both feet and we started the business in December 2014. In our first 90 days, we did $1M+ in revenue. So we really shot out of a can and it was shortly thereafter in early 2015. I think March or April 2015 that I started closing down my law practice and focusing exclusively on Precision Extraction Solutions. So that's how it all got started there. And the only time I ended up in court after that was really just doing favors for people. But my background in law helped a lot with the business because a lot of the industry has to do with regulation and is a constantly evolving Legal landscape.
4:01 - Dai Truong (Arlington Capital Advisors)
How did you guys get off to such a quick start? I feel like that was probably a crowded industry at the time. How did you set yourself apart, not only at the beginning but up until you merged to form Sinclair Scientific? How did you go about building it up?
4:19 - Marc Beginin (Prodigy Processing Solutions)
Well, at the time, we were really the first business that was selling, marketing, selling, manufacturing, closed loop extraction systems. Before that, with our systems, it's used like hydrocarbon butane propane or some sort of mix. People were doing what's called open blasting. would literally be taking butane, blasting it through a pipe or something with the cannabis in there, the flour and the oil would come out. Just incredibly dangerous butane is highly volatile and combustible. The closed loop system is where you keep the butane or propane or both in a constant loop so that it doesn't escape into the atmosphere. Hence, it's a lot. It's the safest way to do it. So we were the first ones really to market it. And I don't want to say on a mass scale because we weren't selling to commercial producers, not too hobbyist, but we were the first really to get out there and definitely had that first move of advantage or at least, you know, with not even a handful of companies. There were like one or two that popped out at the time, two other ones. And we, all of us were successful with precision though. You treated it. I mean, my background is marketing. Prior to my legal work, I am becoming a licensed attorney. So, the market of precision is the consumer product. Really with big branding, big appearances at trade shows, couldn't even spend, have you, we can even have a marketing budget because there were only so many avenues to advertise in whether it was print publication, online, email blasts or whatever it could be. So, even at trade shows, we spent every penny we could on those. So, we were everywhere, very fast and that very much assisted us on growing the company and becoming that brand name in the space and the ones that others looked to for guidance. Along with that, I mean, the main thing was the best customer service we could possibly provide. So, if you combine all that and good technology,you’re bound have a successful company and we really just checked all the boxes.
7:06 - Dai Truong (Arlington Capital Advisors)
That makes sense. So let's fast forward to the merger with Cascade Sciences to form Sinclair Scientific and then very quickly after four months to be specific. You were acquired by Agrify. So why not wait until the dust settled? Integration happened, maybe [get a] higher valuation, like why sell the company when you did?
7:30 - Marc Beginin (Prodigy Processing Solutions)
Okay, well, let me back up for one second. I'll tell you about the growth of the company. So all of 2015, I mean, maybe we did a shy of $4 million in revenue. By 2019, we did $40 million in In 2019, so come 2021. This is on the heels of really the worst year ever with COVID and the restrictions and everybody's business, whole industry, the whole country tanked in 2020. And we're starting to pick it up again in 2021. We were closely with Cascade Sciences. They manufactured a number of laboratory devices including things that are very relevant to post-processing in the cannabis space, including vacuum ovens. So we were very close with them. were their number one distributor. Actually, we were everybody's number one distributor for third parties, for third-party goods. But we had started discussions. was with them because they already knew because with precision, I was already making moves. It was two either new acquisitions or some sort of merger activity. that was all through 2020 because we just knew we had to become bigger, even a lot bigger than we were. And not to catch attention of Wall Street because ultimately, the exit was part of it and the other part of it was having a business with a large mode around it. And being bigger at that time was the best way to really secure our position, lower our risk moving forward. So we worked on it for months and months and months and ultimately, it was late June, early July of 2021, where we did merge together into a newly found entity called Sinclair Scientific. We made that one up. The businesses continue to operate though with their own banking, own accounting. I want everything because what happened next was just so fast, which was not even a month later, Agrify a corporation was courting us for an acquisition. Now, yeah, we could have... The interesting thing is your question, why didn't you wait? Well, I did want to wait. So I was the founder, larger shareholder, CEO, ultimately CEO of the whole thing. And I was the holdout. Everybody wanted to sell, except for me. So I was very much against that transaction. And I thought we had a great business, continue to grow and do a deal that made sense, right? That deal did not make sense to me. I didn't want to do it for lots of reasons. But that's why we didn't wait. It wasn't my choice. So Agrify presented an L.O.I. I think it was in early mid-August. Initially, I was okay with it. And then the more I learned, the more I was against it. And they closed that transaction so fast. mean, I would call it reckless. So within a month and a half, the company was sold, it was acquired.
