The pace of change in technology is extraordinarily fast and, it seems, only getting faster. Ideas and technology that seemed to belong to the realm of science fiction are now very much on the cusp of becoming commercial realities. It is against this exciting backdrop that the latest edition of the CSE Quarterly is launching.
The growing constituency of tech issuers on the CSE, including those profiled in this edition of the CSE Quarterly, provide great examples of innovators leveraging technology to solve real-world problems and have global impact.
Featured in this special technology and innovation edition of the CSE Quarterly are:
It’s one thing to talk about ‘the next big thing’ but it’s another to actually meet the entrepreneurs and thought leaders making it happen.
This month, investors and technology enthusiasts will have the opportunity to attend the first-ever Extraordinary Future conference in Vancouver. Attendees will be able to meet and engage directly with companies working on a number of cutting edge technologies, including blockchain and cryptocurrency, artificial intelligence, virtual and augmented reality and more.
Produced by Cambridge House International and sponsored by the Canadian Securities Exchange, the Extraordinary Future conference aims to connect the vibrant entrepreneurial community of the West Coast with investors who are both curious and keen to stay on top of the latest developments in these fast-moving spaces.
Extraordinary Future: Highlights
One of the biggest attractions for this year’s conference is the opportunity to hear from the innovators defining the commercial landscape for some of the most talked-about ideas making headlines today.
Among the highlights of the show for the Canadian Securities Exchange will be the Technology & Finance panel discussion (taking place at 4:50pm). The CSE’s VP of Listings Development, James Black, will be moderating a group discussion between technology entrepreneurs and investment professionals including Jamie Brown – Vice Chairman, Managing Director Investment Banking at Canaccord Genuity; Tom Rossiter – CEO at RESAAS Services (CSE:RSS); Bill McGraw – Executive in Residence at Wavefront and Aimee Gagnon – VP Marketing & Co-Founder at Dojo Card.
With a mixture of panel discussions as well as company presentations, attendees will have the chance to discover what the entrepreneurs working in this space see as challenges and opportunities on the path to growth.
Another unique and highly-prized feature of the Extraordinary Future conference is the ability to meet directly with company management and executives. Going beyond being able to meet on the show floor, this conference enables individuals to schedule personal meetings with companies to ask in-depth questions of the company. In fact, via the conference registration software, companies and investors can coordinate meeting with one another.
According to Jay Martin, president of Cambridge House International, there is a palpable appetite in Vancouver for a technology show of this nature. One of the most compelling reasons is because growth stage companies are looking to raise capital. The launch of the Extraordinary Future conference offers entrepreneurs convenient access to a critical mass of well-establish brokerage firms and experienced deal-makers who can consult on options available to raising capital – including on how to do so by being public.
Building bridges for innovation
As the Exchange for Entrepreneurs, the CSE recognizes that accessing public capital is one strategy that has proven effective for companies looking to scale their growth. In addition to representatives from the CSE being present, there will also be a number of CSE-listed firms in attendance demonstrating that with the right exchange, the cost of raising capital can actually be competitive with other methods while providing the advantages associated with being public.
For growth stage companies working in such frontier opportunities, the path to going public requires working with partners with an expertise and appreciation for innovation. The CSE is no stranger to bold ideas, a fact borne out by their own revolutionary approach to the Canadian publicly listed marketplace.
In a recent interview, director of the Canadian Securities Exchange and renowned investor Thomas Caldwell stated:
“We felt access to public capital markets for up and coming Canadian entrepreneurs must be made simpler and less onerous. That does not mean less safeguards. The CSE’s collective mission is embodied in our byline “The Exchange for Entrepreneurs”. Our concern is exemplified in the fact that only a single digit number of new companies became public (IPOs) in Canada in 2016. Most were CSE listings.”
By focusing on what would enable entrepreneurs to succeed, including streamlining the listing process, the CSE is arguably the most entrepreneur friendly exchange in Canada. Their leadership and subsequent success in the commercial cannabis sector, is clear evidence of that.
