Tag Archives: cse issuer stories

Canamex Gold: Gold-backed tokens start this company’s cryptocurrency revolution

Cryptocurrencies remain a hot topic in financial markets in the opening quarter of 2018, and Canamex Gold Corp. (CSQ) is moving to become the first company to issue a crypto-token backed by gold, and from its own project in Nevada no less.  The team is also looking at working with other companies in or near production to help them finance with crypto-token gold and silver royalty streams, instead of traditional debt and/or equity financing.

It is a new concept and takes some explaining, but the potential to eliminate further dilution for equity holders and create new models for valuation is both vast and fascinating.  Canamex Gold Corp. Chief Executive Officer David Vincent recently gave Proactive Investors a look inside this new funding paradigm.

Canamex Gold Corp. is literally taking currency back onto a gold standard with the introduction of its gold-backed token with an offering currently underway.  We’ll get to your pioneering business structure in just a moment, but first, the Bruner gold project underlies the token.  Tell us about Bruner and the plans there.

We’ve got Bruner to the stage where we need to complete the engineering studies, the environmental permitting and then we should essentially be at the Preliminary Feasibility Study stage, for a mine financing decision.  We hope to be at that point around the fourth quarter of this year.  At that time, we will make a funding decision to construct the operation.

The intention is to use the crypto-token model as the funding mechanism for the mine construction, which means it would be a non-dilutive financing for shareholders.  So instead of doing a traditional equity and/or debt financing, we’ll be doing a crypto-token financing, backed by a gold royalty stream off the project

It’s a win-win situation for shareholders and for token holders.  Token holders will be buying the tokens at a significant discount to the spot gold price, and the tokens will be tradeable on the Ethereum blockchain, potentially at a significant premium to their issue price, including a speculative premium that we can’t define until it’s actually trading.

This is a pioneering concept and has not been done by anyone else to my knowledge.  Where did the idea come from?

It came from looking at gold streaming royalty models, which traditionally is an agreement between two parties: one is the project owner and the other is the royalty buyer.  Royalty buyers include such companies as Franco Nevada, Silver Wheaton Precious Metals and Royal Gold.

Our concept is to take a gold royalty on the Bruner property, which has a small portion of the PEA defined resource, and tokenize it.  Instead of the royalty being purchased by one party, it is purchased by many parties who hold the tokens and these will then have liquidity on the Ethereum blockchain.

You announced an offering earlier this month for US$5 million.  Are you at liberty to give us some insight on how that is going?

It is going very well.  There is a lot of interest, particularly out of the United States and Europe.  We are receiving application forms and cheques.  We’ll keep the private placement offering open until the full amount is raised and then launch a pre-ITO (Initial Token Offering) on the back of it.

The advantage of coming in on the token offering now is that the buyers get a priority allocation into the pre-ITO  at a discount.

For those new to the cryptocurrency world and the concept of this offering, can you walk us through the steps?  An investor commits to the current private placement offering and you are talking about an ITO.  How do the two fit together?

They are similar in many respects.  The current private placement offering is more of a traditional financing mechanism under the current regulations and instead of being issued gold royalty crypto-tokens they will be issued a gold royalty token certificate.  The names and details will be held in a register.  Then the difference with the ITO is that the certificates can be converted to crypto-tokens at a price discount into the pre-ITO, and then they become tradeable on the Ethereum blockchain.  And at that point the tokens have liquidity.

So, chronologically, you close the offering and then there is an ITO.  What happens next, and what will you use the proceeds for?

The intention is to close the offering and go into pre-ITO, which would be priced accordingly and dependent on the spot price of gold at the time.  But again, the pre-ITO offer price will be at a significant discount to the spot price.  Looking at the monthly price chart of gold it appears very bullish.  We expect that the price of gold could be over $1,400 an ounce in two or three months, then it means the pre-ITO price would be higher than the current private placement offering.  Perhaps 10% higher.  So, coming in now has distinct early mover advantages.

The funds from the private placement and pre-ITO will be used to fund the company for the balance of this year to get to the mine financing stage in Q4.  We may not do the main ITO until the third quarter.  The advantage is that by that time we will know what the speculative premium is for these tokens on the blockchain, and then we can price the tokens according to the market price, and not the spot gold price.  If there is a significant speculative premium the price of the tokens in the ITO won’t be anywhere near the levels we are offering in this private placement.  Investors coming into the current placement are coming in at what could prove to be a very low price.

The work you have done on the token to date affords you rights to do this for other asset owners, does it not?

Correct.  We are looking at a number of possible business models.  We might set up a subsidiary newco, for example, that becomes like a royalty company and it raises capital via crypto-token issues.  It might have a number of royalty streams in North America and other safe jurisdictions and the capital raised to purchase those royalties would be via crypto-token issues, backed by the gold and silver royalty streams.

We’ve already deployed six exclusive token names on Ethereum.  They have been deployed but not issued yet.  So, we could use those tokens to fund additional royalties in the future through a royalty aggregation model.

You are also a highly respected technical analyst of financial markets.  What do you see for gold, and why?

I look at long-wave analysis and currently we are in what is called a fifth K-wave, which is a Kondratieff wave.  K-waves last 60 years, so we are on the fifth one of the last 300 years.  This wave should peak in 2027, which is where I expect this current gold bull cycle to start topping out.  We should see a mid-cycle correction in 2023.  I suspect the price will move up toward the previous high of around $1,900 over the next five years, correct and then in the last part of the cycle into 2027 move much higher than $1,900.  Basically, a full-on bull market. The fifth wave of the fifth K wave, which should generate a big move higher.

