We first looked at NextLeaf ($OILS) in their third quarter of 2019(!). Being pre-revenue, there wasn’t much to see a the time.
Since then, they’ve been presumeably doing what others in the extraction segment have been doing: trying to generate sales. It’s been a slow go for most.
Regarding $OILS, TheCannalysts released a special extraction podcast with the inimitable Tom Ulanowski last fall; and Cyto recently had a look at $OILS’ intellectual property (IP) undercarriage. While on the road last week, I was given an opportunity to tour their facility in Vancouver.
It’s shiny. At a modest 6k ft2, the bulk of the space is used to house operations. They’re a small shop, with a headcount of some 2 dozen. There’s input, processing, and output areas – and a lab for testing and packaging and science. I’ve seen several extractors/LP facilities for it – and they really only vary in modality and scale. Even in the relatively modest size $OILS presents, they can still process 1 tonne of biomass per day into raw extract.
And right there, lays the issue for every single extractor out there right now. See our related “Extractor/2.0 Round-Up” for a look at more in the segment.
As to $OILS – let’s have a look at their latest statements, and see what’s been happening. To the financials!
- Cash at $3MM, inventory a relatively modest $700k.
- Revenue somewhat lumpy – $1MM previous quarter, $130k in this one. Yikes.
- $75k in investor relations and marketing. Most of operational costs modest, professional fees and consulting of $100k/month, wages and salaries slightly less. It’s lean.
- Also paying consultants in shares.
- Something went sideways on an equipment purchase, where $OILS advanced a supplier cash in exchange for hardware. Seems the supplier flaked (according to $OILS), the supplier did nothing wrong (according to supplier), and it’s now in litigation. $OILS has written $380k of it off.
- 13MM options (strike mid-30’s), 28MM warrants (strike in $0.60’s). Going to be many more printed I suspect.
- Management compensation loosely tied to revenues. Looks like they’re beginning to gird based on this latest quarter.
- All of this is nominal. There just isn’t much to say.
Well, a generalization I’ve heard is that this size of public company can be in a tough spot in attracting attention and capital. Perhaps. I think the easiest way to get everyone’s attention is to drive sales numbers, and run at a high capacity utilization. I can pretty much guarantee that’ll get eyeballs.
I see a really interesting product innovation in TCH-O-acetate (as does Cyto). Unfortunately, the product is unlikely to come to market, and as Cyto discusses in his piece on psilocybin – it’ll likely demand clinical trials as well. Legalization was a forehand/backhand to the sector, and commerce will be formalizing around it for years to come. Now that $OILS is getting into psilocybin, they’re likely aware.
The important issue is a $1.8MM convertible coming up. They might be able to satiate, but without a capital injection or roll of the iability….things will be getting mighty lean.
I’m going to end this here, and simply repeat a refrain that’s both the most critical risk issue…… and critical success factor I see facing $OILS. Addressing it will be a cure all, and it’ll bring all the attention and cash they could ever want.
The preceding is the opinion of the author, and is in no way intended to be a recommendation to buy or sell any security or derivative. The author holds no position in $OILS