Mid-year Update: An Interview with Richard Carleton

Richard Carleton, CEO of the CSE
CEO of the CSE, Richard Carleton, providing an update at the CSE’s annual pre-Stampede breakfast in Calgary (July 2017)

Earlier this month, CEO of the Canadian Securities Exchange, Richard Carleton, sat down with Peter Murray of Kiyoi Communications, to discuss the performance of the CSE in the first half of 2017 as well as to get the CSE’s perspective on a number of issues related to Canadian public markets, the evolving cannabis sector and innovation at the CSE.

Scroll down to read the full transcript of this interview. For ease of navigation, a list of hyperlinked topics is included.

  1. State of the Canadian microcap sector
  2. US companies choosing to list on the CSE
  3. Migration from the CSE
  4. Performance of the 1st half of 2017 at the CSE
  5. Reducing regulatory burden on small-cap issuers
  6. Simplifying access to marketplace data
  7. CSE marketing efforts
  8. Overview of cannabis sector
  9. Growing sectors
  10. Digital innovation at the CSE

State of the Canadian microcap sector

PM: Media outlets have published several articles recently on the demise of the microcap issuer, pointing to reductions in IPO activity, capital raised and issuer numbers.  The CSE is doing quite well servicing this segment of the market these companies.  What are your opinions on the state of the microcap sector?

RC: There are different ways to assess the health of the sector, some of which are pretty encouraging.  One of the concerns expressed in an article published by the Globe and Mail recently was that the number of companies listed on Canadian exchanges has declined quite considerably.  What they did not refer to was that there are some 320 companies listed on the Canadian Securities Exchange, and this was not the case eight or nine years ago.

In other words, some of those missing companies are not missing at all – they are listed on the Canadian Securities Exchange.

That said, we’ve obviously gone through a prolonged slump in the mining and oil and gas exploration sectors.  This has an impact on the overall health of the Canadian markets because Canada has been very good historically in terms of creating large numbers of these types of public companies.

The bottom line is that public capital is always there, but raising that capital is never going to be easy.  Quite frankly, it is not supposed to be easy.  But with price weakness in some of the commodities that underpin the value of Canadian resource companies, applying the model of raising public funds for pre-revenue companies has been a bit of a struggle.

Fortunately, the tremendous growth in the legal cannabis space since the spring of 2014 has served as a counterbalance.  We are increasingly seeing old fashioned IPO-type deals where companies are raising tens of millions of dollars, and even into nine figures, in ways that remind one of the good old days, with Canadian investment dealers conducting a wide distribution on behalf of the issuer.

So, what we really have is a kind of dichotomy where the traditional Canadian small-cap space continues to suffer a high degree of stress.  But the sunrise industry that is the legal cannabis space in Canada and the United States has attracted a lot of attention from investors and the investment dealer community.

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US companies choosing to list on the CSE

PM: The CSE has welcomed several issuers based in the United States over the past few years.  What is the attraction for US companies in listing on the CSE, and in general what do they tell you about their listing and post-listing experiences?

RC: The reason they come to Canada is that they can raise money here.  In the United States, deals in the $20 million to $40 million range are the realm of the venture capital and private equity investment communities.  Some companies don’t want to go down that route because there can be significant drawbacks when you accept money from these types of investors.

Specifically, entrepreneurs find that venture capital funds and private equity funds exert a tremendous level of control over investee companies, as you would expect when they are investing the amounts of money we are talking about.  An important advantage to raising funds publicly is that you often retain more control over the future direction of the enterprise.

Another issue is that the exit scenarios for private funds may be at odds with those of a company’s founders.  Funds may be more interested in an early trade sale, rather than continuing to finance the company to the point where it is one of the big and truly successful entities in its space.

The result is that we see companies looking to raise the smaller amounts available in Canada through the public markets.  And the cost of that capital tends to come in lower than if they were raising money privately in the United States.

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Migration from the CSE

PM: A number of companies have successfully grown their operations on the CSE but then left for other exchanges as they reached a point they felt warranted such a move.  Can you share your views on why this happens?

RC: There are two issues in play in my opinion. The first is something the team at the Canadian Securities Exchange is working to address, and that is a bias held by some members of the institutional investment community.

When companies are looking to raise large amounts of money – and again I am talking high tens of millions, or over $100 million – many institutional investors are more comfortable with the incumbent exchanges because they have worked with them before and they understand their standards and procedures.  It really is up to the CSE to better communicate our value proposition and our reliability as a partner to these institutions, because we have a lot to offer.  This is definitely something we are working diligently on.

The other issue is that if a company believes it will have sufficient market capitalization and trading turnover to qualify as an index component on the Toronto Stock Exchange, public company managers may see that as a powerful inducement to move.  Once you join the index it means the company is likely to be followed by several analysts and its shares will be included in a variety of portfolios held by investors both domestically and internationally.

Those two factors combined can create, under certain circumstances, an incentive for companies to move to another exchange.

I do believe, though, that some of this thinking is rooted in the past.

If one looks at the trading volumes and amounts of capital being raised on our exchange in the first half, a well-run company clearly can achieve its goals with a CSE listing.  Not to mention the advantages we offer from cost and other perspectives.

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Performance of the first half of 2017 at the CSE

PM: It has been a good first half for the CSE and the financial community is increasingly supportive of what the exchange and its issuers are working toward.  Can you briefly review the half for us and share some of the approaches that seem to be succeeding for issuers right now?

RC: We have a number of projects underway at the exchange and one I would highlight is the update to our listing standards.

We updated the initial listing standards last year and are now in the process of introducing continued listing standards.  Our intent is to ensure that companies listed on the exchange are active businesses, which means that the ones hanging on purely for shell value are not going to qualify for continued listing unless they can show that there is an imminent opportunity for a transaction.

We are receiving a lot of support from both the investor and issuer communities for this effort.  Last year, we delisted almost as many companies as we listed, which was almost 10% of the listed company register.  We want to assure investors that the companies that remain listed are active.

In the first six months of the year, CSE issuers raised a record amount of capital ($320 million).  I think observers would expect that it is flowing mostly into the legal cannabis space, but actually this sector accounted only for about half of the total.  We have seen a variety of companies in the financial technology space, clean technology and mining add significantly to their treasuries.

Again, although capital is scarce and companies are having to work hard to obtain it, they are certainly doing so at record levels on the Canadian Securities Exchange to this point in the year.

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Reducing regulatory burden on small-cap issuers

PM: The CSA (Canadian Securities Administrators) recently released for comment a list of proposals designed to reduce the regulatory burden on small-cap issuers.  Can you discuss the CSE’s positions on some of the key recommendations?

RC: Most of the recommendations are aimed at small- to mid-cap companies listed on the Toronto Stock Exchange.  So-called venture issuers, which covers companies on the CSE, are already afforded relief from some of the reporting requirements imposed on public companies.  Essentially, the CSA was looking to extend similar relief to some of the companies listed on the Toronto Stock Exchange.