And if you look at the fundamental background it is not good.  Interest rates have been too low for too long and there is lots of debt out there, much of which will not be paid back, so defaults are on the horizon.  Interest rates thus rise because of a global debt default scenario, where lenders demand a higher interest rate risk premium.  What’s this going to do to the gold price?

And silver is even more undervalued than gold.  Silver has greater leverage to the upside.  You could see Canamex launch a silver crypto-token before long, again using a royalty streaming model.

Aside from Bruner, are there any projects in the Canamex portfolio investors should be aware of?

We have the Silverton gold exploration project.  It has similar geology to Newmont’s Long Canyon in Nevada.  Long Canyon is a dolomite breccia.  Our geologist Greg Hahn, who has built three mines in his career, thinks Silverton has tremendous upside and part of the money raised in this placement will be used for an initial drill program on the Silverton project.

Any other insights from the intersection of cryptocurrencies and hard assets before we bring our discussion to a close?

Just that I think we have tremendous value inherent in Canamex Gold Corp.  We have three pillars to the business model: the Bruner gold development project, the Silverton gold exploration project and the cryptocurrency model for funding.  Based on our updated Preliminary Economic Assessment, which came out in January 2018, the net present value (NPV) at the current gold price of Bruner is about $1.60 per share, using the current shares on issue.  The stock trades at around $0.20, or an 88% discount to NPV.  Where are you going to find better value than this in the market?

This story was originally published at www.proactiveinvestors.com on March 6, 2018 and featured in The Public Entrepreneur.

Learn more about Canamex Gold Corp. at https://canamexgold.com/ and on the CSE website at http://thecse.com/en/listings/mining/canamex-gold-corp.

Interview with John Belfontaine from Phivida

Earlier this year, Peter Murray of Kiyoi Communications, sat down to interview the CEO of Phivida Holdings Inc. (CSE:VIDA), John Belfontaine, to discuss how the company was launched, what the drivers were behind going public, where Phivida sees opportunities in the cannabis space and more. Scroll down to read the full interview.

Peter Murray (PM) Talk to us about the genesis of Phivida.  How did you choose your focus with the CBD-infused consumables market still in its infancy?  And as you built the company, what measures did you take to establish the right corporate culture?

John Belfontaine (JB) We have an interesting origin story.  We began as a wholesale company that would broker CBD (cannabidiol) hemp oil from a European supplier to packaged goods companies and fell in love with the idea of creating a whole-plant nutraceutical company, taking our base oils and putting them into packaged goods both for the mass market and the professional clinical market.

Our team consists of consumer packaged goods experts, so it was natural to transition to that type of company from the wholesale realm.  We then renamed the company Phivida and created a three-division structure.  Phivida Organics continues the wholesale, Phivida Nutrition creates functional foods and natural health products that incorporate CBD using a non-encapsulated CBD hemp oil, and Phivida Enhanced is for professional clinical grade products.

As we built the company, we wanted to never lose the spirit of health and wellness – our slogan is Health and Wellness and Harmony.  We have a philosophy of goodwill and benevolence and want to maintain and never lose our original intention, which is to help patients.

We are a company of doctors, a company of functional food and natural health product specialists, and nutritionists.  We want to always keep the focus of Phivida’s direction on bettering the lives of our patients and giving practitioners the tools they need to give their patients a product which will help in their everyday lives.

As a result, we developed a platform called Phivida Families which focuses on education, research and sponsorship.  It underpins our education efforts and marketing for all products.  Every single one of our executives and operational personnel and partners subscribes to that goodwill community-based spirit.

As an example, we launched a subsidy program where families with children under 18 or parents over 65 with a diagnosed disorder can receive free product if they share their experience with us.

And a key reason we were able to assemble such a strong team is that we all have a story where cannabinoids have helped a loved one.  This affects us personally and makes it more than an individual pursuit – it’s a crusade.  And really being part of a paradigm shift, a shift away from pharmacology and back to our roots of traditional plant medicine.  Nothing heals like Mother Nature.

(PM) Tell us about your products and how you differentiate them and the brand now and into the future as the momentum of legalization draws new players into the hemp/cannabis marketplace.

(JB) Phivida has a strategic portfolio of full-spectrum CBD hemp oil extract-based products.  Phivida’s nutrition line focuses on preventative health, using functional foods and natural health products as a vehicle to prevent hospitalization and reduce chronic inflammation for everyday consumers and active individuals.  Phivida Enhanced, on the other hand, creates clinical grade products for professional practitioners.

In terms of our key differentiators, the first is quality standards.  We have dedicated ourselves to GMP (Good Manufacturing Practices).  All of our products are quality and safety tested, both at the batch level and finished stage.  All ingredients are premium, certified organic ingredients.  We try to adhere to a no-sugar-added approach, and if there is packaging better than what we are using we will adopt it.  So, we are looking to develop a product that is the most professional, premium quality product in the industry – the global golden benchmark for quality standards.

Ours is still a cottage industry and not all manufacturers hold themselves to the high standards we are used to.  We apply Health Canada-based standards to a US-operated company with no real regulation.  So, the quality assurance is where we set ourselves apart.

Beyond that we use a special technology with our products called encapsulation.  We use both micro and nano-encapsulation.  Encapsulation simply means that cannabinoids, which we derive from hemp, are lipid-based – they are a fat.  And fats are not soluble in water, but when you encapsulate these molecules on a nano-molecular level, we create a polymer shell around each molecule and it protects that it as it is ingested orally, into your gastro intestinal tract.

The benefit is that the product becomes soluble, so we can put it into a functional beverage format which creates ease of use and a more enjoyable delivery method.

