All posts by Peter Murray

Interview with Tom Rossiter, Chief Executive Officer, RESAAS Services Inc.

In late July, Peter Murray of Kiyoi Communications sat down with Tom Rossiter, Chief Executive Officer of CSE-listed RESAAS Services Inc. (CSE:RSS) to discuss his perspective on opportunities in the real estate sector and RESAAS’s unique platform. Below is the transcript of their discussion.

Peter Murray (PM) RESAAS offers unique services to the residential real estate industry, a massive market if there ever was one.  Can you begin by walking us through what the company does at a high level, and given all the pivots that seem to take place at technology companies, has your mission changed along the way?

Tom Rossiter (TR) Our mission hasn’t changed along the way, it has evolved.  If we rewind to the beginning of RESAAS (Real Estate Software as a Service), we set out to create an online platform that aids the existing practices of the real estate industry.  We all know that real estate agents are social professionals – maybe the most social group of professionals that exist.  When you are together with them in real life it is amazing to see the knowledge sharing, the education, the tips and tricks, and the deals that get done.

We thought that should be supplemented digitally so the value of a professional circle could transcend a local market and put an agent or organization on the map not just locally but nationally, and maybe even overseas.  You can think of RESAAS as an online destination for real estate professionals to act as they do in real life.

Eventually, the networking effect kicked in, which means the bigger the network, the greater the value to those in it.  Word got out about all the great content, and data, and deals, and leads, and listings that were happening inside RESAAS amongst the agents using it.  Leading organizations with extensive footprints in terms of agent count and office locations began to catch wind of what was going on and thought, “Wow, we have this large physical presence.  What would happen if we embraced this RESAAS model to be our digital complement?”

A big part of our business now is working with these larger brands and organizations and supplying our technology and services to their networks.  We provide a white-labeled platform so they can give their agents a way to interact digitally, and ultimately do more business.

(PM) 2. What tools are you providing and what makes them unique?

(TR) The tools are really just an extension of what the agents are already doing.  Every agent either has listings or wants to find listings for buyers, so we provide an easy system for listing sharing amongst agents.

Buyer needs is a particularly important aspect.  In hot markets, there is less inventory and more demand.  Where listings are scarce we provide a buyer needs experience so that agents can signal they have a buyer and detail that buyer’s requirements.  While RESAAS works very well across buyer’s markets, seller’s markets and neutral markets, we’ve become particularly popular in seller’s markets, where there is that supply issue.  What we have been able to do is to create a new way for the industry at large to organize and visualize listings.

The way the industry works is that it can take up to five days between the time an agent signs a listing agreement and the time a property is listed on the MLS with pictures and other information.  During that period, agents might communicate the listing to others and transactions can thus occur pre-market.  And those that do are outside of the MLS.

For local organizations charged with governing their respective local real estate markets, this is a big problem because they need to know everything about the market so their database, their analytics and their comparables are accurate.

Last year in the US about 22% of properties that sold never got to the point of having an MLS listing.  And in hot markets, that can reach 40%.  To bring that back to RESAAS, we have created a way to capture listing data pre-market that is structured, organized, clear and compliant.  Agents love it because it levels the playing field.  But even more important is that our clients, the local real estate associations and boards, can finally visualize and track activity in its pre-MLS phase.

Because of varying regulations and bylaws in individual markets, RESAAS sometimes has data for days, or even weeks, before any other destination online has it.  Ours is the first platform of its kind and has been termed extremely disruptive.  We are marching out across the US and activating different markets every week.

(PM) 3. Would you say that locating senior management and most of the technology team in Canada has been the right decision for RESAAS?

(TR) We are fortunate to be based in Vancouver, which has become what I consider to be the Silicon Valley of the north.  It is a thriving destination for technology companies to base an office in or establish their headquarters.  I have been here for 10 years and watched the city transform from a technology reception standpoint such that there is now an understanding of how a company like ours needs to be supported, financed and communicated.

There is an amazing community in Vancouver amongst technology companies.  Even though companies might compete with each other, there is collaboration and innovation.  And given the variety of companies that exists here – private, public, start-up, emerging, well-established, large and small – there are so many industries serviced by them that the thought-leadership and mentorship opportunities are tremendous.

Importantly, Vancouver has a buoyant investor scene that supports and understands technology companies.  As a public technology company on the CSE, we could not be more grateful to be in such a dynamic environment.

(PM) 4. Take us inside the RESAAS strategy.  How did you develop your game plan, and what are the keys to executing effectively?

(TR) RESAAS started as a freemium platform.  We opened the gates to a network we had built and did so without putting up a paywall.  We wanted to minimize the barriers for busy professionals to use and believe in our platform.

The strategy all along was to build a critical mass of users and analyze what they did – what they talked about, what they wanted and how they used what we had created.  We didn’t put a timeline on it.  Our approach was to launch the platform and once we felt we had enough information, analytics and patterns to understand the behavior, then we’d be informed enough to build solutions that we could sell.

As a result, everything we are doing now and everything we have created is based on industry activity and demand.

Really, it is consistent execution of the game plan.  Run something for free, analyze the patterns and data, build solutions that represent what people are crying out for, then monetize it at scale to an industry in need.  We are now in the last phase of that four-pronged strategy.  By spending time up front to understand exactly what different facets of the industry require, when we build a solution and take it to market the reception is fantastic from the get-go.  We are not finding our way or having to pivot on the fly because we have gone to market with a polished solution we know is in high demand.

(PM) 5. Some technology companies become profitable early on but others achieve very high valuations with hardly any revenue at all.  What is your take on this, and where is RESAAS on the earnings versus valuation continuum?

