We cover a lot of weed companies here at Equity Guru (EG), but Quadron Cannatech (QCC.C) is in a category of its own.
The quintessential “Picks & Shovels” play, Chris Parry first wrote about QCC on Feb 24, 2017, when he was a private investor in QCC – and EG has no commercial relationship with the company.
“Quadron provides equipment for extractions,” wrote Parry, “They formulate products for dealing with weed odors, they’re developing extraction techniques and products, they’re developing vape devices, but mostly they find pointy-headed experts with ideas, put those ideas into reality.”
It comes down to the space between the scientists and the growers.
The weed market is exploding.
The demand for cannabis oil (which can used in high-margin consumables like chocolate) is an explosion within an explosion.
Where is QCC now 16 months after Parry’s original article?
In terms of stock price – about where we started [see chart below].
After a vertiginous expedition requiring ropes on the way up (from .20 to $1 in 60 days) we almost blew our knees out on the way down (from $1 to .27 in 120 days).
In the meantime, Quadron – the company not the stock – has made significant advances in its quest to sell hardware into the exploding weed market.
On June 7, 2018, Quadron announced that it has completed a sale of its first mobile extraction module to TLC Botanicals, located in Langley, British Columbia.
TLC Botanicals is working towards building and operating licensed facilities and providing medical cannabis to both First Nations and conventional patients.
Shamans First Choice dispensary, a subsidiary of TLC Botanicals will provide medical cannabis to approved patients in Canada under the Access to Cannabis for Medical Purposes Regulations (ACMPR).
Problem: Many growers have limited square footage to build and operate a full extraction and processing facility.
Solution: Quadron designs, constructs and deploys mobile extraction laboratories to the weed sector.
Quadron’s mobile units come in different modules to accommodate the specific production needs of the client. Each module offers a scalable controlled-environment, which takes up a limited footprint, and is shipped on-site and installed in less than a day.
‘We’ve designed a turn-key, drop in place, fully-functioning extraction environment,” states Rosy Mondin, CEO of Quadron “The end-result is a processing solution that serves a growing demand within the cannabis industry, enabling participants to process plants for terpenes and other cannabis compounds in a safe and professional setting.”
Developing commercial hardware is no small task: The “Fuzzy Front End” (FFE) where the company “formulates a concept and decides whether or not to invest resources in it” – looks like this:
- Opportunity Analysis
- Idea Genesis
- Idea Selection
- Idea and Technology Development
This can take years. The timeline to commercialisation depends on whether you are building a pair of shoes, a car or a dating-app. But let’s agree that Mondin and her team moved quickly.
QCC’s third quarter ended on January 31, 2018.
The unaudited Q3, 2018 Financials for the previous 9 months, look like this:
- Revenue’s of $1,430,403
- Gross margin of $472,360
- Cash of $5,710,907
- Working capital of $6,991,878
During this time period QCC closed a $5-million bought-deal at 70 cents per unit (half the current share price) and initiated sales of its BOSS CO2 Extraction System.
Quadron is also co-developing four new pieces of equipment for commercial release with Washington based Lucid Labs LLC.
Equipment under development includes an automated ethanol extraction system, an advance filtration system, a distillation system as well as an automated hydrocarbon extraction unit.
“Quadron is strongly capitalized and remains focused on increasing sales of our progressive extraction systems and services,” stated Mondin.
The BOSS CO2 Extraction System has a tiny footprint. The installation is simple. Zero external hardware is required. All that is needed are two electrical outlets and an hour to set-up.
“Companies that will really propel the weed business forward aren’t the ones that throw money at every problem,” wrote Parry back in February, 2017, “They’ll be the companies that work behind the scenes, the pick and shovel deals”.
According to the Canadian government, there was “46% more cannabis oil sold to clients in Q3, 2017 than dried cannabis.”
The market wants a higher volume of sales. But the fact that QCC has sales – this early in its business cycle – is a bullish signal.
Full Disclosure: QCC is an Equity Guru marketing client, and we own stock.Disclaimer: ALWAYS DO YOUR OWN RESEARCH and consult with a licensed investment professional before making an investment. This communication should not be used as a basis for making any investment.