Cannabis is big business. It is projected that the legal cannabis market will reach nearly $22 billion in total annual sales by 2020 in the U.S. alone. Similar to its neighbors to the south the Canadian legal cannabis market is estimated to reach over $2.5 billion by 2020.
Within this market, the wider legalization and acceptance of cannabis, both for medicinal and recreational purposes, has created a massive growing demand for cannabis extracts and concentrates, which are utilized in a wide-variety of cannabis products, which according to consumption trends, is predicted to grow by 198,000% in 5-years.
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With very few exceptions, not many companies have been in the research and development of automation and modernization of equipment for extraction and processing of cannabis on a commercial production scale. This has created an excellent opportunity for companies with cutting edge extraction technologies.
Quadron Cannatech (CSE:QCC) is working to develop a line of automated extraction and processing solutions to provide fully integrated extraction and processing laboratories, via service contracts and sales, including equipment, ancillary products and services. In-house engineering, manufacturing and science-related technology experience provides Quadron a leading advantage as a designer, manufacturer, supplier and innovator of safe, compliant and efficient extraction and processing equipment.
The advantages of a licensed producer using Quadron Cannatech’s equipment are:
QCC builds highly specialized equipment
QCC conducts research and development. QCC’s CO2 machine is currently undergoing rigorous testing to ensure it can run at full peak performance, 24/7
QCC continuously works to refine and improve its equipment
Commercial production means 24hours/day to QCC – QCC builds its equipment for this purpose
The objective is to build full laboratories – and QCC is already doing that. QCC wants to be recognized as a leader in providing extraction and processing laboratories.
In addition to equipment sales, Quadron also generates revenue through service agreements:
Quadron works with clients to design and set-up unique laboratory environments, tailored to each client’s unique needs and requirements, depending on end-product goals (i.e. vape pens, capsules, suppositories, etc.)
• By working with Quadron’s team of experts, clients have access to Quadron’s full suite of equipment and services – benefits of clients working with Quadron: Rapid advancement & equipment rapidly evolves. QCC’s equipment is designed & developed to accommodate next generation technologies.
Quadron provides advanced solutions to the industry for extraction and processing cannabis material into liquid cannabis oil. In addition, Quadron’s equipment is automated which allows growers to monitor the process on their smart devices which reduces the manual operation time of the unit.
Highlights of Quadron Cannatech’s CO2 equipment:
Designed and manufactured in British Columbia
Quick connect: one nut/bolt to loosen cap on the extraction vessel (where you put in the material)
Collection vessels (of crude) can be emptied while you’re working
One trained technician can operate four (4) Boss machines or two (2) Boss Duo machines
Fully automated, offering remote-control and monitoring capabilities
Has a very high flow of CO2 which shortens the extraction cycle (currently at 4-hours)
QCC has maximized thermodynamic efficiencies requiring a low-level power source. The system will run on about 40 amps (like a dryer in a house) Cutting edge technology with low energy consumption – whole system runs with only 2 plugs: one 30AMP plug, and one 20AMP plug
Self-contained system, does not require external components to be hooked-up to make it work
Also developing two 2 x 100L CO2 machines for mobile extractions
In development, machine composed of 2 x 100L vessels
The Boss Duo: same machine, with 2 vessels (2 x 45L)
The Boss: 45L vessel, handles 17-20 pounds (smallest machine QCC makes).
Quadron also provides branding and design services and works with clients to source ancillary products such as custom vape pens, cartridges, inhalers as well as other dispensing devices which gives QCC a complete supply chain ranging from extraction to packing, branding and delivery of finished products.
With all the focus from investors being on the licensed plant growers, Quadron’s business is focused on providing a value add service to growers and processors of varying sizes. The market is undeniably moving toward extracts as researchers have witnessed early from the US just how fast the oils market is growing. According to data released by the Washington State Liquor and Cannabis Board, sales of cannabis concentrates have increased exponentially in the last two years from $3,483,681 in 2014 to $143,282,686 in 2016. An analyst from Mackie Research has estimated that cannabis oil consumption in Canada alone is projected to rise from 284 litres in 2015 to 562,613 litres by 2020, which equates to a roughly C$2.8 billion market segment.
With a CAGR of 356% from 2015-2020, the oils market will significantly outpace the processing capacity of the major LP’s. It’s the smaller growers that will fill the supply gap and Quadron stands to benefit immensely if it can effectively enter service contracts and sale arrangements for its equipment to these producers.
Quadron CEO Rosy Mondin emphasized that cannabis extracts are where the real growth lies and this is why Quadron has so much opportunity for growth. People do not want to deal with the smell and stigma that goes along with smoking a joint. Cannabis oils, pens, and other ancillary products allow the consumer to enjoy the full cannabis experience without the usual drawbacks including the strong odor. While traditional flowers/buds can essentially only be smoked, oils have a far more diverse range of delivery methods and thus have a more universal appeal. Oils can be utilized with a wide range of applications such as baked goods and food, steeped in tea, put in pill form, used in vape pens, as well as topical products.
This is a big reason why the North American extracts market will only continue to grow and evolve as we see regulations and laws change around a relatively young cannabis industry. Quadron earlier this week announced an LOI with Lucid Labs (a solutions provider to cultivators and processors based out of Washington State). Under this agreement, Lucid Labs will sell & distribute Quadron’s extraction & processing equipment to their clients. Lucid Labs has a diverse range of clients/partners across Washington, Oregon, California & Nevada and this strategic partnership gives Quadron instant access to all of Lucid’s channels. In addition to selling existing extraction equipment, QCC will also be developing new processing/extraction equipment in conjunction with Lucid to provide the cleanest purist and most consistent product on the market. It’s these types of partnerships that expand QCC’s distribution, revenue base and equipment offering that will solidify their standing as an industry leader in extraction processing solutions and allow them to capitalize on the rapidly growing extracts market throughout North America.
For investors in the cannabis space; they should be looking for value add sectors within the cannabis supply chain. Quadron is a picks and shovel business within the cannabis oils market which is seeing massive growth. If the company can increase their distribution across Canada and the US, they stand to benefit immensely from an extracts market that is growing 100x faster and projected to be larger than the dried cannabis market as a whole.
Quadron reported revenue and gross margin for the year ended April 30, 2017 of $1,789,188 and $502,320 (28%) respectively – a 972% increase over 2016 revenue of $166,823. With its full suite of products for the cannabis supply chain including its latest CO2 extractor as well as ancillary products such as vape pens, cartridges, inhalers, etc., Quadron Cannatech is fully prepared to seize the opportunity available from an industry that’s experienced 150%+ compounded year-over-year growth and shows no signs of slowing down.
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