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April 19, 2024


Investment information for the new generation


Today’s Idea: Pure Extracts Technologies (PULL.C) is worth a closer look

Pure Extracts Technologies (PULL.C) is the Pemberton, B.C. based cannabis extractions company we showcased a few months back that’s involved in three different verticals: cannabis (and hemp) extractions, functional mushrooms and the nascent psychedelics sector.

Not to belabour the point too much, but when we first started covering this company they were one to watch. They had top shelf extractions machinery, an eye on three potentially lucrative verticals, and enough room to scale their production when those big orders start rolling in. Now nearly a year and a half later it’s beginning to look like they’re suffering from a failure to launch. Maybe that’s a mix of timing, market sentiment, regulatory strangulation or mismanagement, but after a year and a half of waiting, we would have expected a bit more from a company that’s touted itself as a future runner in the space.

The long bevy of news releases suggest a company that’s trying to fulfill its baseline strategy, which is an admirable course. Get the work done is never a bad strategy. But the problem here, likely leading to their latest loss of investor confidence as seen in Vishal‘s chart, is the lack of transparency.  But the question remains: where’s the money? We’ll get into that in depth later.

Staying the course

The company has upped their distribution game, getting their gummies out to Alberta, their vape cartridges to Ontario and their gummies and cartridges to Saskatchewan.

As well as making joint ventures with two separate companies for entirely different products. The first being their August joint venture (JV) with Oregon-based cannabis company, Grown Rogue International (GRIN.C), or more specifically their Michigan-based subsidiary, Golden Harvests. It’ll include building out 2,600 square foot of the existing 80,000 square foot facility dedicated to branded concentrates, cartridges, edibles and tinctures, and may include greenhouse production for cheaper processing and white label opportunities.

“The Michigan cannabis market is large and growing quickly, with sales reaching a record $171 million in July and then $165 million in August of this year, up over 50% from a year ago,” said Ben Nikolaevsky, CEO of Pure Extracts. Adding that, “We plan to attack this market aggressively with a goal of reaching a run rate of $20 million in annual sales by the end of 2022.”

They also formed a JV with public life science biotechnology company, Psyence Group (PSYG.C), to develop psilocybin extracts and formulations to treat psychological trauma. Pure Psyence will use Psyence mushroom supply with their extraction techniques to get high quality extracts and formulations at scale. The key issue with this is that psychedelics aren’t even legal and they’re already a saturated market. Most of the companies presently pushing products out and out to legal jurisdictions where they can sell them are doing extractions and getting their formulations out, and they already have a substantial head start.

It’s also worth it to point out that unfortunately none of these moves have price tags attached so we can’t begin to guess how lucrative (or not) they might be. And that’s bad news.

The Strategy

If there’s a positive note it’s that this company has set solid milestones and has set about achieving them.

Full PULL’s investor deck

The updated version of this would show that the company has been working to complete, if not having already completed, a few of the specifics in the upcoming category.

For cannabis, the strategy is decently simple. They wanted to get products on shelves for both their Pure Pulls, Pure Chews and white label clients. They’re doing that. They also wanted to get into the European market, which they said they had been working on since before COVID-19 made everything far more complicated. This is their most lucrative product and they’ve been pushing out distribution deals anywhere they can find them to pad that revenue line. By how much, though, is anyone’s guess until we see some updated financial data.

For psilocybin mushrooms, the company laid out their research and development milestones in January for psilocybin. It clearly detailed a timetable and milestones for the study, including formulation and manufacturing of psilocybin-based active ingredients for tablets, capsules and a nasal gel, to be used as an investigational product.

Milestones like:

  • Sourcing and procurement of medicinal ingredients, excipients & packaging materials
  • Raw Material Testing
  • Formulation and Manufacturing Process Development, Stability Testing
  • Clinical Batch Manufacturing
  • Quality Control Release Testing
  • Shipping of Clinical Batches to CRO

A few months later, they picked up a dealer’s license so they could get started.

A dealer’s licence could allow for the following activities:

  • Procurement of controlled substances, including by import, synthesis, propagation, cultivation and harvesting of psychedelic mushrooms for psilocybin extraction;
  • Research and manufacture of controlled substances such as psilocybin and psilocin;
  • Business-to-business sale of controlled substances, including by export;
  • Sale of controlled substance through pharmacies.

They formed a partnership with the Toronto Institute of Pharmaceutical Technology, and brought on Dr Alexander MacGregor, to help with their research and development issues.

There’s not much to say about the functional mushroom aspect yet. They’re in the process of collecting licenses. If you’re looking for something a bit more up close and personal, check out Jodie Vance’s take on Pure Extracts.

The numbers

Before we get too deep into the financials, allow me to point you towards our analysis guru, Taku Ndachena, especially his take on the Risks and Uncertainties section.

Otherwise, it’s beginning to sound like a broken record, I know, but the numbers are difficult to parse because it’s late in the cycle and they’re due to drop updated financials sometime this month. The last time we saw some financial data from this company was May, which was the same batch of documents we drew the data from in the last story we wrote. They’ve made some moves—sure, but without actually ascertaining what kind of revenue they’re bringing to the table, we can’t necessarily discern whether or not they’ve been forward moves, backward moves, or if they’ve stayed in the middle.

To Invest or Not: Pure Extracts Technologies Corp. (PULL.C)

From PULL’s investor deck

Forget functional mushrooms. Forget psilocybin (for now). Their core market is cannabis, and while they’re getting their distribution hats on now and trying to get products out to market, the question is whether or not anyone is buying.

If you consider past performance as (generally) indicative of future performance, then there are a handful of red flags on the previous financial statements. Looking beyond the shareholder equity, the general lack of debt, we have $1,818,168 in advertising and promotion. That number is actually down from $3,531,703, spent on the three months prior. So that’s $5.3 million on advertising and promotion in six months.

It does explain a few things, though. Last article I wrote on these guys I detailed a business trip up to Pemberton to see the plant. Before the adventure could begin, though, they treated us all to a comp-lunch at Earls in Whistler. Halfway through the lunch after being introduced to a few folks and chatted my way around the table, I realized that none of these people (except one) actually work for the company. The questions going around the table, deftly dodged in most cases, eventually became more pointed.

Some were other prospective investors, but the rest (maybe five dudes) were all promo people. Getting the word out is necessary, especially for a company at this stage of development, but the $5 million price-tag was excessive then and if the company hasn’t cleaned up their act, it leads to other questions about where their priorities might lie in the future. Maybe that $5 million could have been better spent elsewhere.

—Joseph Morton
Retraction:  As it turns out, Pure Extracts financials aren’t exactly late yet.  We originally wrote that they were, but the BCSC has their due date on the 28th of October.  We regret the error.

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