The key measure in the discussion paper was a proposed reduction in the financial reporting cycle from quarterly to semi-annually.  Basically, only the audited annual financial statements and a half-year summary would be required from public companies.

The CSE does not support this proposal, and neither do the vast majority of companies, financial advisors and accounting firms we have spoken with.

Quarterly reporting is not burdensome, and in fact the decrease in transparency resulting from a move to semi-annual reporting would increase the cost of capital for small companies.  So, while the idea is well-intentioned, we think it would bring about the opposite of its intended goal.

What we would like to see is significant change in how the exempt markets in Canada are managed and regulated.  For example, we would like to see regulation similar in nature to Regulation A+ in the United States, which gives individual investors an opportunity to invest in exempt market companies up to individual deal limits and annual limits.

What this means is that smaller retail investors would be able to participate in opportunities that at this point are only available to accredited investors and institutions.

We think this is important to engaging the next generation of investors because the average accredited investor is getting on in years.  We are concerned that younger investors are not getting the opportunity to invest in the kinds of growth stories they should.

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Simplifying access to marketplace data

PM: I know you are working on a consortium of sorts to address data fee costs for investors.  What are the specific issues at play here and what do you hope to achieve?

RC: I have some good news to share on this topic.

First, though, the background is that any professional investor looking to get a full picture of what is going on in Canadian equity markets must sign contracts and pay fees to each of the individual exchanges if they want access to real-time data.  Not surprisingly, the fees add up pretty quickly.  Canadian data can thus be considerably more expensive than in other markets around the world.  It is another resistance point we just don’t need.

The Ontario Securities Commission was successful in late June in its long-term effort to gain jurisdiction over marketplace data.  It looks as if the commission will seek to exercise that jurisdiction to address the pain points that professional data users currently suffer.  It remains to be seen what specific approaches to the problems the regulators are going to take.

This is a positive development from our point of view because there is a large transparency deficit at present.

The CSE and some of the alternative exchanges do not reach the same scale of user population that the TMX exchanges do from a data-subscription perspective.  And that means a significant transparency deficit exists in the marketplace.

It looks as if we will be asked to take a leading role in helping to define what the data delivery model, fees and terms look like in coming years for marketplace operators in Canada.

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CSE marketing efforts

PM: The CSE team has been very active in the first half of the year hosting CSE-branded events and participating in investment conferences.  Can you share with us the goals and some of the achievements on the marketing side?

RC: Our team has been extraordinarily busy this year, literally traveling all over the Northern Hemisphere – Europe, Asia, and across North America.

We always pursue two goals: to explain to the international and domestic investing public what the value proposition of the Canadian Securities Exchange is, and to meet with issuers, investors and advisors so that we continue to build the list of companies we present through our facilities.

The favourable reception we receive at virtually every stop is extremely gratifying.

I am amazed when I sit back on a given day and try to figure out where the various members of the CSE team are, because we have literally crossed the northern half of the globe several times over the course of the first half of 2017.

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Overview of cannabis sector

PM: Cannabis companies have experienced some ups and downs since entering the public markets a few years ago but the sector in general seems to be getting itself on a steadier track now.  While most of the early movers focused on opportunities in Canada, many of what one might term the “second wave” of issuers seem set on operating in the US.  What is next for the cannabis sector in your opinion?

RC: I actually think of the US companies as the third wave.  The first wave was the licensed medical marijuana producers in Canada.  Next, we saw entities in ancillary industries – extractors and alternative delivery systems are good examples.  The third wave is clearly companies that have business interests in the United States and are ramping up to address the coming legalization for adult use in very large jurisdictions.

We speak to people in this industry on a regular basis and the numbers are mind-boggling.

California’s population is roughly that of Canada, and they are on a similar timeline as Canada to legalization.  Cultivators there are looking to raise billions of dollars to build the operations necessary to supply the state’s legal market.

Given that one of the objectives of government policy in every jurisdiction is to displace the black market, it is critically important to the success of those policy directions to enable the legal market to meet the demand from the adult-use side.

It is fair to say that we have not seen anything yet in terms of how big this is going to become.  There will be a steady stream of companies in this space with solid business plans looking to build out and meet the dawn of a significant new industry in North America.

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Growing sectors

PM: Are there any market sectors right now that remind you of what cannabis felt like in 2014?

RC: In the sense that the legal cannabis market is one of the most significant new business opportunities to hit public capital in a long time, I can’t really say I sense anything up and coming of the same magnitude.

As I mentioned before, we see a lot of different stories getting funded, but I think we are going to continue to see the legal cannabis space driving a substantial percentage of our growth as we make our way through the rest of 2017.

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Digital innovation at the CSE

PM: The infrastructure supporting securities trading and information exchange is predominantly digital these days.  How has the CSE navigated the rapidly evolving digital landscape?

RC: There are a variety of things I would like to see happen faster than they are today.

One of them relates to information released by issuers, where I would like a more aggressive implementation in Canada of a protocol called XBRL (eXtensible Business Reporting Language).  This basically refers to digitally tagging news and company filings with the regulator.  The practical impact is that an analyst can download a company’s financial history directly into spreadsheets.  At the present time, an analyst wanting to initiate coverage on a CSE company has to manually key its financial history into a spreadsheet.

To put it mildly, that is a massive time commitment, with significant potential for error involved.

I would really like to see the Canadian exchanges and regulators get together on a taxonomy of XBRL for reporting financial information for public companies in Canada.  It has already been mandated for use in the United States.

We have also implemented a new trading system and a variety of new technologies around that system.  Although it was a significant investment for us, the benefits have been immediate, including lower operating and data centre costs.

We don’t describe ourselves as a technology company but we do certainly avail ourselves of those tools in a significant way and they up our game from a customer service perspective while helping us to manage costs.

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CSE Stockpools Cannabis Investment Challenge 2017: Insights & Updates

[Updated: 7/17/17] In partnership with Stockpools, Lift Cannabis Expo, and Abattis Bioceuticals Corp. (CSE:ATT), the Canadian Securities Exchange is pleased to announce Canada’s first Cannabis Investment Challenge: a fantasy online stock trading competition focusing solely on the Canadian cannabis sector.

This exciting competition enables participants to create a fantasy portfolio based on select companies listed on the CSE that are actively involved in the cannabis industry.

Contestants will compete for weekly cash prizes based on the best performing portfolios each week and will also be able to play for the grand prize trip to Las Vegas for a marquis marijuana convention. There are up to $4,000 in cash prizes up for grabs as well as the grand prize trip, valued at $3,000.

To learn more about the Cannabis Investment Challenge, and to register for the upcoming week (Week 4), click here.

Weekly Featured Company Insights

As part of the Cannabis Investment Challenge, each of the seven featured companies were asked for their perspectives on the rapidly evolving cannabis industry in Canada.