(TR) We view RESAAS as similar to a Silicon Valley company mentality.  By that I mean that the process is to assemble a team and raise capital, build a product and run it for free, and then based on the data you subsequently monetize it.  We have chosen to do that in Canada, we have chosen to use the CSE as our vehicle to raise our capital, and we have spent time, capital and resources to build something that has longevity and scalability.  And the product is in high demand now that we are selling it.

During the early days, people got excited because when you assemble a brilliant team trying to tackle a problem in an industry as large as real estate, it is natural for people to dream big.  During the development/pre-revenue phase, people get excited and imagined the blue sky.  But when you turn on the revenue, that aspect of the business is beginning from a cold start.

What can happen is that people start to look at you from a current revenue standpoint and forget about the blue sky.  It happens to a lot of companies in Silicon Valley, too.  We are in that phase where we must push revenue growth month-after-month, quarter-after-quarter, geared around a recurring revenue model.  We know where we are going with this, we know how big the market is, we know how many customer types there are, and we have created a model that enables us to monetize a single agent multiple times.  That, combined with the intrinsic value of the data we are gathering, puts us in a strong position for robust valuation in the near term.

(PM) 6. Tell us about the technology and user base you have built to date.  What comes next?  How does it grow in new ways and monetize from here?

(TR) RESAAS attracted almost half a million agents in the first 24 months of operations.  From that we learned, through analytics and behavioral analysis, what we felt different groups in the industry needed and would buy, and we built those solutions.

We started taking our solutions to market in 2016 and are already working with some of the biggest brands in the space.  The top two global real estate franchises are RESAAS customers and run on our technology.

In 2017, we judged that the role of the free network for real estate agents had played its part.  As I’ve already mentioned, the years we spent gathering data and analyzing behavior formed the basis for the products we subsequently created.

We have thus decided to add a paywall to RESAAS, which means the free version is no longer available.  Going forward, all users will be paid for either by the brokerage they belong to, their local association, or by themselves.  It will mean a reduction in the number of users we have but the revenue per user will increase dramatically.  This is a tactical part of our strategy that we began executing this year and we are very happy with the early conversion numbers.

(PM) 7. You have raised over $30 million since debuting on the CSE in February 2011.  What types of investors back a company like RESAAS and what can you tell us about your relationship with shareholders?

(TR) RESAAS is fortunate to have an enlightened, supportive and loyal group of shareholders who have invested from our IPO in 2011 all the way up to our most recent financing.  That is a tremendous asset for our company and something we are very grateful for.  It has allowed us the time, bandwidth and resources to build the company we envisioned, to take the time to professionally execute on our vision, and to take our strategic plan to market in exactly the way we wanted.

The result is that we have come to market with a product and set of services the industry has never seen before and clients are calling out for.  The entire process has been made a lot easier by being listed on an exchange like the CSE.  It provided a tremendous amount of assets, tools, resources and connections outside the network we have within our own company.  The CSE has proven to be a fantastic capital markets partner and facilitated the timeframe we needed to build a world class technology company here in Vancouver.

(PM) 8. Looking at life in the public markets, what are some of the positives, and what has been your biggest challenge?

(TR) RESAAS has found the public markets, on balance, to be extremely advantageous for our company’s growth.  They provided a vehicle to raise a tremendous amount of capital.  They provided us an avenue through which to meet influential, informed and intelligent investors across Canada, and they furnished our company with enough capital to execute our vision.  We have been able to build a better business because of this.

Going public pre-product is somewhat unconventional in North America and definitely made us refine our communication style.  We communicate corporate updates clearly and more regularly than is perhaps the norm, to give investors insight into the direction the company is heading.

Typically, a company would be private and build something and would go to market.  They would have all the right components in terms of revenue growth and then they would IPO.  RESAAS chose to IPO early and use that time to build a product from nothing, but having spent the hours and airmiles to understand industry needs.

We were fortunate enough to have a shareholder base that believed in our vision and supported our direction.  And here we are six years after our IPO in a position where all of our early shareholders are still supporting the company.  They are extremely happy with what we’ve created, and they are over the moon with the opportunity before us.  We could not be happier or more fortunate to have such a supportive group of investors behind the company.

(PM) 9. What would you tell the next generation of growth companies about going public?

(TR) As an emerging tech company, a listing on the public markets provides a proven platform to raise capital, whilst retaining more control than perhaps the alternative of remaining private would allow.  In addition to the financial benefits that a public listing can bring there is greater awareness, credibility, investor confidence and use as a sales tool.  I have to say that the public markets have been fantastic.

(PM) 10. Finally, can you speak about the achievements investors can look forward to in the coming 12 months.  Why should people be excited about RESAAS?

(TR) Well, I would say that 2017 is RESAAS’s breakout year.  It’s the year we finally recognize the effort our company has put in over the last six years to monetize our solutions.  We already work with national brokerages and franchises.  We already work with major and progressive real estate associations and boards across North America.  And most excitingly for this year, we launch our newest solution aimed at the brokerage network, targeting over 120,000 independent brokerage firms across North America with a solution we spent more than a year building based solely on input from the people who run those brokerages.

This is the year that RESAAS becomes “SAAS-ified” and we could not be more excited about the direction the company is heading, our growth potential, and ensuring that we remain number one in this industry from a B-to-B technology standpoint.

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.

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.

Interview with John Fowler, President and CEO of Supreme Pharmaceuticals

Earlier this week, Peter Murray of Kiyoi Communications sat down with John Fowler, President and CEO of Supreme Pharmaceuticals (CSE:SL) to discuss his perspective on the commercialization of cannabis, how the landscape has shifted in the past several years and how choosing to list with the Canadian Securities Exchange enabled Supreme Pharmaceuticals to move quickly in this rapidly evolving space. Below is the transcript of the interview.

1.

