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ACKRELL CAPITAL
CHAPTER III Cannabis Industry Segmentation

across cannabis varieties and even across flowers from the same plant, which limits the accuracy of laboratory tests conducted on a sample of plant material. Cannabis concentrates, however, are generally homogeneous and their active elements can be more precisely measured and reported so as to facilitate standardization of products and accurate dosing by consumers.

The following chart shows the combined relative sales by category of concentrates for Colorado, Oregon and Washington for the three months ended September 30, 2017.

Concentrates Sales by Category: Q3 2017

[Pie Chart showing percentages: 18%, 6%, 8%, 16%, 17%, 35%]

[Legend:]
Live resin
Oils
Other concentrates
Shatter
Vape oil
Wax

Source: BDS Analytics

Concentrates are prepared with extraction techniques that fall into two general categories, solvent-based extraction and solvent-free extraction. Solvent-based extraction techniques include the use of hydrocarbon, carbon dioxide (CO2) or ethanol solutions to chemically isolate cannabinoids and other active compounds. Solvent-based extraction can be performed relatively quickly and can produce high yields and customized formulations, but requires the use of expensive equipment and skilled labor and also may leave residual solvents in the resulting concentrate. Solvent-free techniques include the use of filters, ice water or heat to physically separate parts of the cannabis plant with high cannabinoid concentrations. Generally, solvent-free extraction is inexpensive and can be performed without specialized equipment, but it is also slow and labor-intensive and it typically results in low yields.

Hydrocarbon Extraction

Hydrocarbon extraction is a process whereby a hydrocarbon solvent (typically butane or propane) chemically extracts cannabinoids, terpenes and other compounds from cannabis plant matter. The solvent is then purged using heat and pressure, leaving a concentrated form of the extracted compounds. Because hydrocarbon extraction involves a risk of explosion and usually leaves behind residual solvents, regulations are becoming more restrictive in specifying where and how the process can occur and prescribing acceptable levels of residual solvents in the resulting products. Concentrates prepared through hydrocarbon extraction—including BHO, shatter and wax—are popular with some consumers because hydrocarbon extraction generally preserves terpenes and the source plant’s aroma and flavor.

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