But more importantly, encapsulated cannabinoids are faster acting and longer lasting.  They bypass first-pass metabolism and have a higher uptake into the bloodstream.  They penetrate the blood-brain barrier at a rate up to 600% higher than normal.  So, you receive five to six times the medicine for the same price at a higher quality standard.  That is the Phivida promise – that we give you more medicine, more value, and the highest quality products in the marketplace.

(PM) Tell us about a few products in detail.

(JB) In the consumer line we have created a holistic mind-body-soul line of CBD-infused vitamin juices, and these target certain conditions – from cognition to the immune system to moods.

Phivida Protect is an immunity booster that has a high level of antioxidant and anti-inflammatories.  Phivida Relax brings down anxiety and induces healthy sleep.  That would be the most popular in terms of where our distributors are demanding product for consumers.  And the products are all vegan-based.

On the clinical side, our hard cap pills have a special blend for muscle, bone and joint placement.  We put cannabidiol in with MSM chondroitin and glucosamine to repair and rebuild muscle tissues, which is ideal for patients with osteoporosis or those going into a later stage of their life with deterioration from chronic inflammation.

Those are our two flagship products at this point.  But we are really focused on innovation and building our portfolio of SKUs.  We are at about 30 now and see product innovation as a key component of our long-term growth.

(PM) Discuss your experience dealing with investors in a private setting, and then during your effort to go public.

(JB) We are extremely fortunate to have a strong, sophisticated and well-connected shareholder base.  Our shareholders are the who’s who of the cannabis industry.  Our go-public round could not have gone better.  We facilitated the go-public strategy through a long-form prospectus offering, which is not the fastest or easiest way to go public.  But we feel the hard way is sometimes the right way.

You save dilution by not doing a reverse takeover with an existing public vehicle.  And we were beholden to a higher level of disclosure, which we welcome because we know we have done our homework, we have a strong business plan, a strong team, and our business model is contrarian to the typical cannabis story you see.

We owe a lot to our investment bankers.  We were led by Canaccord Genuity in a syndicated offering with Mackie Research and Haywood Securities, and they did an excellent job of stewarding our story into the retail marketplace.  But we also owe a lot to our key strategic advisors, John Di Girolamo at Liberty North Capital, as well as Donato Sferra and Mark Attanasio, principals of Hillcrest Merchant Partners, who were responsible for leading us through the capital markets strategy and navigating us through proper transaction structuring.

(PM) You opted for the Initial Public Offering route to go public.  What business objectives did you hope to achieve by listing on a securities exchange?

(JB) We debated internally whether to stay private or look to access the capital markets through a public transaction.  We decided at the end of the day that the needs of the shareholders are paramount.  We were able to structure a transaction that would be beneficial and minimize equity dilution in the company.  That would add value for shareholders, and from a business perspective that is the primary concern.

We chose the go-public route to capitalize the company with a minimum of dilution, and we were fortunate to open our IPO at an ideal time.  We opened it days after the World Anti-Doping Agency (WADA) removed CBD from schedule, allowing it to be used by athletes for the first time in the history of competitive sports.  And shortly after, the World Health Organization (WHO) released a report that said CBDs were not only safe and nontoxic and non-psychoactive, but in fact medicinal.

We received so much interest from the institutional investment community that we had 300% to 400% more demand than we were able to take.  We closed the IPO in a matter of days with gross proceeds of $5.75 million.

(PM) In selecting a marketplace to list the company, what stood out about the CSE? What was your experience during the application process, and how have your first few weeks on the exchange been?

(JB) There was only one option for us to list, and that was the CSE.  The Canadian Securities Exchange really caters to the entrepreneur, and that is the spirit of what Phivida is.  The CSE values innovation.  We are a biotech/food and drug company that is about nurturing new ideas and developing new markets based on innovation and product development and concept development, so the CSE was the perfect platform for us.

Our experience listing on the CSE was seamless.  From the service level through the application process through assisting in understanding filing and regulatory requirements.  And immediate response.  When we began trading it was, I understand, the highest volume trading day in the history of the exchange.  Even so, their service was uninterrupted – it was the utmost professionalism and we were extremely impressed and satisfied with the experience and highly recommend it to other private companies.

(PM) The stock market has been reacting well to hemp stories for a couple of years now, but you took your time and built the company privately before making the move to go public.  Talk to us about that strategy.  What advice would you have for companies considering a public listing?

(JB) I believe the timing we chose to launch our IPO was ideal.  Had we considered opening our IPO this time last year I don’t think the markets were as strong.  As we enter 2018 you see major market catalysts.  We saw the WADA announcement.  We saw the WHO put out their positive report.  We also saw Constellation Brands purchase 9.9% of Canopy Growth, the largest cannabis company in the world, to get into the cannabinoid-infused functional beverage market, which we’d been operating in and developing for several years.  So that validated our business model.

And I feel the timing was ideal in terms of how we launched and stewarded and properly educated the marketplace on the offering.

(PM) Talk about the team you assembled around the company to prepare for going public.

(JB) That was plenty of discussion as to whether we wanted to take on a public listing or keep the company private.  But we were fortunate in the sense that we were able to build a public company support team we felt comfortable could navigate the requirements and do a public offering.

First and foremost, our back office and bringing on Carmelo Marelli and DSA who were our corporate secretary.  Our legal counsel, by adding Peter Simeon, a partner at law firm Gowlings WLG, to the board gave us strong legal counsel and a national presence at one of the largest law firms in the country, specialized in publicly traded companies.  And on business advisory, adding Bill Ciprick, Senior Vice President of Business Development at the Business Development Bank of Canada.  He is another component of good corporate governance, which is critical to the development of a young public company.  Good governance, we think, is lacking in the Canadian capital marketplace and we really encourage that approach.