11:22 - Dai Truong (Arlington Capital Advisors)
And, you know, around this time, other sort of cannabis ancillary companies were going public, whether that's on their own or via a SPAC. Was that a consideration? that have been a better deal? And also, what would have made this deal more attractive to you?
11:39 - Marc Beginin (Prodigy Processing Solutions)
More money. mean, every transaction that we had gone through prior to that, whether not it was an actual investment from VC or it was an LOI term sheet executed for an acquisition. went through one before that actually and COVID thwarted it. But every single one, It was 2.2x times Tevenue. Every single one, for whatever reason that was a number, we never worked off of EBITDA because that was sort of unfair because we were reinvesting all our money into growth. This deal was a 1.3x revenue and 40% of the consideration was Agri-Fy's stock, which was also going to be restricted for 18 months with partial releases along the way in six-month intervals. So this is half off and 40% of the deal is their stock. I didn't believe in their company. I thought that at some point, I literally told them that I don't want their stock, I want cash, and don't think their stock is valid currency. I'd rather have Dogecoin. That, of course, ruffled feathers. If you look back now, I was right. stocks have gone down 99.999%. They've had two or three reverse stock splits. mean, just a disaster. I sold as much as I could along the way. Still a lot of money, but it was, again, half off and 40% of consideration was [cash]. That's why I was against it. wasn't against an exit. I was all for it. Just not that one.
13:36 - Dai Truong (Arlington Capital Advisors)
Yeah, that makes sense. Around that same time, even up to now, stock as a consideration, 40% actually doesn't sound terrible. I've seen that much higher in Canvas acquisitions, but agree with you either. It's mostly cash, like a heavy majority or it's stock that you can flip and there's no lock up period, right? Not six months, not 12, not 18 months. A lot can change over that time with Canvas companies.
14:04 - Marc Beginin (Prodigy Processing Solutions)
Yup, absolutely true. I think I think with any company, but either the fundamentals are there or not. I mean, if a company is good, a company is good. Ff it's not, it's not. Certainly there's more volatility when you're dealing with public markets.
14:22 - Dai Truong (Arlington Capital Advisors)
So let's talk about this lawsuit you have against the company. So they did an 18-month hold back on 15% of the consideration. I don't know if that was cash or stock. I think it was probably the cash. That was supposed to be paid in April of this year, 2023. Roughly $5.1 million in cash. So you're in a lawsuit right now because I guess they chose not to pay you that remaining amount.Can you help us better understand what's going on?
14:48 - Marc Beginin (Prodigy Processing Solutions)
Yeah, without getting into details, I mean, it is cash actually at this point. That's sitting there. But the purchaser in this case, Agrify, was allowed to hold back funds for pending claims. So they're claiming that, hey, there's still risk out there that we're going to need this money to pay off this or that, so we're not giving it to you. So, and, you know, we, no, we, they beat us to the punch that they sued us first. So actually we're the defendants in that case. And right now, so we're litigating it. I don't see any reason why we shouldn't be able to settle it, but that's where we're at right now. I think this is sort of like a divorce. The only people who are going to really win are the attorneys. So, you know, hopefully, who had to prevail and I will settle that.
