Nextleaf Solutions is one to watch in Canadian cannabis, this investor says

Cannabis extraction name Nextleaf Solutions (Nextleaf Solutions Stock Quote, Charts, News, Analysts, Financials CSE:OILS) has been bumping along during the past couple of years, but with its heavy IP stack in extraction and processing Nextleaf should be fun to watch. One fan of the company is Bruce Campbell, president of StoneCastle Investment, who says investors would be wise to keep an eye on the company’s numbers of the next few quarters.

“Nextleaf has an extraction technology that is a little bit different than everyone else’s. Most of the extraction technologies out there right now are carbon dioxide or for butane or methane extraction and what Nextleaf has done is they’ve actually built what looks like a small oil refinery and they have a proprietary technology and it apparently produces a much higher quality product,” said Campbell, speaking on BNN Bloomberg on Friday.

BC-based Nextleaf, which entered the public markets via reverse takeover in late 2018, has spent years in R&D and acquiring patents related to its cannabis oil extraction and processing technologies before commercializing its IP through supply agreements with cannabis companies. Its manufacturing capabilities at its molecular distillation plant were finished in 2019 and the company was granted a Canadian patent for industrial-scale extraction of CBD and THC in early 2020. 

“It has taken them a long time to get to this point, probably a little bit longer than most investors had hoped for, and the stock has drifted,” Campbell said. “But recently they’ve seen some good news as they’re moving into production and some of their brands are starting to move up.”

“We don’t own it right now. We have a small warrant position from a previous financing and obviously we’re watching to see what the next few quarters of numbers look like from the company,” hesaid.

Further extraction agreements with Canadian LPs followed, with Nextleaf then launching this year its own Glacial Gold brand of cannabis oils and products. Nextleaf sent its first shipment of Glacial Gold to the BC Liquor and Distribution Branch last month, making the line of products now available across the province at public and private cannabis stores.

“We’re excited to launch in our B.C. backyard first, with a portfolio of large format vape and oil products, all broadly appealing and validated formulations, at accessible price points. We put the emphasis where it counts. Product quality and consumption experience matter most, not excessive packaging, or elaborate promotions,” said Emma Andrews, Director of Marketing at Nextleaf, in a September 9 press release. ”We’re confident that value is a driving factor behind the majority of product decisions, particularly in the vape and bottled oil categories.”

Nextleaf debuted on the CSE in March of 2019 and since then the stock has gone as high as $0.77 per share and as low as $0.15, with OILS currently hovering in the $0.20-$0.25 range. Year-to-date, the stock is up 34 per cent.

Last week, the company gave a glimpse of how Glacial Gold has been doing over its first month of sales which saw Nextleaf with seven SKUs on the shelves in four one-gram vapes and three distilled oil products featuring different potency levels. The company said it had over 50 per cent retail penetration in BC’s over 370 government and private stores. Nextleaf said its Session and Anytime vapes had a top value THC vape cart and 1:1 vape cart position, respectively, in BC and its Distilled CBD 50 Oil and Distilled 30:30 Oil had top value CBD oil and top value 1:1 positions, as well.

“We’re excited how the Glacial Gold brand of Session and Anytime vapes and Distilled Oils has resonated amongst private retailers and consumers across British Columbia,” said Nextleaf co-founder and CEO Paul Pedersen in an October 5 press release. “We’ve launched Glacial Gold™ with the goal of holding a top five category position with our vapes and oils by delivering on the brand promise of unparalleled value through high-quality products at accessible price points.”

Nextleaf last reported its finances in August where its restated fiscal Q3 featured bulk cannabis distillate sales for the year-to-date of over $2.00 million, with revenues expected to arrive from its initial order to the BC province in the fourth quarter.

“Over the last six months, we’ve seen pricing in the bulk concentrate market start to normalize and remain more consistent. We see this as a leading indicator the market is starting to find equilibrium,” said Charles Ackerman, CFO of Nextleaf, in a August 31 press release. “As our B2B revenue continues to trend up, we are excited at the prospect that we’re really just getting started with our existing client base, of which represent multiple global cannabis companies with leading product SKUs in Canada and existing footholds in the United States.”