And in terms of having leadership on consumer packaged goods, adding Jim Bailey, former President of Red Bull Canada, to our board gave us strength and vision on how to develop a functional beverage product.  He understands that we are not an adrenaline-based function but a health and wellness function, yet the same model fits.

And on top of this, we have a tremendously strong clinical scientific team plus, again, a team of directors who have done it before in terms of building both natural health product-based consumer packaged goods offerings as well as food and beverage.

(PM) Looking at the industry landscape, how big can your sector get and where are the best opportunities?  What must participants be aware of from a legal perspective?  Are there challenges to selling product in the United States?

(JB) Phivida has the opportunity to expand globally, and we anticipate being a globally recognized brand and setting the gold standard in CBD hemp oil-infused products in coming years.  We’ve already signed agreements into Asia, expanding our reach into the Japanese market, which is one of the largest nutraceutical-buying markets in the world.  We will continue to pursue new opportunities and markets in North America, Europe, South America, and Asia.

In fact, in the first two weeks of 2018 we have announced a licensing deal in Oregon that opens access to an additional 500 locations for us, and a Global Digital Reseller-Supply Agreement that expands our online reach into Germany and Australia.  And those come on top of the Japan agreement I just mentioned, which we announced January 5.

In the United States, we are excited to be covered by section 7606 of the Federal Farm Bill.  We source our product through farms that receive permits from the state-level departments of agriculture.  We are a federally compliant product which gives us an advantage to be sold as a functional food.  This is unique in the cannabis/hemp space and should be recognized and celebrated.

We recognize and support medical cannabis companies, but we are THC-free – all the medicine, none of the side effects.  And because we focused on hemp-derived full-spectrum oils, it gives us the opportunity to penetrate mainstream markets such as grocery stores and naturopathic clinics.

(PM) What makes Phivida attractive for investors at its current market value and stage of corporate development?

(JB) Phivida is in a rapid growth phase in its corporate development life cycle.  This is a very interesting time for investors to hear the story.  Our comparables in the marketplace have huge valuation multiples compared to where we are.  When we were at a pre-money valuation we were around $10 million market capitalization at the IPO level, and our closest comparable, Isodiol, was at $450 or $500 million market capitalization.  So, we were very undervalued compared to our closest comparable.

We are a growing company with huge potential for acquisitions of new technologies as well as capturing leading share in new markets.  California, Washington, Oregon, Colorado – across the western United States is our foothold, but we have new partnerships globally and we continue to pursue development of globally distributed brands.  As a result, this is a great time for investors to look at a rapid growth company which is well managed with premium quality products that is extremely well structured – fewer than 45 million shares outstanding with almost $8 million cash and no debt.  Management, offering, structure and financial health – we stack up well.

MGX Minerals acquires zinc air battery developer ZincNyx Energy Solutions Inc.

Jared Lazerson, chief executive of MGX Minerals Inc (CSE:XMG, OTCQB:MGXMF), tells Proactive they’ve furthered their reach into the emerging energy space with the acquisition of ZincNyx Energy Solutions Inc.

Canadian group ZincNyx Energy Solutions has developed a modular energy storage system (ESS) designed for energy storage in the 5 kW to 1 MW range for extended periods..

Its technology consists of three main systems each using zinc and air to store energy in the form of zinc particles.

This story was originally published at www.proactiveinvestors.com on December 15, 2017 authored by Andrew Scott and featured in The Public Entrepreneur.

Learn more about MGX Minerals Inc. at https://www.mgxminerals.com/ and on the CSE website at http://thecse.com/en/listings/mining/mgx-minerals-inc.

International Cobalt strategy takes shape following $10mln financing

International Cobalt Corp. (CSE:CO) focuses on primary cobalt projects, and while it has a couple of good land packages under its control in Idaho, a recently closed $10 million financing means the company now has the wherewithal to consider additions to its portfolio as well.  Chief Executive Officer Tim Johnson explains the outlook for cobalt, why supply constraints are here to stay, and how International Cobalt is positioning itself to take advantage of the favourable supply/demand environment.

What outlook for the cobalt market do you hold at International Cobalt and how does that shape your strategy in terms of project acquisition and allocating human and capital resources?

We think prices will remain strong both near term and long term.  Basically, we just cannot see anything on the horizon that’s really going to change the amount of cobalt coming on line.  In December 2017, Glencore announced it was going to double their production in the DRC (Democratic Republic of the Congo) and there was no effect on the market whatsoever.  As long as the battery space stays strong, we think cobalt will stay strong.

This environment really puts us into acquisition mode – we are actively looking for new projects in the space.  Exploration in the cobalt space is not very mature at all, and there are going to be a lot of discoveries and news releases from various companies over the next few years.  We want to be right in the middle of the mix.

Walk us through the components of your project portfolio.  What has you the most excited and what work is upcoming?

We’ve got two projects in the Idaho Cobalt Belt and we bracket eCobalt Solutions’ advanced project.  Although there has been a fair amount of historic work done on our landholdings, the majority of it by Noranda in the 1980s, our team has not really had boots on the ground yet except for a site visit.

We anticipate doing a full geological work-up on both projects, to include extensive soiling and mapping.  I’d say half of our Blackbird project has not been mapped geologically.

So, we are excited to get to work on the projects and because there are many companies in the belt, including us, there is going to be a lot more exploration.  It is a world class belt as far as cobalt goes, so you are going to see lots of news coming out of it.

You mentioned that you are in acquisition mode.  What types of additional projects would appeal to you, and how do you assess them?