Ten years ago you were assisting medical cannabis patients with legal issues and now you are President and CEO of a company worth over $250 million helping patients in a more relaxed regulatory setting.  How has the environment changed and when did you realize what a major business opportunity the cannabis sector would present?

It is impossible in this day and age not to have some understanding of the scale of illegal trade in cannabis.  It is something I don’t participate in myself, but the point is that the business opportunity in cannabis, assuming a reasonable environment governing use for medical purposes, and ultimately for recreational purposes, has always been clear.

Regulated medical cannabis use became legal in Canada in 2001, so there was that setting from a patient rights perspective – a patient could legally access cannabis.  But from a business perspective it wasn’t there.  When Prime Minister Harper created what has now become the ACMPR (Access to Cannabis for Medical Purposes Regulations) – basically, highly regulated cannabis cultivation – I sensed the perfect business opportunity had arrived.  This was an opportunity few are fortunate enough to have, the chance to create a business doing something you are passionate about.  For me that was the combination of operating in a complex regulatory environment while working with the cannabis plant.

The best way to note the change is that when we founded this business in 2013 we expected it could take even up to 10 years post-licensing to complete the greenhouse project, and now we are looking to get it done in 24 months or less.

2.

How has Supreme been able to develop into one of the industry’s leaders so quickly?

Our biggest advantage is that our team is committed to the cannabis space.  Even though we have only been at this for three or four years, most of the team and executives who work with me have been thinking about this for much longer.  What that has allowed us to do is move quickly to define our business, to recognize where we feel it is best to invest in core competencies, and for us that’s cultivation, and how to market a very transparent story.

When you are really focused and passionate about doing something well, which for Supreme is taking craft cannabis and developing it on a massive scale – in a nutshell, showing that “big pot” doesn’t have to be “bad pot” – that resonates with the market, whether it is the capital market, the general public or the consumer market.  This has been our guiding vision, the goal of being a top cultivator and developing the competency of scaled cultivation that has allowed us to gain a favourable market position.

3.

Supreme has always highlighted its role as a cannabis producer.  Do you expect to extend the brand across different verticals in the future?

A lot depends on how the market unfolds.  We are very clear at Supreme that we don’t have a crystal ball.  Rather, we build competencies in a way that sets the company up for maximum flexibility.

I believe when you have a unique market opportunity like this, where the macro outlook is generally very positive – recreational legalization is coming and new international markets are opening – but the minutia at the planning level is still uncertain, you have to build in flexibility.  We felt that by investing in the building of core competency at scaled cultivation and developing management systems to support that, we were building a business in the most moded part of the industry.  Cultivation has the highest costs in terms of barriers to entry, Health Canada approval is a multi-year process, and it is hard to find transferable skills.

After that we can leverage our success in cultivation into whatever aspect comes next.  In terms of what makes most sense at the time, it could be international, it could be products, it could be extracts – it really depends on what our market data tells us when we are looking to make our next step.

4.

Supreme is based, and has its operations, in Canada but are there opportunities in the United States that the company could be attracted to?

The US is a fantastic market that is moving quickly.  At the end of the day, cannabis remains federally illegal in the United States, so we are not looking at the US actively in terms of making large capital investments.  That said, we take a lot of guidance from markets like California in terms of cultivation best practices, industry trends and product iteration.


5.

How do you see the industry evolving going forward and what should be the main areas of focus from the standpoint of companies and investors?

As the cannabis market matures and grows, we should anticipate many more players coming into the space.  I believe what that is going to mean is that companies have to specialize.  I don’t think there is one aspect of the industry that is right for all companies.  A company should have a core competency where they do something with the ambition of being the best in the world at it.

For us, that is cultivation.  In the future we may expand that, but our goal is to develop a leadership position in cultivation.  Any entrant into the space is going to have to figure out the aspects of the industry that they do better than anyone else in the world and focus their energies on that.  And I think investors should be looking at that type of commitment to excellence from companies they are investing in.

6.

Supreme is one of a handful of companies to successfully navigate the licensing process in Canada, raise the required capital and begin production.  What does it take to get a production operation started and what advice would you have for potential entrants to the sector?

Getting a production license in Canada is quite challenging.  It is a long and detailed process.  We submitted our application to the Federal Government in autumn of 2013 and we were licensed in spring of 2016.  For those looking to do it, I would say to make sure you have a clear plan, that you work with good partners and advisors, and that your project is correct and licensable.  And more importantly that you have a business at the end of it.  Some people think of a license as the finish line, when actually it is the starting line.

More generally, the cannabis industry offers opportunity beyond just cultivation.  Entrepreneurs looking to get into the space need to think about themselves, their team, and think about what core competency they can develop so that they do something better than everybody else.  That is their competitive advantage and that is how they will have a market.

If you look at conglomerates in other industries, they are generally grown in that fashion, where the company started with one great business, generated profitability, and that was leveraged into buying other great businesses or extending to other verticals.  But it always comes down to that premise where you need to find something that you do better than absolutely everybody else that you can make the heart and soul of your business.

7.

How are the evolving regulatory landscapes in Canada and the US presenting challenges and opportunities?

Challenge and opportunity are really two sides of the same coin.  Regulatory requirements shape the business, but finding ways to operate efficiently within those regulations and ways to gain an advantage through those regulations is the opportunity for companies.

As an example, we saw a cannabis bill put to parliament this month.  There are a lot of regulations and challenges in there, but for companies that navigate that well there is a lot of opportunity.  At Supreme, we are spending time digging through that, assessing our business model, assessing what business models we think the future will allow, and finding the opportunity that comes out of those regulatory challenges.

8.

With the experience of being an early license recipient, how important is first-mover advantage in this business?

We believe it is important to be early to market, but you don’t always need to be first.  Many great companies in other sectors were not the first movers in their space.  Business is a marathon, and it’s important not to be a quarter-horse in a mile race.

