Ancillary Equipment, Products and Services for the Cannabis Industry Transforming Green to Gold Spring 2017 | quadroncapital.ca | CSE: QCC
FORWARD-LOOKING STATEMENTS This presentation contains “forward-looking information” within the meaning of applicable Canadian securities laws and “forward looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 (collectively, “Forward Looking Statements”). All statements, other than statements of historical fact, that address activities, events or developments that the Company believes, expects or anticipates will, may, could or might occur in the future are Forward-Looking Statements. The words “expect,” “anticipate,” “estimate,” “may,” “could,” “might,” “will,” “would,” “should,” “intend,” “believe,” “target,” “budget,” “plan,” “strategy,” “goals,” “objectives,” “projection” or the negative of any of these words and similar expressions are intended to identify Forward-Looking Statements, although these words may not be present in all Forward-Looking Statements. Forward-Looking Statements are subject to a number of risks and uncertainties that may cause the actual events or results to differ materially from those discussed in the Forward-Looking Statements, and even if events or results discussed in the Forward-Looking Statements are realized or substantially realized, there can be no assurance that they will have the expected consequences to, or effects on, theCompany. Factors that could cause actual results or events to differ materially from current expectations include, among other things: risks related to the costs required to meet the Company’s obligations related to regulatory compliance; risks related to the extensive control and regulations inherent in the industry in which the Company operates; risks related to governmental regulations, including those relating to taxes and other levies; risks related to the nature of the Company as an early stage business and a business involving an agricultural product and a regulated consumer product; risks related to building brand awareness in a new industry and market; risks related to the retention of senior management and key employees of the Company; risks relating to restrictions on sales and marketing activities imposed by Health Canada, various medical associations and other governmental or quasi-governmental bodies; risks relating to incurring operating losses and maintaining profitability; risks relating to competition in the industry within which the Company operates; risks inherent in the agricultural business; risks relating to energy costs; risks relating to the Company’s exposure to product liability claims, regulatory action and litigation; risks relating to recall or return of the Company’s products; and risks relating to insurance coverage. This list is not exhaustive of the factors that may affect the Company’s Forward-Looking Statements. Should one or more of these risks and uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in the Forward-Looking Statements. The Company’s Forward-Looking Statements are based on beliefs, expectations, and opinions of management on the date the statements are made and the Company does not assume any obligation to update Forward Looking Statements whether as a result of new information, future events or otherwise, or if circumstances or management’s beliefs, expectations or opinions change, except as required by law. A number of important facts could cause actual results to differ materially from those indicated by the Forward- Looking Statements, including, but not limited to, the risks described herein. For the reasons set forth above, investors should not place undue reliance on Forward-Looking Statements. The Company undertakes no obligation to update its Forward-looking Statements to reflect events or circumstances after the date of this presentation or to reflect the occurrence of unanticipated events other than as required by law. Accordingly, readers should not place undue reliance on Forward-Looking Statements. Financial amounts in Canadian Dollars, unless otherwise specified. Quadron Capital | Transforming Green to Gold | quadroncapital.ca | CSE: QCC 2