Companies who have shared their insights include (in no particular order):

Follow along as we highlight one of the seven investment challenge’s featured companies each week and gain insight into how they see the opportunities and challenges ahead for the cannabis market.

Disclaimer: The opinions expressed below are those of the author themselves and do not necessarily reflect or represent the views of the Canadian Securities Exchange.

Week 3: Rosy Mondin, CEO of Quadron Cannatech Corp. (CSE:QCC)

Anil Mall from Stockpools asks:   Where do you see things going with legalization and how does this impact Quadron?

Licensing:

In Canada, there already exists a diverse and well-established private sector for both medical and illicit recreational (i.e. ‘non-medical’ or ‘adult-use’) cannabis; in fact, Canada is considered by many as a world leader in cannabis production.

Through my work as Executive Director of the Cannabis Trade Alliance of Canada (CTAC), we’ve been advocating government to implement a licensing structure which grants more licenses to increase the quantity and variety of the available supply chain.  We believe a legalized cannabis licensing structure should be open to industry participants of various sizes, from craft to larger forms of industry, and regulations should implement a more responsive licensing system providing greater flexibility for businesses.  Therefore, we would like to see a move towards a system of separate licensing categories like we’ve seen in Washington, Oregon, Colorado, Nevada and California. Having various types of licensing ‘classes’ falls into line with the consultations and recommendations we made to the Task Force on Legalization last year.

Extracts:  Extracts are the fastest growing category of cannabis products. Canada’s medical cannabis industry has been focused on dried cannabis product, however demand in extracts/oils/concentrate is growing exponentially, and oil sales in Canada are already significantly outpacing dried “bud”.  According to Health Canada data, as of March 2017, oil sales comprised ~50% of total sales by Licensed Producers, and does not consider sales of oils and extracted products sold through dispensaries and the black market.

Health Canada data: bud vs oil sales

Cannabis oils, in addition to allowing for a greater variety of product, is safer than smoking, is more stable than dried material, and can be produced using standardized preparations (particularly important for consistency in dosing).

In addition to this Health Canada Licensed Producer data, if we look at the sales data coming from Washington state, concentrate sales skyrocketed to $140 million last year.  Additionally, if we look at the data that came out of the Mackie Research Focus Report earlier this year, assuming full legalization, by 2018 the Canadian demand for oils to increase by 198,000% by 2020). There’s no shortage of data and statistics. Impressive figures are also coming from growth of ancillary markets, and consulting services: In the USA, investment in the ancillary market (i.e., businesses that do not touch the cannabis plant) grew 161% in 2016 compared to 2015.

Catering to these trends is exactly where Quadron’s offerings are targeted.

The Science of Cannabis:  As cannabis use expands and more products enter the marketplace, third-party testing labs will be needed to ensure purity, potency, and consistency of products before they reach the consumer. It’s a crucial step in the supply chain process, a critical consideration for public health and underlies the whole framework for legalization which is predicated on “safe product”.  Anticipating these needs, our subsidiary Soma Labs Scientific, aims to establish scalable labs, using research, development and science to establish industry standards for the creation of standardized extracts, using our state-of-the-art extraction and formulation equipment, products and services.

Extraction and Formulation Equipment:  There is so much demand for extracted product that there are waiting lists to purchase commercial-scale machinery. Quadron is currently the only company trading on the CSE in the cannabis ancillary equipment manufacturing and supply space, giving us a great first mover advantage.

For more information on Quadron Cannatech Corp. please email QCC@kincommunications.com

Week 2: Robert Abenante, President & CEO, Abbatis Bioceuticals Corp. (CSE:ATT)

Who is Abattis?

As the cannabis industry gears up for legalization in Canada, Abattis Bioceuticals Corp. is establishing itself as the leader in providing services to licensed producers, medical and legal recreational users and large scale farmers of marijuana and hemp biomass. “We see this industry commoditizing at an incredible rate and our intent is to be the picks and shovels cornerstone to this high growth sector.” stated Robert Abenante, President & CEO of Abattis Bioceuticals. “Our mandate is to be fully integrated along the supply chain through our subsidiaries. This means we should be able to cultivate, test, extract, formulate and push value added products into the market in the quickest and most cost effective way” added Mr. Abenante.

Through its Health Canada Licensed Dealer, Northern Vine Labs the Company provides federally mandated testing of legal cannabis and derivatives as well as formulations for products using legal cannabis, derivatives and industrial hemp/cannabidiol.

The Company also has an exclusive distribution agreement with Suzhou Raybot Material Tech Corp. (“Raybot”) which allows it to sell and service proprietary extraction machines in North America and Europe. This ability gives Abattis a major competitive edge within the industry as no large scale cost effective extraction methods currently exist. Raybot’s machines provide industrial scale and cost-effective cannabinoid extraction with the potential to significantly disrupt the rapidly growing cannabis derivatives market by providing several competitive cost advantages in the extraction of CBD, THC and other derivatives from marijuana and industrial hemp.

Abattis also has a sales and marketing subsidiary, Vergence Naturals Ltd., focused on the sales and marketing of nutraceutical products. In addition to selling third party natural health products, Vergence will be the main distribution arm for the products formulated by Northern Vine with or without CBD. Vergence has established sales channels in Asia, Europe, Canada and United States.

Northern Vine, an Abattis subsidiary, is one of the few Licensed Dealers in Canada, of which only seven are cannabis specific and of which only two are publicly traded. In March 2017, High Times announced that the next billion dollar industry would be cannabis testing. With random product testing introduced by Heath Canada in April 2017 and mandatory pesticide testing for Licensed Producers mandated by Health Canada in May 2017, the Company has the best advantage of its peers to be a frontrunner for servicing the cannabis industry.

Combined with the ability to formulate products and to extract biomass, Abattis is well positioned to be a leader in the burgeoning medical and soon to be legal recreational cannabis market.

To learn more about Abattis Bioceuticals Corp., please visit www.abattis.com or www.northernvinelabs.com or feel free to contact Brook Bellian, Investor Relations at brook@abattis.com or call 604-336-0881.

FORWARD LOOKING INFORMATION

This welcome letter contains forward-looking statements. The use of any of the words “anticipate”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “should”, “believe” and similar expressions are intended to identify forward-looking statements. Forward- looking statements in this press release include statements regarding the selling and servicing of proprietary extraction machines in North America and Europe; the potential of the technology to significantly disrupt the rapidly growing cannabis derivatives market; the competitive cost advantages; the potential size of the cannabis testing market; the Company’s advantage to its peers to service and to be a leader in the medical and legal cannabis industry. Although the Company believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because the Company can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties, including that the Company will not be able to open its new lab or execute its proposed business plan in the time required or at all due to regulatory, financial or other issues. Additional risk factors are included in the Company’s Management’s Discussion and Analysis, available under the Company’s profile on www.sedar.com. The forward-looking statements are made as at the date hereof and the Company disclaims any intent or obligation to publicly update any forward-looking statements, where as a result of new information, future events or results, or otherwise, except as required by applicable securities laws.