James Black, VP of listings development at the CSE, also shared his thoughts on the upcoming conference stating: “the CSE is thrilled to be a founding sponsor of the Extraordinary Future Conference. We are excited at the prospect of growing this event into Vancouver’s premier technology investment show by focusing on the topics and themes that are going to dictate the future of our markets for years to come. Vancouver is building a reputation as a world-class tech centre.”
To that end, in addition to being a title sponsor of the event, the Canadian Securities Exchange is offering an exclusive discount code for the Extraordinary Future conference of 25% off the ticket price. Attendees can use code CSE25 during the ticket registration (available here) to receive the discount.
Looking forward to the future
Without question, technology will reshape the world in which we live. To realize its promise, however, ideas need to make the leap into products and services. For that to happen, there needs to be a well-functioning innovation ecosystem, one that brings together companies working on ‘the next big thing’ with those who wish to invest capital and resources to make it happen.
As the Exchange for Entrepreneurs, the CSE is actively working alongside great partners, investors and entrepreneurs at this conference to help ensure the future looks extraordinary.
For more information on the Extraordinary Future Conference, visit the conference website here. To follow the conference activities on Twitter, use the hashtag #XF2017.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
[Updated: 8/07/17] 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 7), 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 7: Brad Moore CEO: Global Cannabis Applications Corp. (CSE: APP)
Around the world, more and more governments are either moving toward legalizing medical marijuana or decriminalizing it altogether. In fact, the global cannabis market is expected to grow at a CAGR of 37.8 percent between 2016 and 2020.
With legislation pending in more than 40 nations, analysts are forecasting legal medical cannabis will become a multi-billion- dollar -per -year industry. GCAC is poised to profit from the growing global trend in medical cannabis regulation and can begin generating revenue faster than the licensed producers trying to break into the space. Global Cannabis Applications Corporation’s (GCAC) technology solutions under the Citizen Green brand are “dedicated to the digital world of all things medicinal cannabis.”
Many potential medical cannabis users in newly regulated markets such as Germany, Australia and Canada may have limited to no experience with cannabis.
Citizen Green mobile apps, CannaLife and Prescriptti , provide a bridge to knowledge and the support of an online community for medical cannabis users. These two solutions create a massive user-driven data solution, a unique opportunity for cannabis R&D.
GCAC’s ‘Pain To Strain’ model combines advanced algorithms, artificial intelligence (AI) and real time anecdotal user feedback to provide a highly valued user data set for licensed producers, practitioners, pharmacists and regulatory agencies. This information is instrumental for creating safe, effective products and programs for medical cannabis users.
As such unlike the plethora of overvalued licensed producers, the revenue model for a cannabis centric technology company is not tied down by a lengthy licensing process nor the heavy costs associated with acquiring land and building facilities. As the global consumer base of medical cannabis products grows so does the value of Global Cannabis Applications Corporation.
Week 6: Larry Bortles – Chairman of the Board, Canada House Wellness Group Inc. (CSE:CHV)
The landscape of the cannabis industry is rapidly changing and expanding, as this trend continues we see an industry consisting of a wide array of businesses that have different purposes and objectives.
Canada House places value on its overall objective that we believe should be applied across the industry, which is to not just focus on market-driven or monetary objectives but also a social responsibility regarding the reinstatement of cannabis as an alternative option to health ailments. Cannabis hasn’t been provided the opportunity to play the role it should in treatment that it did historically before experiencing disparagement and Canada House is helping in its reinstatement of being an acceptable form of treatment. We see this as a common trend within the industry. If we do this successfully we are on track to be successful in the industry ourselves and vanquish the incorrect reputation cannabis has received.
The subsidiaries of Canada House are formed for the best opportunity at success with our integrated services that have been established through a client-centered approach. Together, Marijuana for Trauma, Knalysis Technologies and Abba Medix provide a vertically-integrated platform to help our clients achieve health outcomes that were not previously attainable, an alternative from pharmaceutical cocktails. A client-centered multi-faceted approach based around the role that cannabis plays is a combination that we think the cannabis industry should embody as changes and expansion occur.