We are looking for primary cobalt.  We are not as interested in nickel secondary cobalt or silver secondary cobalt.  Primary cobalt projects are few and far between and we are doing a lot of digging to find good ones, looking mostly in North America.  We have feelers out in Africa as well, but any acquisitions we make in the near term are likely to be North American.

Cobalt really is an underexplored mineral.  It is not like the molybdenum days of the early 2000s, when once moly started to rise in price everyone had a near-term moly mine.  A lot of work will be needed to bring supply on line.

Does that mean most of the projects are early stage?

Right now, most of the cobalt supply is from secondary sources such as nickel and copper.  There hasn’t really been a focus on looking for primary cobalt projects, so anything you find is quite early stage.  It is not like you are going to find something that was almost a mine and didn’t make it because of prices and now it is coming back up.  And if you do find that it is most likely in the DRC.  You know anything you get into is going to be a long-term project and you’ll have to structure your efforts to support that.

The financial markets are supporting mining exploration companies once again.  What observations do you have on the current health of the market, and particularly with regard to the cobalt space?

Cobalt is definitely popular.  There are a lot of financial professionals we have talked to who would like to get in on the space, but there are limited opportunities to do so.  It has to do with the maturity of the exploration cycle – there really aren’t a lot of high-quality projects out there and the price of cobalt does not seem to be going down.  Any decent projects have high valuations, and those are the projects the money is looking for.

What kind of timeline are you giving interested parties in terms of the work you have planned.  And are you only interested in projects you can own 100%?

We are open to looking at other opportunities, whether it be joint ventures or strategic investment.  Because we are an early entrant into the Idaho space you kind of wait to see how things shake out.  I think the belt will potentially see consolidation, as there are some smaller players getting good results but there are no majors there yet.  Once some of the juniors have more success the majors will come knocking.

Cobalt is hot and there are lots of entities jockeying for position.  Are they mostly Canadian companies or are some from other jurisdictions?

There are a few Australian companies in the space, and money is coming out of Australia as well.  We got some backing out of Australia and other companies we have seen did as well.  Some groups that had success in the DRC are starting to look for safer jurisdictions.

How are you going to pay for the acquisitions and work on the project portfolio?

We recently closed a $10mln financing.  Our plan is that the new capital would support at least two years of exploration.  We are talking all of our ground proofing this summer, a potential initial drill program in the fall, followed by another drill program in 2019.  That is the plan with our existing assets, so things could change, of course, if we completed acquisitions.

International cobalt has enjoyed a good start to 2018 in the markets and on the corporate front.  Is there anything else you’d like to comment on?

Just that we are very happy with our land position in the Idaho Cobalt Belt.  The historic data we are turning up is proving our theory right.  There are new reports being made available by the Idaho Geological Survey all the time and each time we find one we get excited again.  Most of the work is by Noranda so we have high confidence in its quality and really want to get boots on the ground and follow up on everything.

This story was originally published at www.proactiveinvestors.com on March 2, 2018 and featured in The Public Entrepreneur.

Learn more about International Cobalt Corp. at http://internationalcobalt.com/ and on the CSE website at http://thecse.com/en/listings/mining/international-cobalt-corp.

Global UAV Technologies: Pure play drone sector exposure with earnings just starting to take off

The main revenue-producing component of Global UAV is its services division, consisting mainly of photogrammetry and geophysical surveying, but it offers a full-service package in the field of unmanned aerial vehicles (UAVs)

Global UAV Technologies (CSE:UAV) is one of the few listed operators in the fast-growing field of unmanned aerial vehicles (UAVs).

Formed just more than a year ago, Global UAV has quickly merged complementary businesses, allowing it to be a “one-stop shop” for those requiring UAV – or “drone”, if you prefer – services and for those who want to offer their own drone services.

The group has been assembled quickly through acquisition. The focus has been on buying companies with proven technologies that provide cash flow. As a result, unlike many nascent technology companies, it is already earning revenues, including a modest profit in the third quarter of 2017.

Admittedly, those revenue and profit numbers are small at the moment, as might be expected of a company capitalised at less than C$20mln. With revenues rising rapidly and a high-margin business model, however, there is every reason to believe the stock is readying for take-off.

Using drones to provide information on the physical properties of a land mass
One of the group’s subsidiaries, Pioneer Aerial Surveys, is the industry leader in drone geophysics and field operations.

In simple English, the company’s drone service can provide information on the physical properties of a land area. This service is a more cost-effective operation than manned surveys and can reach places a manned aircraft or ground crews would find hard to access.

Pioneer Aerial’s UAV-MAG surveys are in high demand from mineral exploration and mining companies worldwide.

In a similar vein, Global UAV’s other services subsidiary, High-Eye Aerial Imaging, provides low altitude, high definition, LiDAR (light detection and ranging), aerial surveying, photography, videography and other aerial mapping services.

Again, mining companies are keen on this stuff, but so too are the construction, engineering and agriculture industries, to name a few.

The company manufactures its own drones
The company uses its own drones, designed and manufactured by its NOVAerial Robotics division.

Its flagship Procyon 800E helicopter is used by international customers and is considered one of the best UAVs in its class. The single-rotor helicopter style design of the Procyon provides higher payload capacities and longer flight times than a typical commercial-grade multi-rotor UAV.

As a small progressive company that keeps abreast of industry trends, Global UAV president James Rogers thinks their products and services will keep them “ahead of the pack.”

The company also has a division, UAV Regulatory Services, which provides an online service called Easy SFOC.

This service assists clients with the preparation of special flight operation certificates (SFOCs). These certificates are required for the operation of recreational and commercial drones in Canada.