You need to be in there at the right time.  The best business plan only works at the right point in time and under the right market conditions.  For us, we saw an opportunity to leverage our competitive advantage in cultivation, to leverage the core competencies we were building as a group, and then we brought in team members to cultivation with the singular focus of producing some of the best quality cannabis in Canada.

The best way to market cannabis is not through the fanciest logo or best packaging, although that is important.  At a high level, you have to remember that billions of dollars of cannabis is transacted per year with no brand name, in bags with no branding, based on “who’s got the good stuff.”  At Supreme, we feel we are growing the good product and that is going to be the heart of our brand going forward.

When branding and advertising are restricted, your product must speak for the brand.  We work every day to ensure our product speaks loudly.

9.

It is almost three years to the day that Supreme listed on the CSE and began to focus on the cannabis industry.  During those years, the company has grown its market capitalization to over $250 million.  How would you characterize Supreme’s experience with the CSE?

Our experience on the CSE has been fantastic.  First of all, it is debatable whether Supreme would even exist without the CSE, because the CSE allowed listing based on a clear, bona fide business plan to get into the cannabis space prior to us having a license.  For the bulk of those three years we were an applicant entity.

In addition, the CSE was very entrepreneurial with its ability to work with Supreme so I could meet the objectives of the company and raise capital as we needed and work on growing our market, and that was invaluable.  And doing it while being easy on our bottom line, for an early-stage company that at times was thinly capitalized.

As for where we are today, we have been able to do a lot of things we were told we couldn’t do on the CSE.  We have been able to raise large amounts of capital.  We raised $70 million last year.  We were able to do a $55 million bought deal as a private placement on the CSE.  And we were able to grow our market capitalization to over a quarter of a billion dollars while listed on the CSE.

I’d like to think we will be remembered for breaking through a number of barriers and bringing some investors to the CSE who perhaps had not looked at the exchange before.  We’ll never forget the seminal role that the CSE played for Supreme and the ability it gave us to develop our business and get where we needed to go.

Versus Systems prepares to play matchmaker between major brands, video gamers worldwide

The precise number depends on the source you choose, but multiple surveys indicate that people spend hundreds of millions of hours playing video games every week. And that’s just in North America.

Considered another way, the Super Bowl and its famously expensive commercials attract around 110 million viewers in the United States, yet that occurs just once a year.

Clearly, then, video games are media – and immersive media at that – with millions of people engaged at any given moment. And most players pack enough disposable income that brands want very much to reach them.

The billion-dollar question is how to introduce a level of commercial marketing into the gaming environment such that it makes a positive impression on behalf of a brand, as the last thing you’d want to do is turn gamers off by being intrusive or annoying.

Versus Systems (CSE:VS) is confident it has the answer, and it revolves around encouraging both avid and casual gamers to opt into an environment where products and brands are featured in a way such that players become eager to interact.

Gamers are naturally competitive, so the idea of offering the chance to play for more than just an ephemeral digital points total makes sense. Playing for valuable prizes introduces a new degree of meaning to the activity, and it is this dynamic that is enabling Versus Systems to draw interest from an increasing number of brands searching for new ways to market their products.

“We’ve created a platform that does two things,” explains Versus Systems CEO Matthew Pierce. “First, it allows publishers and developers to offer prizes within their games to drive engagement. It makes them more fun to play and the idea that you can compete for everything from downloadable content to physical goods to energy drinks and concert tickets is an enormously powerful opportunity.

“The second thing it does is allow brands to be part of a promotions engine for in-game advertising and connect those brands to players and spectators. Our belief is that if you make it fun to try to win prizes and make it aspirational, and you find products that players actually want to play for, that is a really rich opportunity.”

The origin of Versus Systems is a fascinating story and helps explain not only where the core idea came from, but why the company is positioned to succeed in a business with immense challenges, both technical and legal.

Pierce is a Stanford graduate who started his own companies and worked for large consulting groups. Versus Systems was founded in a technology incubator Pierce worked in, but it was an incubator with a twist. Not only was it full of programmers and engineers with incredible skills and entrepreneurial zeal, but its main backer was a law firm, and this is the team’s secret sauce, if you will.

“The thesis was to work in areas that took advantage of the partners’ strengths,” says Pierce. “We thus wanted ideas that were technically complex, and we also needed the regulatory landscape to be complicated because we had access to tremendous attorneys. We are versed in the entertainment space and thus wanted to keep things in that sector. The first company we incubated was Versus and it is the best project I have ever worked on.”

Players who want to compete on the Versus platform must first download an app to their phone or computer so they can log into the community. Once in, a player finds that the Versus experience is additive and does not interfere with their fun by adding the conventional overlay of monetization approaches common to many games these days. Rather, Versus enables players to determine the parameters of interaction themselves.

“You log into your game and a new set of menus appears when you go to play,” explains Pierce. “Players can choose to play for money, for physical goods, or for downloadable goods. You can also decide if you want to play one on one, or perhaps one on five where the top three players win a prize. And gamers often like to play people they have invited because it means something if they can beat them.”

The beauty of the business model from the Versus Systems perspective is that the company does not have to make large financial outlays in order to attract users to its platform. As it aligns with popular games, players will naturally find Versus and its competitive options on their own.

For game developers, the appeal is a platform that is a total solution, managing prize and competition details for players, while also addressing administrative challenges they surely would rather have someone else take care of.

“The concept of creating a platform that solves a lot of the legal and regulatory burdens faced by game developers and publishers was an important part of the genesis of the company,” says Pierce. “We call the approach dynamic regulatory compliance, as we make sure that prizes are only available in regions and countries where those prizes are legal. It is a new approach and we have been writing patents to protect the intellectual property since 2014.”