Week 5: Linda Sampson, CEO and Director, Marapharm Ventures Inc. (CSE:MDM)
Marapharm Ventures Inc. is a publicly traded company, primarily investing in the medical and recreational cannabis space, with operations based in British Columbia, Canada.
Through its wholly owned operating subsidiary Marapharm Inc., the Company has applied to Health Canada to become a licensed producer under the Access to Cannabis for Medical Purposes Regulations (ACMPR). Marapharm’s initial facility, a proposed 22,000 sq ft state-of-the-art cultivation facility, will be constructed on an 11 acre leased site in Kelowna, British Columbia.
The Company’s growth strategy will be to build facilities or acquire licenses in the United States, determined by identifying opportunities in the market. The company has currently focused its attention on opportunities in Nevada, Washington and California. Land has been purchased and construction has begun, In the Apex Business Park in the City of North Las Vegas, Nevada. The company’s intention is to build cultivation and processing facilities in this location, which will utilize two medical and recreational cultivation licenses and one medical processing license. In Washington State, the Company has an opportunity to lease a facility to an I-502, tier 3 license holder. The licensee holds a production license for 30,000 sq ft and a processing license with unlimited potential. In California, we have commenced the purchase of two industrial properties and own a delivery service for medical cannabis.
Marapharm has also purchased and is developing an all-natural hemp oil based cosmetic line called, Maragold, which will be ready for market within a few months. The products created by Maragold will be marketed online directly to end-users and will be sold individually or by subscription.
Week 4: Benjamin Ward, CEO of Maricann Group Inc (CSE:MARI)
As the CEO of Maricann Group Inc., I have been setting the stage for our entrance into the European medical marijuana market for many years. In 2014, we identified Germany as a potential gateway into Europe and secured a facility in Dresden.
Early this year, when German parliamentarians voted unanimously to legalize cannabis based medicines and opened up an estimated 800,000 patient market, we obtained $42,500,000 in non-dilutive, debt-free financing to begin the Dresden facility expansion.
Currently, there are only a handful of Canadian producers who export marijuana, but with the country running out of legal marijuana to supply both medical and – soon – recreational users, exporting is becoming increasingly hazardous to the domestic market.
It has also became apparent that eventually countries will seek to trap the industry’s economic opportunities while alleviating downside risk for regulators in product safety and close their borders to imports. When this happens, only companies with boots on the ground will have a place in the market.
For these reasons, we have chosen not to export our products from Canada and instead produce in Europe to exclusively supply European patients.
Maricann is entering Europe equipped with a German operational team, including the former head of production and manufacturing for Bayer. The company has also carefully selected an Advisory Board of well-respected German-based medical professionals in research, healthcare and business.
We are slated to produce 40,000 kilograms of cannabis per year inside the new 150,000 square foot GMP-compliant, clean-room cultivation facility. With the potential for 820,000 square feet, we can increase production and scale capabilities in Europe’s largest market for medical cannabis.
It is our aggressive global expansion efforts paired with our market leading technological extraction and product formulation differentiation that has positioned Maricann to be leaders in the European and Canadian medical market.
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?
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.
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.
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 firstname.lastname@example.org 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.
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.
There’s no denying that since 2014 the cannabis industry has increasingly grown a following with investors and, of late, mainstream media and conservative business service providers.
In this special edition of the CSE Quarterly, six CSE-listed companies operating in the rapidly evolving cannabis space are profiled. These firms, and the entrepreneurs behind them, showcase the diversity of opportunities and challenges facing an industry that is still in its earliest stages.
Featured in this special edition of the CSE Quarterly are:
As many seasoned mining professionals know, two of the key ingredients to survive the often-harsh world of mining and exploration are hope and enthusiasm. At this year’s PDAC conference in Toronto, however, there was something more in the air – a feeling that has been missing for some time – excitement.