Summary • Quadron provides automated extraction and processing solutions to growers and processors, granting growers efficient access to the high margin cannabis oils market - via lease arrangements, rentals and sales. • ~40,000 MMAR licensed growers in Canada (22,000 in BC). Industry is predominantly small scale and growers lack the capital and knowledge to purchase extraction and processing equipment – large opportunity. • Ancillary products generate additional revenue and provide growers a whole market solution for the sale of their cannabis oils. • High margins on both equipment leasing & ancillary product sales. • Advanced proprietary technology – high yield, faster processing time, lower cost of operation. • Recent acquisition of Cybernetic Control Systems Inc. to increase automated experience for commercial production. Quadron Capital | Transforming Green to Gold | quadroncapital.ca | CSE: QCC 3
The Extraction Problem • Traditional extraction equipment is: expensive, not automated, energy inefficient, labour intensive and inaccessible due to market demand. • Un-extracted cannabis (flowers/buds) sell for lower prices than oil based delivery products. • As policy changes, more regulation is coming to licensed growers which will force them to graduate, evolve or exit. QCC’s Solution • Provide growers with turn key solutions for extraction through equipment leasing & laboratory services. • Design, source and distribute ancillary products (vaporizer pens, cartridges, inhalers, etc) to growers for their extracted oils. • Latest CO2 extractor is providing 3-4 times faster processing times than traditional units = higher total output. “Oil products could be the future of cannabis. We believe that as the market continues to grow and mature , consumer preferences will begin to lean towards oil-based products (a trend we are already seeing in many US markets). In our view, LPs with a strong oil strategy (which requires a separate license from Health Canada) will be better positioned in the market and likely able to obtain higher margins compared to sales of traditional bud.” *Canaccord Genuity, November 2016 Quadron Capital | Transforming Green to Gold | quadroncapital.ca | CSE: QCC 4
Where QCC Stands Growers Oils Packaging/Delivery Extraction Devices Quadron designs, sources and Quadron supplies extraction distributes ancillary products equipment to growers and (vaporizer pens, cartridges, receives a fee on the run- inhalers, etc) to licensed time of the equipment. growers for their extracted oils. Quadron Capital | Transforming Green to Gold | quadroncapital.ca | CSE: QCC 5
The Industry and Market Market size of marijuana from CY2015 to CY2020 assuming full legalization CY2015E CY2016E CY2017E CY2018E CY2019E CY2020E Full Legalization in 2018 Dec 31/2015 Dec 31/2016 Dec 31/2017 Dec 31/2018 Dec 31/2019 Dec 31/2020 Dried Marijuana (C$, ‘M) $48 $93 $185 $431 $784 $1,113 Extracts/oil (C$, ‘M) $1 $33 $132 $755 $1,367 $1,687 Total Market Size (C$, ‘M) $49 $126 $316 $1,186 $2,151 $2,800 % Change 160% 150% 275% 81% 30% *Mackie Research, 2016 • Cannabis oil consumption in Canada is expected to grow from 284 litres in 2015 to 562,613 litres by 2020 (198,000% growth) vs. dried marijuana consumption of 6,388 kg in 2015 to 110,034 kg in 2020 (1,600% growth) - Mackie Research 2016 Anticipated Domestic Client Base ~40,000 MMAR licenced growers across Canada with ~22,000 in BC: • 59% of designated-personal production licences are in BC (individuals who grow and produce for others) Quadron Capital | Transforming Green to Gold | quadroncapital.ca | CSE: QCC 6
Performance and Growing Profitability Q4 - 2016 (3 mths Q1 - 2017 (3 mths Q2 - 2017 (3 mths Q3 - 2017 (3 mths Financial Metrics 9 months ended Apr 2016) ended Jul 2016) ended Oct 2016) ended Jan 2017) Revenue $ 159,823 $ 223,450 $ 429,180 $ 986,430 $ 1,639,060 Gross Profit $ 42,512 $ 131,902 $ 294,887 $ 15,294 $ 442,083 Gross Profit Margin 27% 59% 69% 2% 27% $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $- Q4 - 2016 (3 mths ended Apr 2016) Q1 - 2017 (3 mths ended Jul 2016) Q2 - 2017 (3 mths ended Oct 2016) Q3 - 2017 (3 mths ended Jan 2017) Gross Profit Revenue Quadron Capital | Transforming Green to Gold | quadroncapital.ca | CSE: QCC 7
Cybernetic Control Systems Inc. • Quadron acquired Cybernetic in March 2017. Cybernetic has a proven track record of designing, fabricating and supplying custom and standard machines bringing automation to the process manufacturing and industrial sectors • Provides Quadron with automation expertise to design and manufacture the Soma Labs Scientific line of cannabis extraction and processing equipment: • Machines for CO2 extraction • Odor Elimination System (OES) • LED lighting systems • Nutrient Mixing and Sensing Systems • Enormous potential to take Cybernetic’s automation experience and apply it to create efficiencies, consistencies and improve ROI for authorized industry participants Quadron Capital | Transforming Green to Gold | quadroncapital.ca | CSE: QCC 8
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