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Bridging the Cannabis Gap from Soil to Oil

Dave Jackson Dave Jackson, Stockhouse
0 Comments| March 20, 2019


Click to enlargeIt’s certainly a stretch. That is, going from the son of dairy farmers in Langley, British Columbia to CEO of one of the cannabis industry’s leading first-to-market extraction companies.
 
But that’s exactly what Nextleaf Solutions Ltd’s (CSE: OILS, Forum) Co-founder and CEO Paul Pedersen has accomplished. Mr. Pedersen has been a trailblazer in the cannabis industry since 2013, having previously advised and worked for a number of investors and cannabis companies, including Ample Organics, Lift & Co, and Peace Naturals – the first non-incumbent company to be granted a medical cannabis production license by Health Canada.
 
After Cronos Group closed its acquisition of Peace Naturals in 2016, Paul Pedersen exited and co-founded Nextleaf Solutions with the vision of setting the global standard for the development of cannabis extraction and purification technology.
 
“From day one we said Nextleaf would never grow a plant. Our focus has been on developing intellectual property around converting the cannabis plant into infused products through a scalable, repeatable process.” Paul Pedersen says.
 
Nextleaf is now primed and ready to capitalize on the growth of the exploding cannabis market, specifically infused products with Canada set to become the first G20 country to legalize the sale of cannabis edibles and concentrates by October 2019. The Company has completed construction of its dedicated extraction and processing facility in Greater Vancouver, British Columbia. The Company plans to commercialize its intellectual property portfolio by providing B2B processing services to licensed cultivators and supplying cannabis oil and extracts to qualified Canadian and international partners.
 
Nextleaf acquired market-validated intellectual property in January 2017, which it developed into a portfolio of issued and pending patents. These pertain to methods, systems and equipment for improving the purity and yield of cannabinoids through extraction and purification of cannabis biomass.
 
“Over the past 3 years this industry has been focused on building large indoor cultivation facilities. By acquiring extremely disruptive extraction and purification technology and developing patents around this existing technology, Nextleaf has built a lead over the billion-dollar market cap cannabis producers that have been focused on growing plants. We believe companies that are first to secure unique IP will have a massive competitive advantage as the industry evolves from being able to sell only dried bud and low-dose cannabis oils, into the first G20 country to legalize edibles, beverages, nutraceutical products, and vape pens,” says Pedersen.
 
Nextleaf’s portfolio of issued and pending patents provide protection for the company’s unique, industrial-scale process of producing purified THC and CBD distillate – tasteless, odourless cannabis concentrates best suited for infusing premium value-added products.


Nextleaf’s centralized, state-of-the-art processing facility (Nextleaf File Photo)

Pedersen holds the earth close to his hand, having grown up on a dairy farm in Langley, BC. And he has the kind of salt-of-the earth, grassroots backstory that builds confidence in investors who take serious stock of a company’s executive management team.
 
“My father immigrated to Canada 50 years ago to build our family’s dairy farm, I’ve been around farming my whole life. When we started Nextleaf, our goal was to provide turn-key solutions to cannabis growers and hemp farmers that needed help bridging the gap from soil to oil.”
 
Pedersen has assembled a team of engineers and scientists – some of the brightest minds in the industry – to scale up Nextleaf’s extraction and purification technology, and capitalize on this once in a generation market opportunity.
 
The CEO holds an MBA in Finance from Michigan State University and has more than 12 years experience building emerging growth companies, including a media company acquired in 2007 by Towerstream (NASDAQ: TWER). Nextleaf’s CFO Charles Ackerman is a Chartered Accountant who, like Pedersen, previously consulted for Peace Naturals until the company’s 2016 acquisition by The Cronos Group.
 
According to the CEO, “Being involved in the first legal cannabis producer in this country really gave us tremendous insight into where this industry was headed. When we exited Peace Naturals in 2016, I said we need to focus exclusively on extraction and purification of cannabis and leave the farming to the farmers.”

Click to enlarge 
Paul Pedersen, Co-founder & CEO of Nextleaf Solutions
 
 
The Nextleaf Difference: First-to-Market. First Mover.
 
When asked, simply, what makes Nextleaf’s business model attractive and unique to investors the CEO had this to say:
 
“First and foremost what sets us apart is that we’ve been able to beat every single billion-dollar company in the space to the first issued cannabis specific patent for the extraction and purification of cannabinoids. Why we think that’s important is because of what’s coming in October. Right now, in Canada, every producer can only sell one form of extract, and that’s what the government calls cannabis oil with a maximum potency of appx. 3% (THC). And where the industry is going is into edibles, beverages and vape pens. Extracts are the fastest growing segment. We believe within 12 months of becoming legal, oil and edibles will make up more than 50% of the total market.”
 