Despite political uncertainties at the start of the year, prices for commodities and precious metals have rebounded enough compared to last year to give the mining and investment communities many more reasons to smile and, most importantly, to make deals. And it appears that deals are happening. In the fourth quarter of 2016, for example, CSE-listed companies in the mining sector managed to raise over $30 million signaling that deal flow, while modest, is improved over the same point a year prior for junior and small cap companies.
With the PDAC typically drawing in well over 20,000 delegates (this year they pulled in 24,000), hundreds of exhibitors and dozens of sessions and networking opportunities, it’s not enough to walk the walk – to get the most out of this show, companies and investors must also talk the talk.
In recognition of how important (and daunting) the PDAC can be for small cap mining firms looking to raise capital or for investors trying to navigate opportunities, the CSE, along with several like-minded event partners and sponsors, sought to help by putting the right ingredients in place to enable entrepreneurs and investors to have a positive PDAC experience.
PreDAC: Building Connections Early
Whether it’s polishing a pitch or simply mastering the subtle art of balancing finger foods, a drink and a conversation with an industry colleague, networking with the right people at the right time makes all the difference to an entrepreneur. Of course, it helps to get a head start.
To that end, the CSE along with its event partners, aimed to help PDAC attendees – as well as those who might not be able to attend the convention itself – connect with one another at two pre-PDAC sessions, known as PreDAC, in Toronto and Vancouver.
In each case, not only was there a solid turnout, but attendees were genuinely excited to connect and discuss the industry and outlook for the near term ahead of the whirlwind that is the PDAC. Based on the level of interest and enthusiasm with attendees of these events, PreDAC sessions were on point in getting folks in top form for PDAC 2017.
In Toronto, PreDAC was held at the fun East Thirty-Six resto-bar. Co-hosted by OCI Group, the session included insightful presentations from Dr. Francis Manns, Consultant & Independent Geologist; Krystal Ramsden, Mining Analyst at Extract Capital; Peter Campbell, Investment Banker at OCI Inc; Lawrence Devon Smith, Consulting Engineer; and Katherine Fedorowicz, VP Marketing & Investor Relations at Red Cloud, Klondike Strike Inc. To view more images from PreDAC Toronto, check out the Facebook album here.
PreDAC Vancouver took place at event co-host Clark Wilson LLP’s scenic downtown offices. Joe Mazumdar, Analyst and Co-Editor at Exploration Insights and Matt Zabloski, Founder and Lead Portfolio Manager of Delbrook Capital, provided attendees with their perspectives on what to look at when evaluating a mining company as well as the investment landscape for natural resources respectively. To view more images from PreDAC Vancouver, check out the Facebook album here.
Following the presentations at both the Toronto and Vancouver events, attendees enjoyed networking opportunities, appies and drinks with industry peers, investment professionals and others during the networking session.
The CSE at PDAC 2017
PDAC is always a busy but this year was busier than most for the Canadian Securities Exchange. In addition to exhibiting at the Investor’s Exchange, the CSE hosted the increasingly popular PDAC Investor Luncheon, launched a special edition of the CSE Quarterly and co-sponsored an evening networking reception. All this in addition to the many meetings with investors, entrepreneurs and other industry professionals in and around the convention.
PDAC Investor Luncheon
The PDAC Investor Luncheon continued its growth in both attendance and popularity again in 2017, making it a must-attend event for those interested in the CSE as well as companies listed on the CSE.
In addition to a delicious buffet, attendees were treated to quick pitch-style presentations from several CSE-listed company executives, as well as a keynote special presentation on raising capital in the US by guest speakers Kenneth Sam from Dorsey Whitney LLP and Chris King from OTC Markets Group.
On the exhibition floor, the infamous CSE booth and lectern made their return to the PDAC. With a larger crowd at this year’s show, there was a noticeable bump in traffic to the CSE booth. In addition to the exchange itself, the CSE was also well represented around the convention floor with nine CSE-listed companies exhibiting.
It wasn’t all work at the PDAC. CSE team along with friends from MNP LLP and Aird & Berlis LLP got together at Taverna Mercatto to celebrate another successful PDAC. This event, like many others around the show, was also busy and offered up the chance to recount stories of the day and to make plans for future meetings.