15:50 - Dai Truong (Arlington Capital Advisors)
And you were also trying to do a takeover of the company at one point in time. given that the market cap today is $4 million, it's a penny stock. Doc, as a part of the settlement, would that possibly give you any of the assets from the acquisition?
16:07 - Marc Beginin (Prodigy Processing Solutions)
No, no, no, no, We're not looking for that. We're basically the money that's being held back either for the sellers, which is me and other people. Or it's for to pay pending claims, that's it. any funds that we would go out, we're not seeking the money. It's sitting there in escrow. Oh, that's what you need to know. It's in a third-party escrow account. So the money's there. It's not in their bank accounts. So what you suggested, if they couldn't afford to pay it, mean, yeah, mean, owed more money than their market cap right now. But the cash is sitting there. So it wouldn't be necessary to do something like get assets.
16:55 - Dai Truong (Arlington Capital Advisors)
Got it. Yeah, because I just made the assumption that it was going to be fine. From the balance sheet, and likely they probably have limited cash today, but if it's an escrow, totally makes sense. It's there. just needs to be decided if that can be released to you guys or released back to the company, depending on how the ruling comes out.
17:16 - Marc Beginin (Prodigy Processing Solutions)
Exactly. That's exactly it.
17:19 - Dai Truong (Arlington Capital Advisors)
17:19 - Marc Beginin (Prodigy Processing Solutions)
Yeah, I did attempt a hostile takeover of the company a year after the acquisition. And they had done a... They did... Or was it a reverse stock split? And then forgot exactly how it went down. Yeah. Oh, yeah. did a deal with some third-party where their stock was diluted. I forgot it was like 67% or something, meaning I owned at that moment 9.9% of the company. Right? was the largest shareholder of Agrify for a matter of time. And then I got diluted along with everybody else. overnight I own three-some-ish percent. And okay, this is going to be a never-ending fight, expensive fight here. So I sold all the stock and I got rid of my position.
18:20 - Dai Truong (Arlington Capital Advisors)
And help us understand what, I can dig through all the Filings. So since you're close to the matter, what went wrong with my Agrify?
18:32 - Marc Beginin (Prodigy Processing Solutions)
Honestly, I think they're just focusing too much on who has the stock and press releases rather than people. People matter more than anything. it just seemed to me, even during this acquisition process, people weren't happy. And ultimately, meaning the employees. And I didn't know their customers, because at that point, I didn't think they had any customers right on their technology. was like, if you treat people like this, this is how you're going to treat your customers. employees are going to have a very not horrible culture. You're going to have that happy customers. Ultimately, it appears that's what happened. You focus so much on the stock price, but the fundamentals of the business just fall through the cracks. Then you have a real business. know a lot of details of what happened, but literally they lost, according to their own filings. I don't know if they filed it yet, but they didn't file. This is what, October 2023 now, they didn't file, at least up until a week ago, I got a check now. haven't checked in a week or so. They didn't file their 10K. A for 2022, meaning that fourth quarter and then the annual statement is required by the SEC, right? They didn't file that. They didn't file their first quarter or second quarter results. lost their CFO in February of this year. The CFO hasn't been replaced. They don't, they're running the ship without a CFO. And in the filing that they made that said they need more time to file. For their 2023, they said they lost approximately probably more than they think. the number was $183 million. was always profitable. I'm not saying it was always easy. was tough. But we were always profitable. How do you, in Cascade, have a decent business? That was, you know, their revenue and they acquired two other companies. I think it was a lab society in peer pressure that was within four months of acquiring. Who does four acquisitions in four months? That's crazy. It's hard enough to integrate with one, less four. So, just lots of really big missteps. And, oh, that, we've also, they lost over $187 million in 2022, according to their guest, their own guest event. That's what they reported without reporting. How do you do that? How do you lose all that money? I mean, not even a year later, it just doesn't make any sense.