Versus generates a number of revenue streams from its involvement with each game, the most important being revenue-sharing agreements with developers and publishers when brands pay to offer products or gamers choose a pay-to-play option from the platform. Integration fees help the company cover up-front costs.

“It has to be bespoke integration,” says Pierce. “Nobody knows the players better than the developer and we don’t want to take them out of that world. I don’t want this to be something that in any way detracts from the gaming experience, but rather helps to make it more engaging.”

Pierce and his team are currently working to integrate the beta model of the platform into a handful of games, while at the same time adding prize providers and signing up brands, some of which he expects to be very big names. Rapid expansion of the company and its reach is expected to follow.

“The games we are working with early on are really great,” says Pierce. “When we get out into the market and people see how exciting this is as an engagement engine, I think we’ll soon have to scale up to put this in more and bigger titles. All brands want to be where their customers are, and their customers are playing games.”

This story was originally published at www.proactiveinvestors.com on Mar 1, 2017 and featured in The CSE Quarterly.

Learn more about Versus Systems at http://www.versussystems.com/ and on the CSE website at http://thecse.com/en/listings/technology/versus-systems-inc.

Marapharm Ventures diversifies across products, jurisdictions to find medical cannabis sweet spot

Getting in on the ground floor of an exciting new opportunity is one well-acknowledged path to success. Marapharm Ventures (CSE:MDM) CEO Linda Sampson likens it to finding a “once in a lifetime opportunity” and believes that is exactly what her company is moving forward with as it draws closer to operations at multiple facilities focusing on the medical cannabis industry.

Marapharm is taking a different approach than many of the other companies in the space, diversifying its portfolio across geographic regions and business types, and doing so in a way that marries its corporate strengths with the needs of different markets. It is a plan that at once helps manage risk while increasing the degree of success Marapharm and its shareholders can potentially realize.

Marapharm is advancing cannabis production opportunities in British Columbia and Nevada, and will also serve as landlord of a large facility in Washington State. It plans to not only grow cannabis but also process harvested material into products such as oils and edibles in jurisdictions where this is permitted. Production, processing, landowner, future retailer – put a check mark in the vertical integration box.

Fortunately, when it comes time to ship product, Marapharm’s boss is an experienced marketer. Sampson, originally from South Africa, enjoyed a career before agreeing to head Marapharm that saw her re-brand struggling companies and help turn their operations successful in relatively short order. Sampson also worked with commercial property developers to conceptualize projects, consult with designers to ensure details were right, and market them afterward.

Sampson’s skillset is being put to good use at Marapharm, which leans on her for real estate, market research, and strategic planning insight to name just a few challenging aspects of the fast-moving, big money industry that is medical cannabis in North America.

Marapharm has an application before Health Canada for a production facility in the picturesque city of Kelowna – also home to Marapharm’s head office – that has passed the Security Clearance phase and is now in the in-depth Review phase.

But moving faster thanks to different local rules are facilities in the US state of Nevada. Here, Marapharm is looking to be a major player in the Las Vegas market for medical, and soon recreational, cannabis and processed cannabis products.

“Marapharm owns a company called EcoNevada which holds a 204,000 square foot cultivation license and a 16,000 square foot processing license,” explains Sampson. “And at another Nevada project we own the land with no debt, have an option to purchase 85% of the production license for $250,000, and then can acquire the remaining 15% for $1,000,000. When you consider the three licenses together it totals about 304,000 square feet, which is the equivalent of six and a quarter football fields.”

The holder of the latter license is businessman Kurt Keating, an award winning organic cannabis grower who will work with Marapharm on its Nevada projects as general manager.

But Keating’s role does not end there. Being a Washington resident, Keating obtained a license in that state and will use it to operate a facility that would be situated on 13 acres of land Marapharm has the option to purchase. It already accommodates a 28,000 square foot building used as a cultivation facility and the plan is to expand that footprint.

Companies from outside of Washington State are not permitted to hold local growing licenses, and with Marapharm hailing from Canada that means it can’t be the licensed grower at the Washington site. The strategy is thus to purchase the land, build and outfit the facility, then lease it to Keating and other growers for their own production use. A departure compared to being the actual grower, but still a use of capital that generates a good return and diversifies both the company’s asset holdings and revenue model.

“Part of Kurt’s Washington license allows for unlimited processing,” says Sampson. “There is a building next to the production facility that we can turn into a processing center. We can equip it so as to maximize processing potential to be operated as a turnkey facility. For people who hold cultivation licenses but not processing licenses, we can allow cultivation on our property and then they can use the processing facility after harvests.”

Sampson says Nevada will be the company’s biggest cultivation center, as well as the one that receives the majority of the marketing budget. “The Nevada medical market is unusual in that it is a reciprocal state – if you are a medical cannabis user from another jurisdiction you can bring your card to Nevada and they will honor it,” explains Sampson. “Las Vegas gets 50 million visitors a year, and on November 9 the state voted to move forward with legalization, so that adds another aspect to the value of what we have there. I think our involvement in Nevada represents a giant step forward for our company.”

Looking out over the next 12 months, Marapharm intends to forge ahead with its application in Canada while completing the build-out at its Washington site.

In Nevada, the company wants to get production up and running sooner and use its processing facility to create edibles and other products suited to the local market. “We anticipate that the Nevada market will be more focused on processed products as opposed to the actual cannabis, as they can be used more discreetly,” says Sampson.

Reflecting the different regulatory atmosphere, the Nevada sites actually face April deadlines to begin operating, so Marapharm is working to have initial 5,000 square foot facilities functional on each within the prescribed time frame. “They are OK with us having a smaller building but with the intent to move ahead with a bigger structure at a later date,” Sampson says.

