Canada, June 18 (FINANCIAL POST)- Much of the investment buzz around hemp and cannabis has centered on a company’s capacity for plant cultivation.
As markets for cannabidiol (CBD), cannabis oils and specialty products ramp up, companies are asking themselves how they can efficiently extract, process and deliver those products to a growing market.
Two Canadian companies offering an answer — World Class Extractions, Inc. (CSE: PUMP) and Quadron Cannatech Corporation (CSE: QCC) —recently merged and joined forces as an extraction and processing powerhouse.
Each company offers a unique value proposition.
Quadron offers unparalleled technical expertise, an established customer base and a seasoned management team. Its groundbreaking BOSS and BEAST extraction systems have formed the backbone of the company’s advanced extraction and processing solutions for the cannabis industry and have helped to fuel an established and expanding revenue stream.
World Class contributes its unique patent-pending technology, which the company anticipates will provide higher yields of full spectrum cannabis oil at faster rates and larger volumes than any current technologies. It also offers a strong cash position resulting from its recently-closed private placement for gross proceeds of approximately $23 million.
Until recently, the North American hemp market was fragmented by conflicting regulations around CBD products. The signing of the U.S. Farm Bill in December 2018 made considerable progress in setting the stage for widespread hemp cultivation, and the extraction and processing of CBD oil containing less than 0.3 per cent THC (the psychoactive component of cannabis).
It’s a big deal. Cannabis experts BDS Analytics and Arcview Market Research, project the market for CBD sales in the U.S. will exceed US$20 billion by 2024.
The early uncertainties surrounding the sales of these products have discouraged competitors from entering the mega-scale extraction and processing market. Both World Class Extractions and Quadron doubled down on aggressive research and development programs that have spanned five years.
“This isn’t simply a matter of quickly ramping up your extraction and processing capability,” said Donal Carroll, director of World Class Extractions.
“It’s as much an art as it is a science and our companies have worked tirelessly to develop products capable of providing the capacity and efficiency to meet market demands. Our combined company initially will focus on large-scale hemp in the United States, and on eventual extraction of cannabis oils for edibles and topicals in Canada, when those products become legal.”
Rosy Mondin, chief executive officer of World Class, will head up the new extraction and processing company. She’s overseen the development of four key units, which have been tested and refined in partnership with one licensed producer and other late-stage applicants:
* The BOSS, a carbon dioxide extraction unit;
* The BIG BOSS, a co-solvent extraction unit operating with both carbon dioxide and ethanol, that will hit markets later this year;
* The BEAST, an ethanol extraction system; and
* The BIG BEAST, an ethanol extraction system with an estimated processing capacity of up to 20,000 kilograms of dried biomass per day.
“Ethanol and CO2 extraction technologies aren’t new,” said Mondin. “But we’ve fine-tuned the process so that we can provide hemp oil extraction and processing at scales and speeds never before seen in the industry. More than simply providing raw extraction power, our in-line processes remove fats and waxes to provide a product tailored to the customer’s end use. We even provide a process that allows the user to convert waste biomass into energy.”
The merged company will sell its advanced extraction and processing equipment; however, its focus is turning to to earning recurring revenue through processing hemp for farmers across the United States, and to cannabis and hemp farmers across Canada, and eventually Europe.
“The market for extracts, edibles, vape pens, topicals and beverages hasn’t yet begun, and represents the largest sector of cannabis market. In anticipation of the legalization of those products, we’re aligning ourselves with strategic partners to establish processing centres across Canada in which we take an interest in our joint venture partner companies and solidify revenue sharing agreements in licensed facilities.” said Mondin.
“We are currently establishing such strategic partnerships across Canada. In the U.S., we’re looking to finalize a number of contracts for large scale hemp extraction and processing, and we are engaging with partners in the European market as well.”
Quadron has also developed premium vaporizer pens, cartridges and related materials, providing a source of ongoing revenue for the company.
Providing the right management team for the new company was also critical, said Anthony Durkacz, executive vice-president of First Republic Capital and founder of World Class Extractions.
“There’s a limited supply of people in the industry who can demonstrate a combination of knowledge and experience,” he said. “Quadron was one of the few companies that offered that wealth of management experience, including legal acumen.”
Durkacz noted that, as hemp and cannabis crops become commoditized, product prices will drop:
“As we say, it isn’t the tomato farmer who’s making the money, it’s the people who make the tomato sauce. By going big and efficient, we’re positioning ourselves to serve the emerging extracts, edibles and beverage markets. That’s where the long-term money will be made.”
This story was created by Content Works, Postmedia’s commercial content division, on behalf of World Class Extractions.