Week 1 – Brayden Sutton, CEO of Friday Night Inc. (CSE:TGIF)

 The cannabis industry in Canada, broadly speaking, is very fatigued and taking a much-needed breather, as reflected in the share prices across the board.  Some would say that they ran too hard and too much after Trudeau’s promises.

Right now, as a result, Canadian LP’s are priced with legalization “baked-in.”  This is important to point out, in case Mr. Trudeau does face hurdles, potentially causing a delay in the passing of the legislation next year.

As prospective new patients wait for ‘legalization’ they will notice the disparity between the market caps of collective Canadian cultivators vs. lethargic patients and sales numbers. The fatigue caused by this disparity forces investors to take a closer look at the ancillary components of this sector, such as extraction and processing technologies, branding, software and IT infrastructure, security – you name it. Something else to keep in mind is that the United States could hold even greater potential than Canada in this sector.

29 American states now have some form of a medical cannabis program, with many of them also including an ‘adult-use’ or recreational program. Places like Colorado have provided us now with almost 5 years of data since they went legal, and the numbers are staggering.

The data is very compelling for other states to come on board.

So as the wave goes through the US, it’s all eyes on the next, high-per-capita-use-demographic states, such as Florida, Arizona, and in particular Nevada, with recreational sales beginning there on July 1st of this year.  With an estimated 48 million visitors a year to the “strip” in Las Vegas, it’s a highly anticipated market.

Another up and coming market is Germany, as they too roll out a federal medical program, much like the one we have here in Canada: the ACMPR.  So, it’s tulip-mania over there, much like Canada experienced in 2013 and 2016 leading to the prices we have here today.

There is tons of opportunity all around, but timing is everything. Never bank on something until it’s done, and make sure you know the current usage landscape to ensure it matches the enterprise values.

Alternate Health to gain from the growing market of medical marijuana

The waves of legalized recreational marijuana in Colorado, Washington, Canada and now California have sparked a ‘Green Rush’ in the cannabis industry, but Alternate Health (CSE:AHG) CEO Dr Jamison Feramisco reminds investors not to forget about the market potential of the medical side of the business.

“The key to leadership in medicinal cannabis is constant innovation in the scientific research that puts the patient’s needs first,” says Feramisco. “Alternate Health takes a value-added approach, investing in the clinical studies and patented technology that turns cannabinoids, like CBD, into real medicine.”

The diversified healthcare company – which has patent rights for CBD delivery systems for sublingual tablets and transdermal patches and offers education programmes, electronic medical records (EMR) software and toxicology laboratory analysis – started trading on the Canadian Securities Exchange in January. Two months later it joined the US markets on the OTC bulletin board.

Feramisco brings experience in delivering profitability, strategic mergers and acquisitions and innovation in healthcare as the co-founder and president of Texas-based Apri Health – a healthcare data analytics company, formerly known as Transfuse Solutions. Feramisco is a graduate of the University of Texas at Southwestern Medical School with a Ph.D. in Molecular Genetics and Biochemistry.

Alternate Health stands to gain from the growing market of medical marijuana.

There are about 40,000 patients with prescriptions for medical marijuana in Canada, according to Health Canada. Over the next 10 years, the number of these patients is expected to grow to more than 450,000.

The group’s Alternate Health Media division offers education programmes for training healthcare professionals and physicians in the use of cannabis to treat medical conditions.

The Cannabidiol Certification Programs have been approved by the American Medical Association (AMA) and address all facets for the use of marijuana’s two active chemicals that have medical applications – cannabinol (CBD) and tetrahydrocannabinol (THC).

CBD and THC are considered useful substances to manage pain, and are also prescribed by some physicians for conditions including glaucoma, epilepsy and anxiety.

In January, the company announced the first continuing medical education course for practitioners on the endocannabinoid system, the body’s reaction to CBDs.

The video-based course, accredited through the University of Louisville and approved by the AMA, provides an overview of the endocannabinoid system and the role it plays in the different functions of the human body.

“Doctors and medical professionals have been waiting for a proper medical education program to provide details for this emerging medicine,” says Feramisco. “This program is the culmination of many years of investigation and research, coupled with a substantial investment in production to create a quality and highly necessary education program for doctors and healthcare practitioners.”

Cannabis tablets as an alternative to traditional smoking

Alternate Health has acquired the commercial rights to patents for developing and manufacturing sublingual tablets that include CBDs and/or THC.

The sublingual tablets can be rapidly absorbed into the body in less than three minutes. The company said it recognised the need for a more efficient way to use medical cannabis than the traditional smoking and ingestion methods.

Sentar Pharmaceuticals in March granted Alternate Health an exclusive 10-year agreement for global nutraceutical license rights to its patented sublingual delivery systems to administer CBD and THC in tablet form.

The company paid Sentar 850,000 common shares for the renewable license agreement.

The California marijuana Industry is estimated to grow to $25bn per year and is set to eclipse $50bn by 2026, Alternate Health said, citing USA Today.

“Alternate Health is uniquely positioned for licensing their manufacturing pharmaceutical grade delivery systems of CBD and THC healing products in this fast-growing new marketplace,” says Feramisco.

“Alternate Health facilitates the development of organic, safe and healthy medicines through our patented delivery systems to patients around the world, and the California market represents a significant starting point for us.”

Leader in electronic medical records software

Alternate Health describes itself as a leader in software applications and processing systems to the medical industry.

Its Alternate Health Technology business includes VIP Patient, electronic medical record (EMR) software that allows doctors to register patients and document their diagnosis and generate insurance recoveries with up-to-date billing codes.

The CanaCard Patient Management System tracks patient data and prescriptions while ensuring regulatory guidelines and financial transparency. It is a complete EMR, managing controlled substances like medical marijuana with an interface between patient, doctor and licensed provider.

“Alternate Health’s proprietary EMR systems give doctors, patients and producers the tools to manage prescriptions and dosages in a safe and transparent way,” says Feramisco. “This software is a key asset in the management of Alternate’s CBD delivery systems, while providing us with valuable feedback and clinical data.”

Alternate expands its labs division

The group also has an independent clinical lab in San Antonio, Texas, under the banner of its Alternate Health Labs business, which specialises in toxicology and blood testing services.

The lab receives and assesses the blood and urine of patients from across the United States and then supplies the results to physicians so they can diagnose and treat diseases and medical conditions.

In March, the company agreed a deal to expand the business through the acquisition of a 20% stake in Clover Trail Capital, a Texas-based investment company.

Clover Trail, which owns a 40% holding in Sun Clinical Laboratories, has investments in labs that conduct toxicology and blood studies for hospitals, private insurance groups and clinics.