21:42 - Dai Truong (Arlington Capital Advisors)
Yeah, I think the last Quarter for the three months ended, September 30th, 2022. I'm not even sure if I can find anything in 2023, I think they’re behind on filings, a lot of restatements of Annual filings. Just from what I can see, it looks like COGS were much higher than Revenue and then also pretty high SG&A, which means you already are starting out loss. So hard to recover from that. And it seems like a lot of cash burn, obviously, with the losses, even though they could raise once upon a time raise a lot of money in the public markets. Yeah, I will do some summary of this, but it just seems like. Some bad starting points already.
22:33 - Marc Beginin (Prodigy Processing Solutions)
Yeah, mean, it's not just, people say, oh, it's the market. No way. No way. That's, I mean, at one point, I guess this is my, you know, my guesstimate, but it kind of tracks with their numbers. They were burning $11 to $14 million a month last year. Burning, right? So, you know, you acquire all these businesses that were either profitable or sustaining themselves. And then. He turned it into a total utter loss. I mean disaster loss. Can't get a CFO. It's crazy. anyway, so I was, you know, I'd say 2020. Yeah, I was, you know, a good vision back in, you know, 2021, you know, leading up to this acquisition. I did not want to do it for lots of reasons which ended up all turning out to be correct.
23:29 - Dai Truong (Arlington Capital Advisors)
Let's talk about your new company. So started over, tell us about Prodigy and kind of, you know, you're going back to, you know, same company as before and sort of what's the game plan here to succeed.
23:43 - Marc Beginin (Prodigy Processing Solutions)
Well, the first thing about that is how did we have an acquisition of my company, by a publicly traded company and then have, you know, founder, largest shareholder and CEO under a non-compete.
This is an interesting story too. Our operating agreement with Precision said if anybody's dragged along, these drag along provisions is what they're called. Through a deal they didn't vote for, then they get actually one thing, which is no non-compete. So because I was dragged along through that deal, I had no non-compete. Now, Agrify, they figured this out toward the, in the last week or two of the process prior to the acquisition. And there was, yeah, killed the deal. And then it came back and I wanted, so just give me this much cash. And they said F off. they still did the deal, which I think was crazy. So basically, October 1st, I was overnight, October 1st of 2021, I was cash rate. This job, poor. And with no non-compete. So basically, I used that cash to do lots of stuff, fun stuff. And then to also start a competing company. Prodigy, processing solutions is a rinse repeat of precision extraction solutions, just with better people. So we say, we phrase that, we had great people at precision. So there's people and there's some new people. These are all great people. A lot of the same suppliers, plus some better ones, better technology, eight years of lessons learned and being fully funded. So this was the birth of Prodigy. And so for all the reasons I just said, we have a competitive advantage. And right now we just launched, not even 90 days ago. So, you know, Did a stop launch, did a few press releases, attended some conferences, including we saw each other at the Binsenga Cannabis Conference in Chicago, which was a great time. And a good networking event. So, Prodigy, we release the Pro-X, which is a large commercial slash industrial hydrocarbon processing solution. And it is the fastest piece of equipment, the most efficient that's ever been built. And we are continuing to innovate with some new stuff that we're even coming out with that's going to be very much disruptive to And we're leading the industry down the path toward federal legalization, where you're going to have to do very much large industrial processing. That's where we're at right now, our website's prodigyusa.com. If anybody wants to go take a look at our equipment and what we're doing. We're going to make a lot of waves and we already are. That's where Prodigy's at right now.
27:15 - Dai Truong (Arlington Capital Advisors)
Yeah, I assume some of that is winning customers from your prior company and Agrify. How many prior customers have you been able to bring over to Prodigy and sort of what's that cycle? I think the machines that you previously sold maybe have a two or three year life cycle. Kind of help us understand how you're winning customers and what sort of a differentiator.