So, big plans and tight timelines, but how is Marapharm set to manage financially? To begin with, the Nevada land is paid for and the company does not have any debt, plus warrant exercises brought in over $1.5 million as the stock price topped the $2.00 level in November. The stock trades good volume between $1.00 and $2.00, which suggests the company has financing options that would not require it to accept undue dilution if it needed to go to market.

Marapharm also has designs on California, not to mention automated vending machines, that, using proprietary biometrics for identification purposes, would be used where regulations allow. It is a strategy of diversification, integration, but focus on a young, growing cannabis industry – the pieces appear to fit.

“It is not often a chance like this comes along – it is kind of like the gold rush,” Sampson concludes. “We just feel so honored at the opportunity to be in on the ground floor and be working in good jurisdictions with great people. I think the future looks very bright.”

This story was originally published at www.proactiveinvestors.com on Feb 23, 2017 and featured in The CSE Quarterly.

Learn more about Marapharm Ventures at http://www.marapharm.com/ and on the CSE website at http://thecse.com/en/listings/life-sciences/marapharm-ventures-inc.

Oriental Non-Ferrous Resources Development sees Mongolia as cornerstone of Asian mining strategy

Covering an area larger than Peru yet with a population of just 3 million people, Mongolia is the most sparsely populated country on earth.  It is also a beautiful and fascinating nation, with traditions established before Genghis Khan founded the Mongol Empire in 1206 influencing lifestyles to this day.

While mindful of its rich culture, Mongolia is easing into the modern economy with commercial-scale mining leading the way.  How could it not when minerals comprise some 80% of the country’s exports?

Mongolia’s most famous mine is undeniably Oyu Tolgoi, the copper-gold behemoth operated jointly with the Mongolian government by Rio Tinto (LON:RIO) subsidiary Turquoise Hill Mining since 2013.

But the country is home to other mines as well, such as Centerra Gold (TSX:CG)’s Boroo mine, a historic gold mine whose modern-day output began in March 2004 and continued until September 2012, though with a stoppage of just over a year beginning in November 2010.

Oriental Non-Ferrous Resources Development (CSE:URG) and its leadership team were attracted to the country for the same reasons as other companies – high-quality projects, proximity to Asia and a favourable permitting environment, to name a few.

The driving force behind the company’s strategy and operations, founder and director Youliang Wang, explains that the concept for Oriental Non-Ferrous Resources Development dates back some 20 years to when he was a banker at China Construction Bank, where his responsibilities included overseeing loans to Chinese mining companies.

Attracted by the scale and variety of opportunity in Mongolia, Wang first invested in a dairy business, eventually broadening into other agricultural businesses as complements.

Given his background in mining finance, though, it was only a matter of time until he created a plan to move into this sector.  In 2013, Wang and his team immersed themselves in the Mongolian mining community, working with consultants and local exploration teams to examine various properties.  The result was the company’s current land package, prospective for both industrial and precious metals.

Oriental Non-Ferrous Resources Development’s properties are located in the Bornuur district in the Tӧv Aimag, or Central Province, of Northern Mongolia.  Its package spans roughly 1,050 hectares, comprised mostly of the Kharganii am-1 Molybdenum Property.

“Our licensed area is situated in the North Khentii tectonic belt and we have encountered gold, copper, molybdenum, tungsten and silver on its grounds,” says Wang.  “The projects are located 24km northwest of Centerra Gold’s Boroo deposit and 15km east of their Gatsuurt gold deposit.”

Since acquiring the Mongolian projects, the company has completed extensive trenching and geophysical work, geological mapping, ground magnetic surveys and polarization gradient surveys.

“Our initial phase of exploration drill work has contributed to a database that contains approximately 3,501 drill core samples and 29 trench samples that were assayed for molybdenum,” says Wang. “This includes a current program which encompasses 29 holes for a total of over 11,630m.”

Wang explains that many of the holes have multiple intersections of molybdenum mineralization above 0.05%, with several intervals of between 1m and 2m exceeding 0.5% Mo. The best hole yielded a 3m length averaging 2.413% Mo.

Wang notes that the Mongolian permitting environment is very reasonable, with the various licenses Oriental Non-Ferrous Resources Development holds typically being extendable for up to 30 years.

P&E Mining Consultants of Toronto was recently chosen to complete a NI 43-101 report for the company’s Kharganii am-1 Project, which will reflect results from the current drill program and associated metallurgical test work.  A concurrent evaluation of the preliminary economics of the molybdenum deposit is also planned.

The properties being situated within a recognized gold belt, Oriental Non-Ferrous Resources Development is also gearing up to initiate a property-wide evaluation of potential gold targets.  The work will include mapping, prospecting and IP geophysics.  Expansion of the property is also under consideration.

“The North Khentii gold belt has an extensive history of mining both alluvial placer and bedrock gold deposits,” says Wang.  “After discussions with geologists from P&E, we are looking to evaluate high-potential targets within the property for gold mineralization.”

Wang says Oriental Non-Ferrous Resources Development is also evaluating both merger and acquisition opportunities and possible project procurements, the longer-term objective being to develop a portfolio of Asia-based projects diversified across various mineral types and regions.

Time will tell where these expansion efforts lead, but for the time being there is plenty to be excited about in Mongolia.  The country has only been an internationally accessible mining jurisdiction since the mid-1990s, and if one considers what the industry has been able to accomplish in the last decade between new discoveries and active operators, Mongolia holds its own vis-à-vis many more mature mining jurisdictions in other parts of the world.

“We have long believed in the viability of mining projects in Mongolia, and when the projects in our current portfolio came to our attention, we thought what better way to get involved in the space than to make investments in some of these great projects, and then look to take them public,” Wang concludes.  “Mongolia has a rich mining tradition, and we hope Oriental Non-Ferrous Resources Development will in time be able to play a lasting role.”