Recipe for Success
PDAC 2017 was undeniably great for the CSE as well as for CSE-listed issuers and the growing number of investors who are interested in the Exchange for Entrepreneurs.
As this world-class event continues to grow, so too does the importance of getting the most out of the time spent at the show. Judging by the response from industry experts, investment community professionals and investors who attended the CSE’s events, the extra support these activities provided might just be the extra ingredient needed to stay a step ahead.
The Special PDAC Edition of the CSE Quarterly is Now Live!
As the world’s leading mining conference, the PDAC is a great example of how truly global the mining industry is.
This special issue of the CSE Quarterly profiles several CSE-listed mining and exploration companies on their global journey to seeking out interesting projects from Montana to Mongolia and many points in between.
In addition to the profiles and update on the CSE provided by CEO, Richard Carleton, this edition of the CSE Quarterly contains some new features.
First, a “Company Snapshot” has been embedded at the end of each article providing a more well-rounded view of the company as an investment opportunity. Second, the Quarterly now more clearly identifies companies who also trade in the US on one of the OTC Markets tiers.
Featured in this special PDAC edition of the Quarterly are:
Many junior and small cap companies have seen a resurgence in market caps as well as investor confidence. For public companies and their shareholders, however, one recurring question is – does where a security is listed make a difference to either the degree to which it will trade (i.e. liquidity) or to the amount of money that it can raise?
Based on data detailing financing and trading activity on Canada’s most popular small/junior cap exchanges, the TSX Venture and the Canadian Securities Exchange, the answer appears to be a resounding no.
Starting first with capital raised, the following table summarizes the amount of money raised as a proportion of the total market cap of the exchange on both the TSX Venture Exchange and the Canadian Securities Exchange in January and December of 2016. This metric provides a measure of effectiveness for a particular company at raising capital relative to its market value.
Table 1: Capital raised divided by market capitalization of CSE and TSX Venture listed securities
TSX Venture Listed
While January 2016 was a tough month for small cap entities raising capital, December 2016 was much better. For CSE listed companies, the dollars raised in December 2016 as a portion of the total market cap worked out to be 2.85% – more than double the 1.14% for TSX Venture listed companies.
Despite external market conditions, in both December and January of 2016, CSE listed companies were able to raise a greater percentage of their market capitalization from investors than TSX Venture listed companies were. This implies that investors were more interested in the deals taking place on the CSE rather those on the TSX Venture.
In terms of liquidity, data once again demonstrates that where securities are listed does not appear to determine whether or not investors wish to trade in those particular securities.
As shown in the following table, for both December 2016 and January 2017, the aggregate trading value divided by the total market cap was about two percentage points higher for CSE listed companies than those listed on the TSX Venture.
Table 2: Trading value divided by market capitalization of CSE and TSX Venture listed securities
TSX Venture Listed
Clearly, the perception that trading is more liquid or that companies are more readily financed if a company is listed on a larger exchange is not borne out by the data. Although a fraction of the size of the TSX Venture, the relative outperformance of the Canadian Securities Exchange shows that ultimately it is the companies and their respective investors that drive interest in deals and liquidity.
Nevertheless, as awareness of the choice available to publicly listed securities in Canada improves, factors such as total value to shareholders will become the more important benchmark for publicly-listed companies to consider when evaluating which venue to list on. As trading, financing and listing data have shown, however, an increasing number of companies and their shareholders are being rewarded for listing on the CSE.
With trading volume, capital raised and listings on the CSE achieving their highest levels in the exchange’s 13-year history, the Exchange for Entrepreneurs continues to prove that small-cap companies, as well as those who invest in them, benefit from having real choice in the Canadian securities landscape.
And, while the numbers themselves are impressive, the numerous examples of continuous innovation this past year at the CSE demonstrate why they are committed to making 2017 even better.