“It can be a fairly complex process to apply for that [an SFOC], so UAV Regulatory essentially offers a consultancy service to consumers who are interested in starting their own business. We can guide them through the regulatory requirements to help them get their licenses,” explained Michael Burns, CEO of Global UAV.

Together, these four businesses within Global UAV provide a fully integrated profile of manufacturing, services and regulatory compliance unique to the UAV industry and its customers.

“Right now, the main revenue-producing component of Global UAV is our services division, consisting mainly of photogrammetry and geophysical surveying,” Burns explained.

“The geophysical surveying services have been very lucrative for us. We have been the leader in this commercially since 2014 when we really brought this technology to market. We set ourselves up as a commercial supplier of the UAV-MAG services through Pioneer Aerial,” Burns continued.

“We’re able to offer to our customers either a full-service package, where they can hire us to come and do the work, or we can also do a sale. If a customer would like to purchase the equipment and get set up as a user, we can sell them a drone, train the customer and set them up with all the regulatory framework.” Burns added that it is a very attractive model for small companies.

The top line is heading higher – rapidly
A chart of quarter-by-quarter sales for Global UAV shows the sort of vertical take-off one might expect from the company’s drones.

In the first quarter (the three months to January 31), sales were C$22,386; in the second quarter they soared to C$181,204, and in the third, they rose to C$333,529.

The third quarter – to the end of July – saw the company move into the black, with net income of C$154,956.

A NOVAerial drone typically sells for US$30,000 to US$40,000. Therefore, the company does not exactly need the manufacturing clout of General Motors to keep that top line moving north at a rate of knots, especially as a high-margin business that gets the bottom line heading in the right direction as well.

According to auditing and consulting services provider PwC, “the drone revolution is disrupting industries ranging from agriculture to film-making”.

PwC values the emerging global market for business services at US$127bn, with infrastructure (US$45.2bn) and agriculture (US$32.4bn) the two biggest markets, while mining, where Global UAV is already strong, is valued at US$4.3bn.

In conclusion, the market opportunity is enormous. As James Rogers observed, however, North America is not awash with listed pure-play UAV companies, with big names such as Facebook, Google, Amazon and Boeing certainly having their fingers in the pie.

“Global UAV offers a ground floor entry opportunity to get into the drone sector.”

This story was originally published at www.proactiveinvestors.com on March 2, 2018 and featured in The Public Entrepreneur.

Learn more about Global UAV Technologies at https://www.globaluavtech.com/ and on the CSE website at http://thecse.com/en/listings/technology/global-uav-technologies-ltd.

Bunker Hill Mining: One of America’s most historic mines is ready for a comeback

Mining investment is back in a big way if the first quarter of 2018 is any indication, and it’s helping set the stage for one of the largest and most storied mines in the United States to finally come back onstream – the Bunker Hill Mine in Idaho’s Coeur d’Alene Mining District.

Seasoned mining industry observers won’t be surprised to learn that the man behind the project is Bruce Reid, Chief Executive Officer of Bunker Hill Mining (CSE:BNKR). Reid has acquired, worked on and sold six mines in his career, five of which are currently in production (number six is slated to begin producing in 2020 or 2021). Bunker Hill will make seven and mark the culmination of an effort ongoing for over two decades.

“I tried twice in the last 20 years to get Bunker Hill but wasn’t able,” Reid explains. “When the largest shareholder of what has become Bunker Hill Mining asked me to lead his company, I told him, ‘Go get the Bunker.’”

Sure enough, he got it, although the deal originally agreed with the heirs of the long-time owner was re-written in August 2017, shortly after Bunker Hill Mining began trading on the CSE.

The Bunker Hill mine went into production in the mid-1880s and remained in operation until 1981. For many years early in its life it was said to be one of the largest mines in the world.

“Bunker Hill leads the way as one of the most important mines ever in American history,” says Reid. “It produced over 35 million tons of high-grade lead-zinc, about 8.5% lead, 4.5% zinc and 2 to 3 ounces of silver. When it closed it had resources and reserves of over 60 million tons, or almost twice what had been mined.

“Collectively, it has about 9 million tons of 5.5% to 6% zinc, 2% lead and a little more than an ounce of silver left in stopes that are already open and not flooded.”

That is a major amount of rock waiting to be harvested, and the cost of getting the mine back up and running is far from astronomical. Just US$15mln would re-launch operations at 1,000 tons per day, and scaling up to 3,000 tons per day, as plans call for within two years, could make Bunker Hill the largest lead-zinc-silver mine in the United States outside of the gigantic Red Dog mine in Alaska, according to Reid.

Why, then, if all that ore is just sitting there has the mine remained inactive for so long? The owner at the time proved hard to convince and the US Environmental Protection Agency (EPA) was heavily involved as well, running a wastewater treatment facility onsite to deal with acidic effluent. While the Mine itself was not involved, the associated lead-zinc smelter caused significant pollution in the entire Silver Valley and the district was the site of a billion dollar cleanup through the EPA Superfund. That is mostly completed now as the Valley is in much better condition.

The deal now in place with the mine owners is a 24-month lease under which the project can be purchased for US$25mln over 10 years. Another US$20mln would go to the EPA, this amount a partial acknowledgement of costs accumulated for clean-up over the years. An operating Bunker Hill Mine would also pay the EPA $1 million per year to continue operating the wastewater plant.

“The EPA has proven to be a good partner — they are reasonable,” says Reid. “People want to see the mine back in production for a number of reasons, one of them being jobs. But also, this mine, if left alone, will only get more troublesome as parts internally break and water starts leaking from different areas. If it’s in production, however, we’d have the cash flow and earnings to build up the closure bond, and to take care of many longer term problematic areas.