Feramisco said: “It is an excellent opportunity for us to grow and increase the effectiveness of Alternate Health Labs, already a leading source of revenue for us and a key part of our strategy to fundamentally advance patient care.”

This story was originally published at www.proactiveinvestors.com on May 11, 2017 and featured in The CSE Quarterly.

Learn more about Alternate Health at http://alternatehealth.ca/ and on the CSE website at http://thecse.com/en/listings/life-sciences/alternate-health-corp.

iAnthus Capital bordering on big things

The movement to legalise cannabis in a majority of US states is drawing interest from an expanding list of companies, as entrepreneurs sense opportunity in a market where growth is virtually guaranteed.

Currently, 29 US states have legalised the use of full-strength medical cannabis, with eight of those states allowing recreational use of the drug as well.

In all, 43 states allow some degree of cannabis use, meaning 93% of Americans live in a state that allows consumption.

According to the latest industry data, direct legal cannabis sales totalled US$7bln in the US in 2016 and by 2020 will reach around US$22bln.

However, although this looks like a good opportunity for businesses, the fact that cannabis is still illegal on a federal basis in the US makes it difficult for entrepreneurs to finance their operations.

This is where Canadian Securities Exchange-listed iAnthus Capital Holdings Inc (CNE:IAN, OTCQB:ITHUF) has stepped in.

“You have a strange anomaly in the US where cannabis is legal at the state level and illegal at the federal level,” says Hadley Ford, chief executive of iAnthus Capital.

“Citibank and Bank of America aren’t making any loans to cannabis operators, and the Goldman Sachs and Morgan Stanleys of the world aren’t taking anyone public.”

iAnthus, however, raises capital in Canada, where cannabis is legal for medical use at both the federal and provincial levels, and puts the cash to work in the US market.

That market is growing at a compound annual rate of over 30% so the returns on investment have the potential to be significant.

iAnthus, which has raised over C$50mln since its founding, has been putting money to work in Colorado, Vermont, New Mexico and Massachusetts, and is also in discussions pertaining to other high-growth markets.

TGS deal

In early February, iAnthus announced a strategic partnership with The Green Solution (TGS), a big player in the US cannabis industry.

TGS operates 12 dispensaries and integrated cultivation and processing facilities in the state of Colorado and has generated over US$150mln of cumulative revenue since its inception in 2010.

“The chance for us to work with TGS on strategic opportunities is very exciting,” said Ford. “TGS is a leader in cannabis and we look forward to seeing what we are able to do by working closely together.”

As part of the strategic relationship, TGS will provide iAnthus with retail expertise and advice on investments in Massachusetts, Vermont, New Mexico and Colorado.

iAnthus is providing a US$7.5mln credit facility to TGS which will be used to fund the build out of additional store locations. The facility runs for one year and carries an interest rate of 14% during the first four months, escalating to 23% thereafter.

To finance the credit facility, and also to provide cash for general corporate and working capital purposes, iAnthus closed a bought deal private placement at the end of February which raised gross proceeds of C$20mln. The deal was structured as a convertible debenture with an 8% coupon and convertible into common shares at a price of C$3.10 per share.

The stock, which also started trading on the OTCQB in early April, is currently changing hands for around US$2.00.

“If you are an investor, there are very few industries where you can pretty much have guaranteed top-line growth of 30% for the foreseeable future,” Ford points out. “There are not many ways for the public to play that opportunity. We believe iAnthus provides an easy way for investors to invest in multiple operators across high-growth states in the US.”

Ford says the group has put over US$19.1mln to work to date, and he thinks the opportunities for investors “look outstanding.”

Massachusetts interest

Aside from being excited about working with TGS in Colorado, Massachusetts is also high on Ford’s radar.

At the start of March, iAnthus said construction had begun on a state-of-the-art cannabis cultivation and processing facility for affiliate Mayflower Medicinals, Inc., a Massachusetts non-profit and cannabis dispensary licence holder.

The 36,000 square foot facility in Holliston is expected to have annual production capacity of 8,700 pounds, with the ability to supply over US$35mln of medical and retail sales. The company has spent US$2.1mln of the approximately US$10mln it will need to build out the cultivation, processing and store locations. “We have the necessary cash on our balance sheet today to complete the project,” notes Ford.

Ford calls Massachusetts the “Colorado of the East, but with less competition.” Mayflower has been awarded two of its three licences by the state, including one of the three dispensaries currently approved to open in Boston. A Boston ordinance provides that no other dispensaries can be opened within a half-mile of any dispensary currently approved by the City.

Ford believes that operations in Massachusetts should start generating revenue in the fourth quarter of this year.

Political risk limited

The election in November last year which made Donald Trump US President included referendums in a number of states on legalising cannabis in one form or another.

Even so, some people question the heightened political risks to the US cannabis industry caused by Trump’s presence in the White House.

Ford, however, plays down such fears, seeing no material change with Trump in power from the environment under President Barack Obama. “Obama could have decriminalized cannabis. He didn’t,” notes Ford.

Ford says the real issue is not one of politics, but of economics, with states like Colorado seeing a big tax boost and the cannabis industry serving as an important jobs provider.

“Nothing is going to stop the forward motion of the industry at this point,” Ford explains. “It doesn’t make sense politically, doesn’t make sense economically, and there just aren’t the federal resources available to roll back the progress that has been made in 29 states.”

iAnthus reported a small loss last year, but as it puts its capital to work it should ultimately see the business turn very cash generative. “When I look at some of the opportunities we have in the pipeline, the future looks very rosy from our perspective,” Ford concludes.

This story was originally published at www.proactiveinvestors.com on May 11, 2017 and featured in The CSE Quarterly.

Learn more about iAnthus Capital at http://www.ianthuscapital.com/ and on the CSE website at http://thecse.com/en/listings/life-sciences/ianthus-capital-holdings-inc.

Maricann looks to replicate Canada success in newly legal German cannabis market

Anyone looking for a model company in the medical cannabis sector would be well advised to consider Maricann Group Inc (CSE:MARI), as thus far it seems to have done everything right.

With a green ethos that drives both product development and corporate efficiency efforts, Maricann succeeded in becoming one of the first companies in Canada approved to cultivate and sell medical cannabis.

Not content with being an early mover in just its home market, Maricann was quick to stake its claim in another jurisdiction largely overlooked by its peers: Germany.

On the verge of turning a profit

The combination has the company predicting profitability by the second quarter of 2018. Its top line is off to a good start, with sales currently running at $450,000 per month. And having just announced a $42.5mln non-dilutive stream financing that will fully fund its German plans, Maricann is positioned to really put its foot on the accelerator.

The strategic mix of Canadian and European markets notwithstanding, Maricann chief executive officer Ben Ward sees the company’s key point of differentiation being technology for extraction and product formulation.

“We have locked up two groups with preparative chromatography expertise in cannabis and this means we have the only ability in the industry to get all the cannabinoids, terpenes and flavonoids,” says Ward. “To formulate the plant, you first have to be able to deconstruct it to make sure you get the active pharmaceutical ingredients.”