This story was originally published at www.proactiveinvestors.com on Feb 28, 2017 and featured in The CSE Quarterly.

Learn more about Oriental Non-Ferrous Resources Development on the CSE website at http://thecse.com/en/listings/mining/oriental-non-ferrous-resources-development-incc.

Irving Resources unearths exceptional gold, silver exploration opportunities in Japan

When one thinks of Japan, sushi, Shinkansen bullet trains and onsen hot spring resorts come to mind more readily for 99.9% of the population than precious metals exploration. But those famous hot springs are plentiful because of geothermal activity, and this special geological phenomenon in Japan has given rise to some rich gold mines in years past.

The most impressive example in modern times is the Hishikari mine located on the southern island of Kyushu. Operated by Sumitomo Metal Mining Co. Ltd. (Tokyo Stock Exchange:5713), Hishikari is very high-grade in nature, averaging some 40 grams per ton of gold in its ore.

Quinton Hennigh and Akiko Levinson knew about the potential for exploration in Japan as they were building up ounces at the Springpole deposit in Ontario while running Gold Canyon Resources. Springpole developed into a resource of over 5 million ounces of gold before the company was acquired by First Mining Finance in 2015.

As part of the deal, Gold Canyon spun out a new company with Levinson at the helm. She and Hennigh had for years agreed that if they ever started a new company, it would focus on Japan. The new vehicle was their chance and Irving Resources (CSE:IRV) had its direction laid out from the get go.

As 2017 kicks off, Irving has a project portfolio with all the hallmarks investors like to see – multiple projects with high-grade gold and silver showings, sound infrastructure, and a friendly jurisdiction to work in. Combine these attributes with good share structure and a healthy treasury and the Irving story has become an investor favourite, its stock price rising over 600% in the past 12 months to around $0.90.

In November 2016, Irving raised just short of $6 million, with famed precious metals investor Eric Sprott personally providing the lead order. That leaves the company with over $7 million in the treasury, or to put it another way, all the financial runway it needs for well over a year to begin showing the world how rewarding precious metals exploration in Japan can be.

“We are one of very few exploration companies operating in Japan,” explains Hennigh. “We are building relationships in the country and it is a very pleasant place to work.”

Irving, though a local subsidiary, has thus far acquired three projects, all located on Japan’s northernmost island of Hokkaido. Each of the projects holds great promise from an exploration standpoint, but Omui is the one that excites Hennigh most at this early stage, and with good reason.

Chip sampling off float boulders on the property returned assay numbers the company termed “exceptional”. The assays included samples of 480 grams per tonne (g/t) gold and 9,660 g/t silver, 143.5 g/t gold and 2,090 g/t silver, and others of similar quality. Even the newcomer to investing in precious metals will recognize those grades as being virtually off the charts.

“Omui is a very high-grade epithermal vein system exposed at surface and there was limited mining there in the 1920s,” explains Hennigh. “We expanded our land position by filing for applications for additional tenements, and have also started to prospect beyond the historic Omui mining area.”

Importantly, the exploration team has also found Omui’s rock to contain silica, a common element accompanying veined precious metal deposits, and critical to ore processing in Japan. The early results indicate rock at Omui being very low in toxic elements such as arsenic and antimony as well, suggesting any deposit outlined at the project could yield ideal smelter feed for domestic refineries.

While Hennigh and Levinson will be spending quite a bit of time in Japan going forward, when not there they have teammates to rely on in the country who are second to none.

Hidetoshi Takaoka enjoyed a long career at Sumitomo Metal Mining, helping to explore the Hishikari deposit and sharing credit for finding and developing Alaska’s world class Pogo gold deposit. “I’d say Mr. Takaoka is Japan’s best known geologist,” says Hennigh.

Irving also considers itself fortunate to be working with Haruo Harada and Mitsui Mineral Development Engineering Co., Ltd. (MINDECO) for assistance with permitting applications and other work with specific engineering requirements.

Dr. Kuang Ine Lu, an Irving Resources director who earned a Ph. D in Economic Geology from the University of Tokyo, brings yet another experienced hand to evaluate projects and strategy based on years of local experience.

Longer term, the plan at Irving is to prove up deposits from which to sell smelter feed to domestic smelters.

Hennigh is quick to point out, though, that the company intends to move ahead in a methodical manner, so as to make the most of its financial resources and ensure the highest possible likelihood of ultimate success.

“We are looking to shore up our land positions in the next few months and then starting in May begin field work on the various projects,” says Hennigh. “Omui will be first, as it is our most advanced project and is giving us the best numbers. But we will explore Utanobori, Rubeshibe and possibly other projects we are considering with chip sampling, mapping, soil sampling and maybe some geophysics. This year will focus on refining targets and it will probably be 2018 when we are ready to get drills turning.”

Interestingly, Hennigh says that experienced drill teams are available in Japan not only owing to mineral exploration but also because resorts and energy projects drill to tap hot springs throughout the country. They use core drills primarily, which is exactly what Irving wants so that it can preserve layers of rock and assess veining at various depths in detail.

Shareholders will be happy to learn that the depths Irving envisions its targets at are not that daunting, with Hishikari’s deepest levels of 350m serving us a good indicator for a Japanese precious metals deposit.

And because of Japan’s size and advanced development, project accessibility is not an issue. “Most areas in Japan are accessible by road and we don’t have to walk more than half a kilometer to any of the sites,” says Hennigh.

The stars seem aligned to make 2017 an exciting year for Hennigh, Levinson and the rest of the Irving Resources team. With field work starting in a few months and early project showings nothing short of outstanding, the company is set to draw attention to a country whose potential for precious metals exploration has largely been overlooked.

This story was originally published at www.proactiveinvestors.com on Feb 27, 2017 and featured in The CSE Quarterly.