Strength in Numbers
From a trading perspective, 2016 was the best year on record for the CSE. Order flow came through at 6.4B shares worth a total value of over $1.5B – the highest amount ever since launching in 2003 and a 159% increase over 2015. In addition to the secondary market, investors were also interested in directly funding CSE listed companies. CSE-listed companies participated in 364 deals raising over $400 million in 2016.
While these figures are a great endorsement of companies being able to raise capital on the CSE, the bigger win for companies as well as their investors is that more of that capital could be used for their own growth plans rather than go towards the ‘middlemen’. As shown in the image below, unlike competitor exchanges, the CSE does not take a percentage of the funds raised which means more money in the hands of entrepreneurs as well as their shareholders. For additional information on why companies are choosing to list on the CSE, click here.
On the listings front, the CSE saw a record high number of listed securities in the summer of 2016, reaching 328. In addition, the CSE’s commitment to innovation meant that, despite a relatively challenging IPO market, five companies elected to go public on the CSE and 38 listings joined the exchange in 2016. The CSE saw the composition of securities listed on the exchange shift to include firms participating in emerging industries like drone transportation, fintech as well as medical marijuana.
Finally, with regards to performance, the CSE Composite Index, a benchmark of performance of the CSE, finished 16.1% higher compared to 2015 and the 103 firms (as of December 19th) that constitute the index had a collective market cap of over $2.3B.
The Value of a Handshake
Part of what has contributed to this record-breaking year has been a consistent focus on the entrepreneurs, companies and investors that choose to work with the CSE. Despite the realities of operating in an increasingly digital world, the CSE made a concerted effort to reach out in person to entrepreneurs and investors across the globe.
From coast to coast across Canada, as well as throughout the US, Europe and even as far away as Mongolia, the CSE team members attended, sponsored or hosted over 40 events throughout the year. In those travels and conversations with many entrepreneurs, it was abundantly clear that modern capital markets are global in nature and that the CSE has an increasingly global reach. Many of the chronicles of the CSE team’s travels from 2016 can be found on the CSE Facebook page here.
Another important outcome of talking to entrepreneurs in person was the discovery that many of them were curious to understand the requirements and realities of taking a company public. As a result, this past year marked the launch of the first ‘Going Public’ boot camps in 2016.
These one day workshops were held in Vancouver and Toronto and brought together capital markets professionals and entrepreneurs for an intensive and informative session on what it takes to succeed as a growing company.
Both sessions were met with an overwhelmingly positive response, indicating that, regardless of what stage they may be at with their respective businesses, entrepreneurs value learning about the path to going public. For those who missed it, recordings from the Vancouver session are available on the CSE YouTube channel here.
Committed to Innovating
Capital markets are rapidly evolving and becoming increasingly reliant on technology to power all parts of the capital formation ecosystem. In 2016, the CSE implemented a number of enhancements to the overall technology infrastructure that helped pave the way for expansion and improved service delivery.
In April of 2016, the CSE rolled out its newly designed responsive website. Rebuilt from the ground up, this new website streamlined the user experience to enable visitors from screen size to access data on the CSE as well as the companies listed on it. In addition to the design and layout changes, the addition of integration with social media, such as Twitter, enabled website users to stay updated on the latest developments and activities at the Exchange for Entrepreneurs.
Another important development to the CSE’s digital evolution in 2016 was the increased focus on digital communication, specifically across social media.
A photo posted by Canadian Securities Exchange (@canadiansecuritiesexchange) on
The CSE added another digital channel, Instagram, into its stable of digital social media channels. Over the past year, followers of the CSE as well as listed issuers and investors were able to get an increasingly detailed view of the work of the CSE as well as exclusive access to what goes on behind the scenes at the Exchange for Entrepreneurs.
Finally, one of the big technology projects of 2016 was the rollout of a new trading engine that improved performance, decreased latency as well as enhanced stability all the while consuming less resources than the previous system.
Looking Forward to 2017
With such a strong performance in 2016, the bar has been set high for 2017. While it is difficult to predict exactly what the year ahead will bring, the CSE will continue to stick to its winning formula of putting entrepreneurs first, committing to innovation and providing real value to public markets.