Ward explains that there are 500 terpenes – an organic compound found in numerous plant-based products – specific to the cannabis plant, and that companies looking only at cannabinoids or THC are missing much of what cannabis has to offer. “We are focusing on whole-plant medicine, which is done by extracting all of the different isolates.”

This approach to the industry reflects the direction set for the company early on by founder Dr Eric Silver. An assistant professor and clinical teacher in the Department of Family and Community Medicine at the University of Toronto, Dr Silver knew first-hand the benefits that alternative medicine employing cannabis could have on patients. The next step was to gather colleagues from the industry with capital and know-how and begin the search for a facility to purchase.

Eventually, the team settled on the Langton facility, which had been operating under the MMAR (Marihuana Medical Access Regulations) regime established in 2001.

The facility was approved under the more robust MMPR (Marihuana for Medical Purposes Regulations) in March 2014, with a license to sell product grown at the facility arriving in December of the same year.

A green ethos going hand-in-hand with the commercial imperative

A brief analysis of the facility indicates Maricann is committed both to being a custodian of its environment and running its business with an eye on costs. Langton has its own co-generation plant to help with electricity needs and there is even a natural gas well on the property to provide some of the fuel. Other efforts include equipment to capture rainwater for use in the fertigation process.

These and other efforts lead the company to believe that it is among the most competitive producers on the Canadian landscape, with per-gram costs estimated at just $1.37. That should translate into healthy margins that really make their presence known as sales continue to ramp up.

“Our revenue generating capacity right now is restricted only by our footprint of 34,000 square feet,” says Ward. “We are building a 216,000 square foot facility and that will be able to produce another 20,000 kg of dry flower starting in the first quarter of 2018.”

As far as near-term trends are concerned, Ward is in the camp of industry executives who believe smoking cannabis will give way to ingestion in other forms over time. “We think users will come to prefer extract-based products, which is the experience in more mature markets such as Colorado and California,” Ward notes. “Once people can access a product with a consistent extract in a dose they are used to, they will opt for that. We think that is when the real adoption will take place.”

Maricann is ready with its own line of gel caps, which it developed in partnership with another company, to help that trend along.

First we conquer Canada, then we take Berlin

The Canadian operations are clearly well on their way to developing serious momentum, and the plan is to create the same success in the German market.

It was only in January of this year that Germany’s lower house of parliament, the Bundestag, voted to legalize medical cannabis. The drug will be available from pharmacies to patients with a prescription, and importantly for companies serving the market it looks like it will be covered by German health insurance.

“I think we will see almost a carbon copy of the Health Canada program as far as cultivation and regulations are concerned. The difference will be in distribution,” posits Ward. “It won’t be supplied directly to patients but through major pharmaceutical companies or wholesalers, or distribution through pharmacies. Germany’s market will likely remain medical for a long time, but from an ease of access standpoint I think it will move ahead of Canada because of the German population’s propensity to seek alternative therapies.”

Ward explains that companies hoping to grow cannabis in Germany need to possess over three years of cultivation experience, a benchmark that the team at Maricann is able to meet. The company is currently preparing an initial 150,000 square feet of space in a facility that it has the option to purchase. “All we have to do is install the tables, the fertigation system and the lights and we will be operational,” says Ward. “We are moving through the licensing process there right now.”

Ward comments that the team is happy working in jurisdictions where legalization is uniform on a federal level, contrasting the environments in Canada and Germany to that in the United States, where cannabis is illegal federally but many states have passed laws to make it legal.

“Much of the rest of the world, and especially western Europe, is moving forward with legalization in some way,” observes Ward. “There is a much larger population that Canadian companies can export our experience to, and in doing so create best in class companies that compete globally. We might only be talking five or six years, but that is a lifetime of experience in the cannabis sector. I see Canadian companies moving into other markets and helping governments with regulatory issues so that their citizens can look forward to safe, reliable access to high-quality cannabis.”

This story was originally published at www.proactiveinvestors.com on May 10, 2017 and featured in The CSE Quarterly.

Learn more about Maricann Group Inc. at https://www.maricann.com/ and on the CSE website at http://thecse.com/en/listings/life-sciences/maricann-group-inc.

Namaste Technologies moves closer to buying “vaping” online business

The acquisition by Namaste Technologies Inc (CVE:N) of various assets currently owned by Haze Industries has moved a step closer.

The Canadian company, formerly known as Next Gen Metals but now focused on medical marijuana and alternative medicines, said that it has now signed an asset purchase agreement that will see it acquire a number of web site domains, a customer list of more than 150,000 individuals plus intellectual property and goodwill of VaporSeller, an e-commerce platform for the fast-growing vaporizer and accessories market.

Namaste will pay US$500,000 in cash when the deal closes, and will hand over five million shares of the company. In addition there is any earn-out clause of US$1.5mln over a three-year period that could be triggered by revenue, margin and operational controls.

Namaste anticipates closing the transaction on or about June 30, 2016, subject to the receipt of all director and regulatory approvals, including approval of the Canadian Securities Exchange if required.

Namaste also revealed it has arranged a non-brokered private placement of at least 8.5mln units but no more than 12.5mln units at C$0.12 a pop, to raise between C$1mln and C$1.5mln.

Each unit comprises one common share of Namaste plus half a warrant; each pair of warrants would entitle the owner to exchange them for a single common share upon payment of C$0.18 any time up to 24 months after the date of issue.

The net proceeds from the offering will be used to fund cash closing costs associated with the VaporSeller transaction, inventory expansion and for general working capital purposes.

“The signing of the definitive agreements for the acquisition of VaporSeller represents a significant step forward in terms of the completion of this transaction. As the first of multiple opportunities we have identified to expand through acquisition, our management team is high focused on ensuring an efficient and effective execution of this transaction as well as a seamless integration of our current platform and VaporSeller,” said Sean Dollinger, president and chief executive officer of Namaste.

This story was originally published at www.proactiveinvestors.com on June 8, 2017 and featured in The CSE Quarterly.

Learn more about Namaste Technologies Inc at http://www.namastetechnologies.com/ and on the CSE website at http://thecse.com/en/listings/diversified-industries/namaste-technologies-inc.

Webinar: Trends & Directions in the Cannabis Industry

On May 23rd, the CSE hosted a special webinar event featuring Tom Adams, managing director and principal analyst of the investment research and consulting division at BDS Analytics as well as editor-in-chief of Arcview Market Research.

The webinar dissects the cannabis industry, and with BDS Analytics’ impressive data collection of more than 250,000,000 processed and analyzed legal cannabis transactions, provides valuable insights into a rapidly growing industry.

In his presentation, Tom showcases the market’s current data, trends and opportunities and what it all means for investors. Tune in to see his detailed market forecasts and the possible direction BDS sees the cannabis industry heading in.