Reid is not only a formally trained geologist, but also a former analyst and successful investment banker. He thus has detailed insight into the metals markets Bunker Hill would once again serve.

“Zinc is in a deficit in terms of the raw metal,” Reid explains. “We are still losing production even with the price being up, and some mines that have been dragged back into production are running out of ore. The zinc concentrate market is even tighter – it looks like concentrate could be in deficit for another three years.”

And while one might think the omnipresent talk about future battery technologies would undermine the lead market, Reid says it is “amazing” how tight the lead concentrate market is right now.

Details regarding the path to production for Bunker Hill are still to be decided but could entail initially toll milling (utilising another entity’s mill), although ultimately the company will want to build its own mill plant.

“My estimate is that starting the mine utilising a toll milling arrangement is estimated to be about $10 million including working capital,” explains Reid. “I’m in active discussions with a number of financiers and toll milling partners and we hope to be in production in 2018. The longer term goal, though, is to build our own expandable process plant right on site, which is also part of the Patented Land package involving the entire Bunker Hill Mine site.”

It is an amazingly near-term timeline for a small company that began trading less than a year ago, but given the Bunker Hill Mine’s size, grade and favourable jurisdiction, plus the strength of Reid and his team of local professionals, the market is buying in, having taken the company’s share price as high as $3.15 since its debut.

Also amazing to observers who know how the financial markets work is that Reid, his team and that the one large shareholder have put their shares into a voting trust and none of the shares can be sold until there is a change of control, which is another way to say that Reid must sell the entire company for the insiders to ever realise on their share positions. We’re talking approximately 15 million shares out of the company’s 33 million outstanding.

That lock-up suits Reid just fine. He knows he has a monster by the tail and his track record suggests that few people could be better at finding a buyer when the time comes.

“This is one of the most important lead-zinc resources in the Americas that is not producing currently,” Reid concludes. “And then once we put it into production we’ll follow up with a drill programme to beef up reserves and resources. Bunker Hill is a big one. It will outlast us all.”

This story was originally published at www.proactiveinvestors.com on March 5, 2018 and featured in The Public Entrepreneur.

Learn more about Bunker Hill Mining Corp. at http://www.bunkerhillmining.com/ and on the CSE website at http://thecse.com/en/listings/mining/bunker-hill-mining-corp.

Liberty Health Sciences making high-quality medical cannabis available one state at a time

Around a third of all Florida residents, or some 6 million people, could qualify to use medical cannabis, so there’s good reason for the Sunshine State to be the initial focus for Liberty Health Sciences (CSE:LHS).

“Florida is one of the most populated states in the U.S., but it also offers quite a diverse amount of chronic medical conditions that doctors can prescribe cannabis for,” says George Scorsis, Liberty’s chief executive officer.

At present, the state has just over 36,000 patients registered for medical cannabis, after a 300% rise in registrations in the past quarter.  Liberty is one of only 13 companies licenced to cultivate, process and dispense it by the state government.

Research suggests Florida could be a US$1.6bln medical cannabis market by the end of the decade.  In other words, it has the potential to eclipse Colorado, a pioneering state in legalizing cannabis, as the latter is forecast to be worth US$1.5bln by then.

As we reach the fourth quarter of 2017, 29 states and the District of Columbia have legalized the use of cannabis in some form.  Last year provided something of a tipping point, with five additional states, including Florida, approving medical cannabis use, while states such as California and Nevada also approved the drug for recreational consumption.

At a federal level the market is a greyer shade of green – the state by state legalization does not equate to national legalization, and businesses thus cannot operate across state lines. In other words, each state has its own regulations and within each state businesses must establish internal production and distribution channels.

As a result, Liberty’s strategy is to enter specific state markets and embed their entire verticals within those states. Scorsis highlights the importance of Liberty’s approach to growing its business, where Florida is the initial focus, and new ventures in other states are in the pipeline.  Discipline is a particularly important tenet of the strategy.

“First and foremost, we will only enter into medical markets. There are now a tremendous number of markets that allow medical cannabis, such as Florida, Ohio, Pennsylvania, Maryland and Connecticut, with more on the horizon,” says Scorsis.

“We plan to enter into all of those markets if they follow through with the second criteria in our business strategy, which is the number of chronic conditions that the states permit for medical cannabis treatment.”

Scorsis points out that in Florida, for example, more than 30% of the population could qualify to become a medical cannabis patient.  Meanwhile, in Ohio that figure is around 24%.

Moreover, there are some 3mln potentially qualifying patients in Pennsylvania, equating to 24% of the state’s population, while in Maryland the figure is 1.8mln patients or 30% of the population.   Connecticut is estimated at 20%, or 736,000 people.

Conversely, Scorsis notes that in New York State the medical cannabis program is too “narrow” to meet the company’s investment criteria.

Liberty is targeting states with both large populations and large numbers of qualifying patients not only with revenue in mind, but also cost – producing at a certain scale is a necessity to meet the business objectives in a given market.

“We need to ensure that we can provide what truly differentiates us from all our competition,” Scorsis explains.  “We are experienced commercial greenhouse growers and can produce the lowest cost, highest quality cannabis in the marketplace.  That means we can supply it to the patient at a more accessible price than anybody else in the industry.  We don’t enter into markets that have canopy restrictions because we would like to grow at scales in excess of 100,000 sq. ft.”

With such major ambitions it is nice not to be going it alone, and in this respect, Liberty benefits from the support of successful licensed Canadian cannabis producer Aphria.  That C$1.3bln company owns 36% of Liberty and provides both licenced products and operational expertise.

Notably, since adopting Aphria’s licensed production techniques, Liberty has increased output by about 15%.