27:40 - Marc Beginin (Prodigy Processing Solutions)
Well, there's a few. One is, it's sort of like a car, two to three years old. Things get better. would trade it in, do things like that. The trade-in has a lot to do with our strategy as well. But we are the only company that's out there now that is. We are American made. We're made in the USA. Everybody else is foreign. And that matters for a reason here because we're the only one that uses 316L pharmaceutical grade stainless steel and is made in the USA. Even the precision was always questioned, are we getting the right steel from these foreign suppliers? And that's a big concern. And those are all 304 stainless steel, which is a lower quality of steel. So, now you have it state by state. The feds are, they can't regulate something that's on the schedule on a list of controlled substances. So, when it comes to operator safety, have the local authority having jurisdiction, whether it's a fire marshal or some sort of other organization looking out for operator safety. But there really isn't a lot of oversight for consumers. Consumer Safety, the local health department, what is it? Sometimes the state, they make you test it for pesticides, things like that. when it comes to, for example, metal leaching, that's a big issue. That's a big issue. when the FDA comes in, they're going to be looking at that. when you have, you know, 316L pharmaceutical grade stainless steel, this is not an issue. So any company that's out there that's sophisticated, enough in the intent on growing their businesses and surviving through federal legalization will need prodigies equipment or something similar. And something similar just doesn't exist. So not only is our equipment, it's faster. It's faster at just operating like any other, you know, competitive equipment, but it's safer for the consumer. It's, you know, certainly, you know, the safest for the operator. One thing that we did on Our equipment is rated, we got it rated, this is by PSI, which is any legitimate extraction equipment producer uses PSI, is pressure safety inspectors out of Colorado as the third party engineering firm which certifies these goods. We are the only one rated to negative 300 degrees Fahrenheit to operate at. So really when you're operationally, we are operating more like a negative 100, 100, 10 degrees Fahrenheit. But what that also does by operating with that cold, and we're the only ones that are certified to do that, you eliminate the need for winterization. Winterization is removing the fats and lipids. That is a 12 to 24 hour process. With our equipment, it runs so cold, it's automatically separated while you're doing the extraction. So you just save yourself another 12 to 24 hours. So we're the only ones. Do we have competition out there? Absolutely. But are they meeting these standards? Absolutely not. Are we faster, more efficient? Yes. We're really designed for, again, a sophisticated business that's operating as such that is concerned about their future and consumer safety, as well about the day-to-day efficiencies running the equipment.
31:27 - Dai Truong (Arlington Capital Advisors)
And with the 3.16L metal, how does that impact your growth margins relative to your prior company?
31:36 - Marc Beginin (Prodigy Processing Solutions)
Well, that's interesting because it's hard to do that because it really is expensive. Domestic manufacturing is more expensive. That's why everybody is doing their stuff primarily out of China, right? again, past relationships. prodigy, of our partners, Scott Mitchell. Scott Mitchell owns Mitchell Fabricators. He's been doing pressure vessels for 50 years, 50 years of experience. Mitchell Fabricators, you know, Mitchell had a nuclear certificate. That's how sophisticated they are in terms of the precision of their builds and the quality. So that's a partner of Prodigy. So because it's a partner, we are essentially manufacturing this equipment as well. Hence, we don't have control over the manufacturing process and the costs, and we don't have to get a margin before we sell it to ourselves. So we are set up, again, back to the eight years of lessons learned. So we're keeping that all in-house. That's why we can keep those costs competitive and along with that, we are offering all our... New customers, they're like, oh, well, I have my equipment. don't have to change, and it's really going to be expensive. And we are offering a buyback. So we're buying back competitors' equipment. We'll buy it from them minimum for what the value is in the used market and maximum what they bought it for. So we're really being competitive out there, making it easy on our new customers, which is a lot of our new customers, our precision, our old customers, competitors. we're going to buy back this used equipment and make life really easy and provide our customers with a smooth transition into better technology.
33:48 - Dai Truong (Arlington Capital Advisors)
It's amazing that you're able to use that for sales. I guess let's start with something we didn't discuss yet. How are you funding this company? Because that takes cash to be able to buy back their current equipment, that isn't prodigy.