To view the webinar in its entirety, click here.

Cannabis industry webinar with Tom Adams - BDS Analytics

 

The Canadian Bioceutical Corporation profits from shift to US cannabis market

Technology companies often attribute their success to a strategic “pivot” that saw them de-emphasize an early business in favour of what ultimately proved to be a better idea.

The burgeoning cannabis sector now has its own example in the form of The Canadian Bioceutical Corporation (CSE:BCC), which shifted its focus to the United States after identifying cultivation opportunities it could advance much more quickly than its founding project in Canada.

Through a strategy of acquiring existing businesses and providing capital and management expertise to accelerate their growth, the company has positioned itself to be profitable early in its young life.

With its first acquisition, completed in January 2017, The Canadian Bioceutical Corporation acquired highly profitable assets in Arizona. These were only consolidated as of January 1, so their contribution to the company’s full financial year, which ended March 31, will be limited. Still, they will provide a good indication of what can be expected in coming quarters.

The Arizona assets are the first of several that chief executive officer Scott Boyes is working to bring under the company’s umbrella. The plan is to move quickly, setting up shop in states where risk is quantifiable and businesses are available at valuations that allow for multiple expansion as capacity is expanded on both the production and distribution fronts.

Unlike Canada, the US cannabis cultivation market is fragmented

“The market in the US is highly fragmented, characterized by a landscape with thousands of small producers,” explains Boyes. “This contrasts with Canada, which has a much more concentrated landscape with fewer but larger players.”

Boyes shares that the Arizona deal cost US$25mln, and was concluded at around 1.5 times revenue and 4 times cash flow, undeniably reasonable metrics for a business in the super-hot cannabis sector.

The Canadian Bioceutical Corporation gained more than just operating assets, as Boyes was eager to work with the executive who had built the Arizona business, Beth Stavola – so much so that Stavola is now president of the company’s US unit, CGX.

Purchasing the Arizona assets was an easy decision based on the results of extensive due diligence, which included an audit by a Canadian accounting firm and other assessments.

“The business checked every box,” says Boyes. “It was in a state where the regulatory authority is friendly. Also, when you obtain a license in Arizona you get seed-to-sale capability, with the right to operate a dispensary, to have one on-site cultivation, one off-site cultivation, run a full concentrates operation, and do your own packaging.”

Boyes explains that Arizona laws dictate medical cannabis operations must be owned by non-profit organizations, and therefore The Canadian Bioceutical Corporation does not cultivate or sell cannabis products itself in states with this type of legislation. Rather, the company purchased management, real estate leasing and other entities providing support to the licensed cultivation and retail operations under long-term services agreements. Because the owner of the license and facilities is a non-profit, the cash left over after operating costs flows to the service providers.

The company also holds another license that will enable it to open a third Arizona dispensary, which is currently in development. All three will operate under the Health for Life (H4L) banner and carry, among other products, the award-winning Multiple Extracts (MPX) brand Stavola established.

One final note on Arizona is that legalization for adult recreational use is off the table right now, following a November 2016 vote on Proposition 205, which proposed legalizing cannabis use for people 21 years of age and older. The “No” victory was far from overwhelming, with the vote decided by a margin of fewer than 3 percentage points.

After praising Arizona, the company is turning its focus to Massachusetts

The company’s second big acquisition of 2017 is taking place in a state where voting in November approved recreational use. In early April, The Canadian Bioceutical Corporation announced a Letter of Intent (LOI) to purchase a 51% stake in Massachusetts-based IMT LLC. The deal will take place via CGX using a services company structure similar to that employed in Arizona.

Assets include a 40,000 square foot facility zoned and licensed for cannabis cultivation and a license to open up to three medical cannabis dispensaries. Annual capacity is an impressive 2,500 kg of cannabis and 500,000 g of concentrates. The first dispensary, in the city of Fall River, will be adjacent to the cultivation facility.

The acquisition calls for a US$5.1mln cash payment to IMT LLC and a further US$2mln in capital to build the second and third dispensaries. Massachusetts could begin licensing dispensaries for recreational sales as early as January 2018, with preference given to medical-use locations already up and running.

In early May, The Canadian Bioceutical Corporation announced it is moving into a third market, as it is acquiring 100% of GreenMart of Nevada, a licensed cultivation and wholesaling business based in Las Vegas.

The growing facility is fully operational and can produce 1,600 kg of dried cannabis per year plus 85,000 g of concentrate. Total cost is US$19mln, payable half in units of the company and half as a non-interest bearing promissory note.

Boyes notes that while Nevada’s population is less than three million people, over 42 million tourists visit each year, so with voters having recently given the green light for recreational use the total market could be very large.

Completing over C$50mln in acquisitions during the first half of 2017 would be quite a feat, and a US$25mln line of credit the company secured in May will play an important role. It will also help to limit dilution; the company stated its intent in late March to raise US$20mln by issuing new shares but decided to raise less (the book was closed at US$11.2mln) because the line of credit can cover a substantial portion of near-term spending.

While Boyes says the Canadian cultivation license for its facility in Owen Sound, Ontario, is still something the company would like to obtain, the focus for now is definitely the US, where he says more acquisitions can be anticipated this year.

The company is undervalued relative to many other cannabis players in Canada

Boyes has been somewhat surprised that his company has not achieved the valuation multiples enjoyed by some other public cannabis issuers in Canada, but thinks this will correct itself over time as investors become more comfortable with businesses operating south of the border, where on a federal level the possession of cannabis remains illegal.

“There is a degree of concern about the political environment in the US, but the more you are involved down there the less you see it as a risk,” Boyes concludes. “Some states may need to tighten their regulations, but overall the industry is growing too quickly and simply creating too much employment and tax revenue. We may see some speed bumps along the way but, in my opinion, the US is a good place to be growing a business such as ours.”

This story was originally published at www.proactiveinvestors.com on May 8, 2017 and featured in The CSE Quarterly.

Learn more about Canadian Bioceutical Corporation at http://www.canadianbioceutical.com/ and on the CSE website at http://thecse.com/en/listings/diversified-industries/the-canadian-bioceutical-corporation.

CannaRoyalty charting own course in North America’s cannabis marketplace

When the first companies focusing on cannabis opportunities started listing on the Canadian Securities Exchange a few years ago, the common model was to submit an application to Health Canada with an eye to producing for the domestic medical-use market.

Fast-forward to 2017 and regulatory change in Canada, plus some 29 US states and the District of Columbia, is creating new business opportunities in what is beginning to take on the guise of an international market.

For CannaRoyalty Corp. (CSE:CRZ), it’s 25 opportunities so far, or at least that is the number of holdings the company has acquired to date.

Run by founder and CEO Marc Lustig, former head of capital markets for investment banking powerhouse Dundee Securities, CannaRoyalty looks on both sides of the border for investment opportunities with the potential to contribute a dependable stream of cash flow.