Learn more about Irving Resources Inc. at https://www.irvresources.com/ and on the CSE website at http://thecse.com/en/listings/mining/irving-resources-inc.

Mining for Movies: Virtual Reality booms for Imagination Park and its low-risk approach to Hollywood

In a world where corporations with big budgets toil night and day to eke out what often are mere single-digit profit margins, the idea of a company making modest, low-risk investments and generating swift returns of 1,000% or more seems fanciful. Such a company would have to operate in an innovative industry facing serious capacity constraints, and be one of the few groups holding the keys that unlock the potential to address them.

Well, meet Imagination Park (CSE:IP), a young company that actually is on such a path, working in a realm that over time is likely to touch each and every one of our lives…virtual reality (VR).

Imagination Park is home to a multi-talented team whose members have sold feature films, concepts, scripts and intellectual property to some of the largest entertainment studios in the world. It is a company that seems to have the business side of the industry figured out, pursuing a model that provides multiple chances to make exceptional returns while limiting financial risk to a minimum.

How do they do it? They follow the money.

“I am a film producer by trade and learned early on that the best money in film is not made in production or finance, but in intellectual property,” says Gabriel Napora, Imagination Park’s Chief Executive Officer. “Our mission is to create, option or purchase the most compelling intellectual property in the fields of film and VR.”

More on virtual reality in a moment, but to illustrate the power of ideas in the entertainment industry, consider a story Napora tells about one of his many successful projects. “Early in my career, I produced a project called Tetravaal with a young director on a budget of about $4,000. Tetravaal won the attention of the right people and ended up being the precursor to Chappie, which had a budget of around $70 million. But it all grew from an idea that originally cost only a few thousand dollars to produce.”

Imagination Park brings substantial heft to its projects thanks to a team whose members include two highly successful producers — Napora, plus Imagination Park President Tim Marlowe who was the Executive Producer for The Lady in Number 6, which won an Academy Award. Colin Wiebe, a creative entrepreneur, digital marketing expert and musician who toured with the likes of rock legend Randy Bachman chairs the board of directors, which also includes producer and ace talent scout Yas Taalat. The top execs oversee a technical group on the special effects and virtual reality fronts that is second to none. This is a company ready to leverage technical and cost advantages to compete in a large and rapidly growing market for the products and services in which it specializes with an emphasis on 360 degree, 3D virtual reality content.

“Netflix had a budget of around $6 billion last year, you can expect Amazon to match that or be higher, and HBO will have to do the same,” explains Wiebe. “With more and more people binge-watching on Netflix content gets consumed very quickly, so studios have to both be shooting around the clock plus looking outside their walls. But the fact is that there are only so many quality content producers around and only so many production facilities.”

Imagination Park takes advantage of this growing supply/demand imbalance not only by producing films and other content, but also with virtual reality services and more conventional production support.

It does this in a clever way from a financial perspective, structuring agreements so they pay on both the front and back ends. “In film, and to some degree virtual reality, the riskiest thing is financing. No matter how smart you are, nobody can guarantee that a film is going to make money,” says Napora.

“When we create, option or license intellectual property to present to major studios there is always an upfront fee paid by the studio before we go into production. In most cases, we also earn producer fees to move things forward. By the time the film goes into the world we have already made an exponential return, and if the film is successful we’ll make even more. So, our model is significantly less risky than one involved in actually financing films.”

In the next few months the world will get to see a series of Imagination Park projects, including a full-length feature film starring Danny Trejo, several virtual reality pieces, and a full-length documentary. “We are close to having around 18 projects either created, optioned or acquired on our basic slate for 2017,” says Wiebe.

A proof of concept is like a mini-trailer, but the intended audience is a studio or other entity who would purchase or financially support the idea. Imagination Park creates proof of concept packages for third-party filmmakers as well as for itself to market its own concepts developed internally. Napora’s Tetravaal production was a proof of concept.

“Looking back, I have been able to sell about 50% of the projects I have been involved in to major studios,” says Napora. “I am not saying we will sell half of everything we are involved in going forward, but even if we were to sell three or four we would be a very well-to-do company. If we are right on two or three projects and they turn into hits, we become a major Hollywood player.”

On the virtual reality side, Imagination Park has created content soon to be for sale in virtual reality stores. It will also work with advertising agencies, and with film studios that have a new title ready to go but need virtual reality content online to help excite potential moviegoers.

“Sales of virtual reality equipment have exceeded $1 billion and this is not even the beginning of the curve,” says Wiebe. “We are currently in discussions with some major corporations focused strictly on advertising. We have detailed proposals going out to major companies and see this as being the very start of something that will spark a huge wave of virtual reality service work for us.”

The modest investment philosophy extends to all corners of the company, with the chairman saying it is important to stay lean and mean. “Nobody is getting big salaries. Everything is performance-based and we have specific budgets for travel and projects.”

Virtual reality, proofs of concept, feature films and production work are enough to keep the Imagination Park team busy on its North American home turf, but China beckons as well. The Asian country is a huge and rapidly expanding market for feature films, and Napora happens to have both experience and connections there, plus an understanding of the types of concepts that sell to its unique audience.

“There are opportunities now that never existed in the past and they are there for the taking if you know the right people, have the right product, and have a team that can execute,” says Wiebe. “It is like mining for movies. But ours is a mining project where you know in advance that the value is there. All you have to do is go and get it. The skyrocketing virtual reality trend has been an added surprise discovery that luckily we’ve been way ahead of. ”

This story was originally published at www.proactiveinvestors.com on Nov 24, 2016 and featured in The CSE Quarterly.

Learn more about Imagination Park Entertainment Inc. at http://imaginationpark.com/ and on the CSE website at http://thecse.com/en/listings/diversified-industries/imagination-park-entertainment-inc.