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World Class Extractions (PUMP.C) has everything they need to be a success story in 2021, but a little bit of luck

12/24/2020

You’d be hard pressed to find a success story in cannabis worth talking about nowadays. Most companies are puttering along, doing their best to avoid death-by-creditor and price stagnation, while toting their buildout or what key strains they’ve sold to the Ontario Cannabis Store in lieu of actual news.

The prospect of the COVID-19 pandemic doesn’t help matters much, especially if you’re looking to do business in Doug Ford’s Ontario. At first glance, locking down half the province for an entire month seems rather heavy handed, but once the numbers are in the narrative shifts to why didn’t they do this sooner.

For cannabis, though, which you’ll remember was considered to be non-essential in Doug Ford’s Ontario, that represents a significant problem for some retailers. How do you get your product into the hands of consumers? Usually by adding to your overhead (or worse, passing the cost onto customers) by adding an extra link onto your distribution chain through contracting to a third-party delivery service. Not exactly a thrilling chapter to the next multi-billion dollar success story.

World Class Extractions (PUMP.C) skipped that part by buying their own delivery distribution arm by picking up a controlling interest in Pineapple Express Delivery, which is really only one of the shrewd developments that PUMP’s done this year.

Here’s how well PED has done this quarter from a press release:

“Pineapple Express Delivery’s October, 2020, revenues totalled $795,580 (September — $767,545) with gross margin of 30 per cent (September — 32 per cent) (unaudited). As a result of recent COVID-19 prevention measures, B2C (business-to-consumer) revenue increased approximately 6 per cent during October, 2020, mainly in the recreational delivery segment. The number of deliveries continues to increase month over month with 62,327 deliveries rendered in October compared with 59,102 deliveries in September. Within the province of Ontario, Pineapple Express Delivery offers same-day service in 37 cities (183 postal code regions) and three-day service in 65 cities (288 postal code regions). Pineapple Express Delivery will soon be launching in three new jurisdictions in Ontario and working to launch alcohol delivery to service the Greater Toronto Area (GTA).”

Essentially, World Class Extractions primary business focus is on cannabis and hemp extractions—the process of actually extracting the raw chemicals, like CBD and THC, used in tinctures, topicals and the like.  PUMP takes on third party clients, offering both in-house services as well as leasing or selling their own extraction devices—specifically ethanol and CO2 extractors called the BOSS, the BEAST and the BIG BOSS, which is a larger version of their CO2 extractor. These are holdovers from their days as Quadron Cannatech, prior to their merger with World Class Extractions.

They recognize that a company needs more than hype and good press to do well in the post-cannabis bubble market. Now they have to have to be shrewd, recognize opportunities and have a little bit of luck.

Luck is something they haven’t had much of yet, if their chart is any indication:

Source: stockwatch.com

But that’s owing more to the size and visibility of the company, and the pool they’re swimming in at present. Honestly, if they weren’t a long-time equity.guru client and therefore subject to my regular contractual attention, I wouldn’t have given them a second thought. But they are and they more than earned it, and because of it, even if they weren’t a client (or cease being one) they’ll still be interesting enough to keep an eye on.

Mostly because when they do put out news, it’s not the standard look-at-our-strains and buildout dross you get from the rank and file in the cannabis sector, but something of substance. For example, earlier this year they swooped in and snatched a HydRx Farms’ $11.5 million debenture for $5 million, bringing them a $50 million facility for a tenth of the price.

It might also be worth pointing out that right now they’re trading at a penny and a half, and they have a market cap of $9.3 million. Essentially, the $50 million facility they picked up earlier this year is worth more right now than their whole company. Do you think it’s going to stay that way? If 2021 brings them the luck they’ll need, they’ll be able to write their own success story.

—Joseph Morton

Full disclosure: World Class Extractions is an equity.guru marketing client.

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