34:04 - Marc Beginin (Prodigy Processing Solutions)
Well, that's back to the buyout, right? mean, geez, ultimately I got it for 7 million cash out of that deal, you know, so far. So, ah, Agrifyze funded it. So we don't need third-party funding or financing, we just don't. However, that being said, once we can demonstrate our trajectory, then we will be speaking with, you know, certain VC and other funders out there, because our goal is to accelerate that growth. So for now, and any funds that we would seek out in the future is all for growth. Just growth capital, not survival capital, but we have all the money that we need. You know, for our operation. I mean... According to our CASWIFRA Business Plan here, we don't need capital, will never need capital, we'll be profitable within six months. I could say that, have done it before, So, it's just doing it again, just doing it better. the third party funding is just to throw at marketing, to throw at technology, even more rapidly than our current plan calls for it.
35:35 - Dai Truong (Arlington Capital Advisors)
That makes sense. And I think the other thing I want to ask you all on is just a customer payback. So how do you define that? Because I know you've mentioned previously, you have a customer in Oklahoma that based on their estimates, they're getting like a 60-day ROI. So it's that based on their gross profit over what the machine costs, which I believe you've mentioned also, it's potentially up to half a million bucks. A Rolls Royce or a very nice house. So, kind of walk us through that ROI calculation.
36:06 - Marc Beginin (Prodigy Processing Solutions)
Well, it depends on the price of the input material, the cost of your input material, what you're selling, out of it. Are you white labeling? For example, distillate that you're going to make with the Pro-X or you're going to make it ultimately into a final product, not that's a liquid in a vape cartridge or a gummy, etc. That was in Oklahoma and Oklahoma, extreme, they were giving away the flour. I mean, it was so, when I say that, I mean you're talking about anywhere from $10, $15 a pound for not great material up to like $30, $40 for great material. So, Based on those incredibly low costs of the input material and a reasonably high cost of the extracted goods, that was their ROI based on their profit, which is crazy. I wouldn't say that would be for everybody, but in that microcosm at that time, that's what it was.
37:23 - Dai Truong (Arlington Capital Advisors)
So even others though are about six to nine to 12 months per century. So anytime for equipment of that sort is spent in six figures, if you can pay that back in six to 12 months, even that's very attractive.
37:39 - Marc Beginin (Prodigy Processing Solutions)
Yeah, normally it's a year and a half. mean, you know, 18 months to pay off any sort of CapEx investment like that. In our marketplace, it could be anywhere from 60 days to, you know, say two months to nine to 12 months. It just depends on how much volume we have. That's it. The volume And, you know, your cost of goods and, you know, your sale price. So it's not a lot of math to do, but that's really it. So it's paid off relatively quickly. With our equipment, I mean, we demonstrated there's some companies out there doing three shifts, three, eight hour shifts a day. They're going all nice, know, six days, six, seven days a week. We're like, well, use the Pro X and you can go one shift five days a week. Imagine how much money you're saving on people, you know, and keeping the lights on. And an incredible hassle of doing it like they're doing it. So a piece of equipment like the Pro X can make their life very much more efficient and profitable.
38:53 - Dai Truong (Arlington Capital Advisors)
Yeah, now that's a huge cost savings, especially on labor, which is very costly when you factor in. Health insurance and other costs for employees.
39:04 - Marc Beginin (Prodigy Processing Solutions)
There's actually one other thing, but it's not only we're doing the buyback with the customers. We worked out a deal with Excess Financial, which is one of the premier financing companies for equipment in the cannabis space. Excess, there's still letters, ExcessFinancial.com. They only work with big companies, though. You have to have at least 10 million revenue for the past year and been in business for at least 18 plus months. They're very particular on who they fund. With their score of customers, we've offered them 0% financing. How we do that is basically we're giving a credit to the lender, and that we're paying down basically the interest rate. These companies are very sophisticated, right? So you can get 5% by putting your cash in a savings account right now. I mean, it's not that hard to find a money market. So we're offering 0% financing where you can't get financing for less than 18% in this industry. So for them, roughing 0% financing and for anybody who's listening out there, if they have their own lenders, we'll do the same. So to them, it's free money. So they're going to make 5% separately, because they're paying 0% on our equipment.
