DISCLOSURE: I own shares in World Class Extractions (PUMP on the CSE and WCF in Frankfurt/Germany), and much of the information is biased. I may buy or sell shares at any time in the future. I am not a registered investment advisor and advise you to do your own due diligence (DYODD) with a licensed investment advisor prior to making any investment decisions. This company is highly speculative and not suitable for all investors. Any errors are mine and mine alone. Thanks

Earlier in July I offered my thoughts on one of my swing trading positions: World Class Extractions. Here’s what happened since then:

Given that the CSE Composite Index, “is a broad indicator of market activity for the Canadian Securities Exchange (CSE). With approximately 75% coverage of all equities listed on the CSE it is a uniquely positioned gauge of the Canadian small cap market.” It is easy to see why quite a few equities listed under CSE are down by more than 50% since end of spring and trending even lower than the tax loss season of December last year.

Add to that if you are a cannabis issuer listed under CSE then it’s a bit of a double whammy given a whole collection of headwinds that do not seem to be letting up:

These two broader issues and lack of catalysts being crystallized for World Class Extractions it should not be a surprise that the stock is down by 50% since early July.

It seems to be a consensus among speculative traders and fundamental investors alike that most of these companies are now past the stage of euphoric rallies and trading more based on what they actually offer as a means of fundamental value and I agree; Most of these companies will pretty much either go bankrupt, rollback get and get vended into the new deals in newer sectors or try for collective bail outs via hasty mergers/acquisitions.

The ones that will survive however are those that have strong balance sheets and execute on revenue generating deals to make sure that their future remains robust. Sadly some of those companies have also felt the pressure of sentiment based trading and are trading at a discount to NAV and cash in some cases. World Class Extractions is one of those trading on similar sentiment IMO.

The silver lining is that markets never trade one direction for too long and those with real assets and real contracts will survive and depending on what catalysts get crystallized might thrive and trade closer to fair value or much higher owing to implied future value. That’s why I continue to be a shareholder in World Class Extractions as I don’t find any reason to panic with a company that as per last financials has a cash position of ~$14m and Assets ~$10m (excluding goodwill) and next to no liabilities.

To me World Class Extractions is a “picks and shovel” business looking to provide supplementary service and booking profit/loss based on services rendered via extraction contracts as opposed to carrying tons of product/inventory (LPs) or operating a cash burning brick and mortar venture (MSOs). What I would love to see though is contracts being signed outside of First Republic ventures like FSD Pharma, Cannara Biotech etc.

Share Price Commentary

- 821,567,140 ($122,528,723) PUMP.C shares exchanged hands from Thu Mar 28 2019 to Sun Oct 06 2019 across all exchanges.

- Chart/TA traders considered 11-12.5 cents as a technical bottom but considering this is a sentiment based market you can’t really rely on charts for trading small caps. A more fundamental bottom given cash, assets and cheapest options issued seems to be .05 cents

- I am not interested in averaging down because the trading window ahead before more tax loss selling kicks in seems to be 18 trading days from now till the end of October so barring any surprise announcements/ catalysts a more optimal timeframe to average down would be middle of December ahead of post-tax loss season.

Tax Loss shopping watch list for cannabis issuers

Heritage Cannabis - CANN

MediPharm Labs Corp - LABS

CuraLeaf - CURA

Cansortium - TIUM-U

TILT Holdings - TILT (Depending on terms of financing)

Parting thoughts

Feel free to follow me at ceo.ca/@dandan for timely updates. Cheers!