On September 27, 2017 Quadron Cannatech (QCC.C) launched a fancy piece of CO2 extraction hardware – called the “BOSS”.
According to Urban Dictionary a “Boss” is “a higher life form” that “demands respect” and is “always winning”.
That depends on forward-looking data like 1.the # of units sold, and 2. the profit on each unit.
That data is not currently available. We could create our own targets. But what’s the point?
To paraphrase a local lithium promoter – we “have two balls – and neither of them is crystal”.
What we can do is drill down into CO2 extraction technology and try to understand why the cannabis industry – and others – are so excited about it.
Most Equity Guru readers are aware that in July 2018, Cannabis will become legal in Canada triggering revenue growth not seen since the invention of coconut water.
But inside that macro growth story are localised, powerful detonations of wealth creation opportunity.
One of those explosions is cannabis oil – extracted from the leaf.
Cannabis oil consumption in Canada is expected to grow from 284 litres in 2015 to 562,613 litres by 2020 (198,000% growth) vs. dried marijuana consumption of 6,388 kg in 2015 to 110,034 kg in 2020 (1,600% growth) – Mackie Research.
There are multitudes of folksy oil-extraction techniques. One young man posted an instructional video showing how to manufacture cannabis oil with a cheese-cloth filter on a conventional oven.
The majority of the 891 comments posted to his video channel are positive:
“I use your CBD oil twice a day and it helps to ease my body pain which is chronic. I have a dog who has severe arthritis. I noticed when he has the pet CBD he seems to be in less pain and less grumpy.”
Oh, to be your little bitch.
CO2 extraction, sometimes called supercritical fluid extraction, is the premium industrial technique.
Supercritical fluid extraction (SFE) uses the properties of gases that have been compressed beyond their “critical point.”
Carbon dioxide (CO2) is the gas of choice because we breath it all day, and its critical point is 90 ° Fahrenheit (about the same temperature as our skin). At this relatively low temperature, terpenes and cannabinoids are still pharmacologically active.
A supercritical fluid acts like a liquid (dissolves compounds) and a gas (diffuses through solids).
According to a Hightimes.com article:
“The fluid has almost no surface tension, so it easily penetrates the cuticle of cannabis’ trichomes dissolving all the oils in its path.”
Up the now, CO2 extraction hardware is the domain of big industry.
We believe that the transition to a fully legalised cannabis market will not catalyse a quantum leap from Mom & Pop to Mega-Corp – but will create a wide swath of mid-level companies.
Big enough to regulate, but not big enough to monopolize a politically sensitive market.
We anticipate companies with grow-ops in multiple locations that will move the Boss to sync up with rotating harvest cycles.
Quadron is doing the same thing with CO2 extraction that Apple (AAPL.NASDAQ) did on cell phones.
It’s making them smaller and smarter.
QCC’s BOSS combines proprietary CO2 extraction and thermodynamic technology with automated features, and an intuitive plug and play design.
According to the company literature:
The BOSS requires only a fraction of the space and energy requirements compared to other systems on the market and is built to sim
plify extraction with the benefits of automation and data analytics. The system is designed with industry needs in mind to reduce costs and increase profit margins for extract production.
The Boss Extraction System Advantages
- Fully automated with remote monitoring and control features
- Software collects and analyzes data for R & D
- Programmable cycles – maximizing extraction and separation efficiency
- No external setup required
- Simplified assembly (2 pieces of hardware; 2 plugs; 4 hoses.
- Integrated heat exchanger with proprietary thermodynamics
- High precision operating parameters
- Ability to collect extract during runtime
“We engaged with a broad base of industry participants and listened to their needs,” stated Rosy Mondin, CEO & President of Quadron. “Utilizing military-grade craftsmanship, precision engineering, and state-of-the-art automation, the BOSS is designed to deliver the most advanced CO2 extraction technology.”
Quadron’s technology also has industrial applications outside the cannabis industry including:
- Fruit and nut extracts
- Omega-3 oils
- Tobacco extractions for e-cigarettes
On August 30, 2017, Quadron reported its annual financial and operating results for the year ended April 30, 2017.
Year-end Highlights (audited):
- Revenue for the year of $1,789,188, a 972% increase over 2016 revenue of $166,823;
- Gross margin for the year of $502,320 (28%);
- Loss and comprehensive loss from operations of $1,987,088 for the year, which includes a one-time charge of $1,344,713 related to the acquisition of Cybernetic;
- Working capital of $2,043,408 as of April 30, 2017; and
- Acquired automation design firm, Cybernetic Control Systems (“Cybernetic”).
Quadron’s position on the development chain may be too early (risky) for some investors.
Bird’s eye view: surging revenues, frontier industry, innovative product.
As always, bigger risk, bigger potential reward.
Full Disclosure: Quadron Cannatech is an Equity Guru marketing client. We are also investors.