40:32 - Dai Truong (Arlington Capital Advisors)
Yeah, no, and that's potentially taking the 18% a 23% delta for pretty advantageous. So let's talk about other pushbacks then. So it seems like you've made it very easy for people to consider swapping over to use Prodigy to get it financed. What other pushbacks are you facing right now?
40:51 - Marc Beginin (Prodigy Processing Solutions)
We're really not facing a lot of pushback. It's just, now, I think I'm going to move from what they have into taking a stop into making a move. It's like getting new furniture for your house. It's like, ah, this is okay. It's just convincing us really them convincing themselves that, hey, I'm just going to make a move and do it. I'm not providing equipment for small producers. with precision, have much smaller equipment. And those just aren't our customers now unless they plan on scaling where our Pro-X can, right now it has eight columns, right? So those 80 pounds a run. And you could reduce that down to three or four columns and save a lot of money. But then you have a piece of equipment that can scale up to that 80 pounds. you can start at 40 scale up to the 80 down the road. We don't make a larger investment, but we're not doing any sort of like five, ten-pound units. So that would be, I wouldn't say a pushback, but that's just not our target market. So that's not our customer.
42:17 - Dai Truong (Arlington Capital Advisors)
Right. So it would be appropriate to say you're going after more of the enterprise customers, of the MSOs or the larger single-state operators. So folks who are more SMBs, let's say relatively in this industry aren't really your focus.
42:33 - Marc Beginin (Prodigy Processing Solutions)
Yeah. Most of the MSOs, the negotiated companies, the large producers that are coming out of the new ones, for example New York, that need to get started, but they want to get started right. And a lot of these ones, they learn from the mistakes made in the real estate in this country, and they want to start right. we're talking with a number of them. And even though their processing projections may not be what the Pro-X can actually do, they want to start right and grow into it. And that has a lot to do because they already know that federal legalization is coming. So why would you invest in something that the FDA may just say you can't use anymore? So for that reason, plus the fact that it can scale and they intend on operating very successful businesses, they're going to grow into it over the course of a year or so. But they're starting out right. So that's additionally our customer.
43:44 - Dai Truong (Arlington Capital Advisors)
And what about the roadmap for additional products?
43:48 - Marc Beginin (Prodigy Processing Solutions)
Oh, yeah. Yeah, we have. I mean, I can't really talk about what we're developing right now, but within the next few months. I believe the Pro-X is incredibly innovative. It's more efficient. The most efficient on the market is the best that's out there today. What we're coming out with in short order here is disruptive. So yeah, I can't really talk to the technology, but stay tuned.
44:23 - Dai Truong (Arlington Capital Advisors)
Sounds good. And how about just your plans for this company? What's your three, five year outlook look like?
44:32 - Marc Beginin (Prodigy Processing Solutions)
Really, the hyper scale. mean, just like, you know, precision went from an idea. Oh, by the way, precision started with $45,000 in capital. Just put that into perspective. It was, I mean, basically you get half down and half would be the deposit and the other half plus shipping expense we paid for. Before you ship, right? So we didn't have any accounts receivable and those few times we did have accounts receivable didn't work out so well, so we stopped doing that. So this is why, you know, this business is structured similarly, but we're starting with millions of dollars, right? When I was used to starting, you know, the history of starting with basically nothing. So we are starting off with an incredible advantage here in terms of capital and knowledge. So precision went from, you know, nothing, a $45,000 investment to a $55 plus a million exit within seven years. So the goal with prodigy is to dwarf that because we are, you know, we're more sophisticated, we're more knowledgeable. For all the reasons I suggest, you know, success earlier, we're positioned to do that within three years. And with federal legalization, which is everything that we're doing is with that in mind that we will either become part of a larger organization when that happens or we will certainly be that. So it's really a three year runway.