Pure Extracts Technologies Corp. (CSE: PULL) (OTC: PRXTF) (XFRA: A2QJAJ) is a plant-based extraction company that is focused on cannabis, hemp, functional mushrooms, and psychedelics. During the last quarter, we have been closely following the operator and believe that our readers need to be aware of it.
So far this year, Pure Extracts has reported series of major developments and we are favorable on how the business is positioned to be a major beneficiary of the growth of the plant extract market. The Company represents a differentiated opportunity, and we are favorable on the diversity of the platform.
Over the next year, we expect Pure Extracts to announce additional commercial sale agreements as well as biomass purchase agreements. We believe the market is discounting the amount of revenue that can be generated through these avenues and want to provide an update on the opportunity.
Last week, Pure Extracts reported an important milestone and contracted its first commercial sale of cannabidiol (CBD) oil. The Company expected the sale to take place over multiple shipments this year and will sell CBD distillate that is 85% pure.
Increasing consumer demand for Canadian cannabis 2.0 products has served as a key catalyst for the business and this is a trend that we expect to become more significant on a going forward basis. The distillate that is produced by Pure Extracts is primarily meant to be used in cannabis derivative products like edibles, vape pens and beverages.
Prior to the COVID pandemic, we had the opportunity to visit Pure Extracts’ state-of-the-art facility which allows for sub-critical and super-critical CO2 extraction. We were immediately impressed with the structure of the operation and believe the management team is focused on maximizing the amount of revenue that is generated per square foot.
The best-in-class technology that makes up Pure Extracts’ sub-critical/super-critical CO2 extraction system to create high purity tetrahydrocannabinol (THC) and cannabidiol (CBD) full spectrum oil (FSO) and distillate. We are bullish on the amount of value that can be generated by the facility and believe the management team has done a great job at executing.
An Execution Story in the Making
Last month, Pure Extracts announced its first substantial biomass purchase agreements as it works to scale-up the production of both THC and CBD extracts. Under the agreements, Pure Extracts agreed to purchase 220 kilograms of dried cannabis flower from a large-scale Canadian Licensed Producer (LP) and 1,000 kilograms of biomass from a leading cultivator in Western Canada.
Pure Extracts expects these purchase agreements to start to impact the business in the first quarter of 2021 and we will monitor how the story advances from here. Over the next year, we expect to see a mixed trend as it relates to the prices of biomass of CBD and THC flower. As it relates to Pure Extracts, we believe the business is de-risked and is well insulted against a dramatic decrease in biomass prices.
When we analyze the growth prospects that are associated with any client, it is important to be able to take a step back and consider the potential impact on the business over the long-term. As it relates to these initial agreements, a successful outcome for Pure Extracts should provide it with more credibility and serve as a catalyst as it relates to entering into additional purchase agreements.
A Domestic and International Story with Catalysts for Growth
One of the most significant potential catalysts for Pure Extracts is the granting of a European Union (EU) Good Manufacturing Practice (GMP) certificate for its facility. The development would serve as a gamechanger for the business and would allow Pure Extracts to capitalize on strategic international markets.
Over the next year, we expect Pure Extracts to report important developments as it relates to the domestic and international market. The Company’s state-of-the-art processing facility has been constructed to EU-GMP standards and we are closely following this aspect of the story.
In late 2020, Pure Extracts completed a go-public transaction on the Canadian Stock Exchange (CSE) and we have been closely following its performance since then. At current levels, we find the valuation to be attractive and are favorable on the risk-reward profile that is associated with the long-term opportunity.
If you are interested in learning more about Pure Extracts, please send an email to [email protected] with the subject “Pure Extracts” to be added to our distribution list.
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