Candidates are put through a strict due diligence process and those making the cut are offered capital under a set of terms tailored to fit their business, along with guidance from CannaRoyalty that has proven valuable in helping investee companies deploy that capital to boost growth.

“There is no cookie-cutter framework we use as a threshold for all asset types,” says Lustig. “We are primarily seeking exposure to obtain royalties, which means that when we invest we are getting a part of the business in the future in the form of a percentage of revenue or a percentage of net income.”

A quick perusal of the CannaRoyalty portfolio shows that royalty agreements often come alongside equity stakes in a business, which enables CannaRoyalty to be more hands-on than would be the case if it were merely receiving a percentage of revenue.

One of the company’s earliest investments was in Toronto-based Resolve Digital Health, in which CannaRoyalty participated as a seed investor. “With minority positions such as Resolve, we of course want a good return, but the bigger priority is the strategic side,” says Lustig. “Resolve is producing a revolutionary technology called the Breeze platform which we aim to license from them. It’s great that Resolve is worth eight-times more than where we invested, but the strategic upside is equally important.”

Resolve’s Breeze vaporizer provides users with a metered dosage of cannabis using a sealed pod that is inserted into the device. Usage can be monitored through an app that works via bluetooth on smartphones, thus providing accurate information for the patient and supporting health care professionals.

Another example of a minority holding is Vancouver-based Anandia Laboratories, in which CannaRoyalty holds a 20% equity stake. “Anandia is definitely one of our most exciting holdings,” says Lustig. “It is a leader in testing and genetics of cannabis and a good example of our interest in ancillary businesses that are integral to the execution of a federal recreational policy in Canada.”

Lustig refers to the Anandia investment as the “picks and shovels model,” whereby rather than investing in producers themselves, CannaRoyalty favours businesses that make products cultivators need to grow cannabis effectively – moving up the value chain as compared to cultivators whose product is at risk of becoming a commodity.

At the other end of the ownership percentage spectrum, CannaRoyalty owns 100% of DreamCatcher Labs, which Lustig describes as one of the largest companies designing vaporization pens and cartridges. Hardware designed and manufactured by DreamCatcher is sold to other companies on a private label basis, with one model in particular also used for CannaRoyalty’s own GreenRock Botanicals brand.

Lustig’s personal interest in the cannabis industry developed through his work at Dundee, and he had an edge in understanding the potential of the fast-changing sector thanks to his molecular biology degree and start in the pharmaceutical industry, prior to moving into capital markets for his career.

In 2014, when Canada allowed companies to set themselves up as entities producing commercially for the medical-use market, the overnight change in investor sentiment opened the banker’s eyes to a new opportunity.

“If you were in one of the investment firms in Canada you could not help but do financings for new cannabis companies and that was my education in terms of the capital markets opportunity – there was endless capital that wanted to be invested in this new and exciting area. But it was also an opportunity for me to learn about cannabis the plant and cannabis the market.”

Lustig believes sales of cannabis and related products could one day outstrip those of alcohol and tobacco, seeing as the plant has both recreational and medicinal uses. “Because of the legal environment, cannabis has never had the chance to benefit from large research budgets to determine the full extent of its medical properties,” says Lustig. “When you consider all the therapeutic uses it could have, that is where the unlimited upside comes from – the idea that cannabis can be officially recognized as a medical product as well.”

Despite that growth, being in the right product at the right time will remain important, and Lustig holds strong views on how the cannabis marketplace is likely to evolve. “We will continue to grow our company on the principle that we are a lot more excited by non-smoking methods of ingesting cannabis, such as transdermal patches, edibles, vape cartridges and capsules. That, to me, is where the high growth in the market is. I think you will see that side of the market get to 75-80% versus the ingestion of cannabis by smoking.”

As for CannaRoyalty in the near term, Lustig says investors can anticipate more deals bringing cash flow and strategic synergies, some in markets where CannaRoyalty does not currently have a presence. Jurisdictions in which the company already has portfolio holdings include Canada, Washington, Oregon, California, Arizona and Puerto Rico.

Before long, all of this is expected to culminate in an attractive bottom line. “Investors should view our portfolio as a diverse mix of income and asset growth in the cannabis market,” Lustig concludes.

“With our cannabis know-how and management expertise we are building a platform of assets designed to accelerate early strength in high-value segments of the cannabis market. This strategy sets us apart from other cannabis companies and will drive asset growth and shareholder value.”

This story was originally published at www.proactiveinvestors.com on May 2, 2017 and featured in The CSE Quarterly.

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Learn more about CannaRoyalty at http://cannaroyalty.com/ and on the CSE website at http://thecse.com/en/listings/diversified-industries/cannaroyalty-corp.

CSE and Stockpools team up to launch the Cannabis Investment Challenge

The Canadian Securities Exchange, along with Stockpools and the Lift Cannabis Expo, are excited to announce the launch of the first ever Cannabis Investment Challenge – an innovative fantasy online stock trading competition focused entirely on the cannabis sector.

The Cannabis Investment Challenge is a unique opportunity for the public to participate in today’s hottest market sector and compete for prizes without any cost or financial risk to the user.

How it Works

Stockpools is like fantasy sports, but for stocks. The Stockpools platform enables users to choose a simulated portfolio and to compete against other participants’ portfolios in an online environment that mimics the concept of traditional fantasy sports. It offers curious investors a completely risk-free platform to have fun exploring the stock market, while potentially winning real cash or other prizes should their portfolio outperform the competition.

How to Participate

This competition is 100% free and available to anyone over the legal consent age. For more information on registration, visit the CSE Cannabis Stock Picking Challenge page on Stockpools.com

Competition partner Lift Events is also welcoming delegates to register at the Lift Cannabis Expo from May 26 – 28. Guests can come to booth 345 for more details and to register in person.

When does it Start?

The competition begins July 3rd 2017 and runs until September 15th 2017. Registration for the competition is now available online at the CSE Cannabis Stock Picking Challenge page on Stockpools.com.

This is the first collaboration between the CSE and Stockpools. As noted by CSE Director of Listed Company Services Barrington Miller,  “CSE is excited to co-launch this initiative with Stockpools. Cannabis-related companies have been a huge driver on our market recently and the amount of participation we’ve seen from investors has been staggering. We hope this competition inspires more people to learn about the stock market while having fun in a simulated investing environment.”

Noted Anil Mall, President of Stockpools, “Launching this initiative with the CSE has been a natural fit – they bring an entrepreneurial spirit to what they do which is in great alignment with Stockpools. Just as important are the numerous Cannabis-related clients listed on the CSE, of which the entire competition is based upon.”

Both organizations believe the Cannabis Investment Challenge competition can enable a new generation of investors to explore the world of investing and publicly traded cannabis markets via an accessible and engaging platform.

For more information, contact

Anil Mall
President
Stockpools Inc.

T: 604-684-2444
C: 604-653-6578
W: www.stockpools.com