And research backs up those numbers. In fact, an Arcview industry report says the edibles market alone could be worth over $4 billion in Canada and the US by 2022. The report stated: “Legal cannabis-derived edible products, from candy and chocolate to infused beverages, is a sector worth watching over the next few years…It has become clear that the legal cannabis market is about much more than inhaling the smoke of smoldering cannabis flower.”
 
Nextleaf holds multiple US-issued and pending patents for processing cannabinoid distillate – the precursor of every cannabis-infused product. Highly-concentrated THC or CBD distillate is odourless, tasteless, and purified. The flavours and aromas of cannabis are undesirable in edible and infused products made with crude extracts due to the presence of chlorophyll, fats, lipids, and other impurities.
 
The Company says their “patented process will disrupt the production of infused edibles and beverages.” Further, consumer preference is shifting towards value-added and derivative products. These require sophisticated processing solutions in order to produce standardized and impurity-free extracts that are easy to dose and formulate.
Cannabis companies like Nextleaf clearly see the future isn’t in flower…but in oil.
 
 
(Click image to enlarge)
 
 
The Cannabis Distillery
 
“Premium Vodka versus Moonshine”. That’s the metaphor that Nextleaf uses to explain their patented distillation and purification process. And every edible, infusible, and consumable cannabis product requires one thing – a high-purity cannabinoid, ready to infuse.
 

(Click image to enlarge)
 

And like oil and water, the CEO explains how Nextleaf’s patented refinement and purification methods separate the Company from the competition:
 
“Our patented process allows us to go from crude oil to a high-purity oil – tasteless, odourless and easy to standardize, or make water soluble. And it goes far beyond crude extraction. It allows us to separate and isolate molecules, before reformulating in the ideal combination based on the product, client, and end consumer’s needs. This is important to differentiate from what (other) producers are focused on, and what you can sell today, which is basically only one form of extract.”
 
He continued on by suggesting that drafted and proposed regulations put forth by Health Canada regarding edibles, concentrates, and infused products will be stringent and require companies to produce an extremely high-quality product:
 
“In October 2019, when the proposed regulations are set to come into force, there will then be a diverse new assortment of products, welcoming with it a new segment of consumers. And what’s important for any brand is that in order to manufacture these products you need to have a very high-purity oil. When we were looking forward into the future, beyond the first formats legalized (flower, pre rolls) we had to think what’s coming next. That’s why we had to think about large pharmaceutical companies and established Consumer Packaged Goods (CPG) companies getting into the cannabis industry. These are companies that don’t want to be farmers and grow plants. They want to add molecules to differentiated products through a scalable and highly repeatable manufacturing process. And that’s what we provide.”
 

(Click image to enlarge)
 
 
The Edible and Infused Product Landscape
 
According to a Deloitte report from June 2018, six out of ten cannabis consumers are expected to use various delivery methods other than dried flower. These include a wide a wide array of edible and infusible products – everything from gourmet chocolate bars to infused root beer. In the US, cannabis-infused refreshments sales have skyrocketed.
Nextleaf holds multiple US-issued and pending patents for the process of producing cannabinoid distillate – the precursor of every cannabis-infused product.


(Click image to enlarge)
 
Nextleaf says through a combination of extraction, refinement, and purification steps they’ve created a distillate suitable for a variety of product concepts and methods of consumption.
 
 
The Transaction
 
On March 14, 2019, the Company completed a successful Reverse Takeover of Legion Metals Corp. (the “Transaction”). In connection with the Transaction, Nextleaf Innovations completed a brokered and a non-brokered private placement (together, the “Private Placements”) of units of Nextleaf Innovations (each, a “Unit”) at a price of $0.35 per Unit for aggregate gross proceeds of $5,000,000. Mackie Research Capital Corporation acted as lead agent and sole bookrunner on the brokered portion of the Private Placements, on behalf of a syndicate of agents including Industrial Alliance Securities Inc. and Gravitas Securities Inc.
 
The Transaction was completed by way of plan of arrangement. Former Nextleaf Innovations shareholders now hold an aggregate of 92,979,101 shares of the Company, representing 96.23% of the issued and outstanding shares, and remaining Legion shareholders hold an aggregate of 3,647,029 shares of the Company, representing 3.77% of the issued and outstanding shares.
 
The common shares of Nextleaf Solutions are expected to resume trading on the Canadian Securities Exchange on March 21 (the “CSE”) under the new ticker symbol “OILS”. Details of the Transaction are disclosed in the CSE Form 2A Listing Statement, which will be filed on SEDAR (www.sedar.com) prior to the resumption of trading.
 
 
In Closing
 
Retail investors are now looking for real-world, value-added opportunities in the ever-expanding and ever-changing cannabis space…especially the exploding edibles and infused beverages marketplace. Smart and savvy investors, with an eye to the future, may want to give this performance-driven Canadian company a serious look.
 

(Click image to enlarge)
  
 
From the CEO:
 

(Click on image to play video)
 
   
 
FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.



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