Big Cannabis Money Will Be Made on Extraction Technology

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Most investors view cannabis as a commodity, but the smart money would be wise to focus on the innovation side of the industry. This is why Nextleaf Solutions Ltd. (CSE:OILS) has piqued our interest. Nextleaf Solutions is a cannabis extraction company, which means they extract oil from the cannabis plant (marijuana or hemp) that is used in Cannabis 2.0 products, such as edibles, beverages, topicals and vapes. Cannabis 2.0 is the future of the industry, and Nextleaf has over 40 issued, and 60 pending patents related to cannabis extraction technology, which will allow the Company to produce the lowest cost cannabinoids molecules (THC/CBD) at scale.

In a recent article published on New Cannabis Ventures, Jay Yonamine wrote that he believes it is inevitable that patents will play a crucial role in the cannabis space, adding that this nascent industry has shown a pervasive indifference to patent rights that all but ensures widespread infringement.  Thus, many cannabis-related businesses are at serious risk of being subject to patent litigation.

The concentrates market is now the largest and fastest growing sub-segment of the broader cannabis industry, with (legal) 2019 revenues estimated at $6 billion a year and growing at 30% annually, according to cannabis market research firm BDS Analytics. Therefore, Mr. Yonamine says that as the cannabis industry grows and matures, it will increasingly depend on incentivizing investment in R&D and innovation, which also requires that the industry follows general business best practices, such as paying for the rights to practice patented technologies.

Nextleaf Solutions has been issued patents in Canada, United States, Australia, South America, Asia, Africa and Europe, especially pertaining to the Company’s unique method of extraction and distillation of cannabinoids. These patents protect methodologies relating to the removal of chlorophyll, fats and waxes during the extraction and refinement process, achieving more efficient throughput rates and a higher quality distillate. Less refined cannabis extracts contain chlorophyll, fats, and other impurities that result in undesirable flavours and aromas. Solving this problem will be crucial in the wide-scale public acceptance of legal 2.0 products, such as edibles and cannabis-infused beverages.

Nextleaf Solutions has over 40 issued and 60 pending patents with a 100% patent pending to issued success rate.

But Nextleaf is more than just patents. The Company says its Phase 1 extraction plant can process the same amount of biomass into a refined oil as 10 large CO2 extractors, through the use of OILS’ closed loop, chilled-ethanol extraction with inline filtration, winterization, solvent recovery & remediation. By doing so, Nextleaf Solutions is demonstrating true scalability with a lower operating cost as their technology is operated by 2-3 people while any off the shelf CO2 extractor requires 8-10x more staff to match production. The processing capacity at the Nextleaf Solutions plant is 600 kg of biomass per day into refined oil. OILS™ has an asset light, IP heavy approach and understands that while scale is important, efficiency and margins are essential.

A significant catalyst for cannabis extraction companies, such as Nextleaf Solutions, is the looming Canadian harvest in the fall. With over 20M sq2 of licensed outdoor grow, “Croptober” will be the largest legal cannabis harvest in history. This supply of outdoor harvests in the fall will flood the market with existing production from indoor facilities. Since biomass has a six-month shelf life, there will be a historic amount of biomass on the market, presenting a lucrative opportunity for Nextleaf to extract more cannabis oil for the accelerating roll out of Cannabis 2.0 products into 2021.

Ubika Research/SmallCapPower has received compensation from Nextleaf Solutions to provide analyst research coverage. For full disclosure please visit here >>

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