Liberty’s current footprint in Florida comprises a 14,000 sq. ft. growing operation on a 36-acre property in Alachua County.  Production capacity is approximately 700kg of cannabis per year.

By March 2018, Liberty aims to be growing 3,000kg per year as it ramps up to 56,000 sq. ft. of growing space.  Over the following years, Liberty expects to be at 13,000kg and an intended 187,000 sq. ft. of room for growing.

Retail outlets are also part of the plan, and before the end of 2017 the company anticipates having dispensaries open in Fort Lauderdale, Miami and Tampa.  Locations are planned for Orlando, Tallahassee and Pensacola by June.

With anticipated annual production of 13,000kg and an increased retail footprint, Liberty would be supplying the equivalent of 20,000 patients.

The opening of mass market consumer states like California (where the new legal framework officially comes into effect in January) will hold strong appeal for cannabis companies and their investors.

But Scorsis definitively sees Liberty as a medical cannabis company, with specific competitive advantages.

“Medical cannabis is who we are.  It’s the ethos of our organization,” Scorsis emphasizes.

“We truly believe that cannabis is a product that should be used for medical purposes.  Our intellectual property, our knowhow and the equipment that we have invested in are really designed to produce products for medical purposes.”

“For instance, not only do we produce the highest quality cannabis at the lowest cost, we inspect our products over 500 times before they are released to any patient.  Why?  Because it is medicine.”

This story was originally published at www.proactiveinvestors.com on December 20, 2017 and featured in The CSE Quarterly.

Learn more about Liberty Health Sciences Inc. at https://libertyhealthsciences.com/ and on the CSE website at http://thecse.com/en/listings/life-sciences/liberty-health-sciences-inc.

Exro Technologies applies new twist to enhance electricity generation

Exro Technologies Inc (CSE:XRO) has developed a technology to enhance an invention that has served mankind remarkably for more than 150 years.

Exro’s dynamic power management technology enables electric generators and motors to work at peak efficiency, even at variable speeds.

Why is that important?

As Exro’s chairman and chief executive officer Mark Godsy explains, electric generators only work efficiently at a single speed, and “if they go too fast, it’s a challenge; if they go too slow, it’s also a challenge.”

For scores of years this has not been a problem because generators have used an energy source – coal, diesel, or gas – that allows the rotating part of the generator to remain at, and operate at, a consistent and optimum speed and torque, but the increasing push towards renewable energy is changing the game.

Exro’s technology adds some smarts to a generator and an electric motor

Mother Nature may be bountiful, but she is not constant, and if you don’t believe it, think of those seemingly paradoxical reports of wind turbine generators shutting down because it is too windy.

“What we do at Exro is, very simply, bring Intelligence to a generator and an electric motor,” Godsy says.

So, what’s the big twist on the ancient technology?

The traditional generator works off a single configuration of coiled copper wires, whereas Exro’s does not.

“We isolate all of the coils. We then create circuits amongst them, driven by a computer that, depending on the speed and torque, will reconfigure the coils in the generator for exactly the right speed and torque, creating an efficient and “Intelligent” generator,” Godsy explains.

The technology was invented by Jonathan Ritchey, Exro’s founder and its chief scientist and designer.

Optimizing power systems is becoming more important in the current economy.

“The problem does not apply only for renewables,” Ritchey declares.

Take electric motors. These are essentially the flip-side of electric generators, and the same conundrum applies: getting the motor to work at maximum efficiency at variable rotational speeds.

“These are the technical issues that Exro is addressing,” Ritchey asserts.

Ritchey sees a lot of applications for Exro’s technology in the high-profile sector of electric and electric-hybrid vehicles.

“Put in our technology and it will allow you to have a situation where we not only gather more electricity when you are braking but that electricity does more for you when you are converting it back into mechanical energy,” Ritchey says.

The potential breadth of applications for the technology is enormous, but initially, Exro is targeting proof of concept in wind energy, unmanned aerial vehicles (drones) and electric/hybrid vehicles starting with electric bicycles.

The company has built three prototypes to prove its technology’s viability and is now focusing on early market opportunities.

In a capital-intensive, low-margin business, those sorts of efficiency improvements are sure to make wind farm operators sit up and take notice. Exro’s technology can also be used to retrofit existing wind turbines.

As for drones, these will become more efficient, paving the way for smaller drones or bigger payloads, and potentially longer flying times.

Exro has already signed a development agreement with a leading supplier of propulsion systems for drones and is working towards validating the technology for this application.

As for electric/hybrid vehicles, reduced electricity consumption and greater power regeneration when braking could significantly reduce the range anxiety for drivers.

The Exro business model envisages income from licensing fees and royalties

The name of the game for Exro is to prioritize near-term market opportunities with low execution risk.

A key aspect of this strategy calls for securing partnerships with leading companies who have their own design and manufacturing facilities and distribution channels.

Exro’s revenues will largely come from licensing fees and ongoing royalties, in return for allowing the use of its technology to be integrated into generators or electric motors.

“The reason for a licensing/royalty model is to achieve scale and create concurrent value for our shareholders. Our proprietary technology has the potential of creating intelligence in billions of electric rotating machines — be it in generators or electric motors. If we were to do an elevator a day just for the approximate 17 Western European countries, it would take us over 1,000 years,” Godsy explains.

“We need to work synergistically with parties in this space by working with them, not competing against them.

“We want to work with all companies that can benefit from our technology – not unlike Intel wants to provide processors to all computers versus creating its own computer brand and competing with them – working with companies is a much better long-term strategy since our technology is easily integrated into generators and motors,” he adds.

If that sounds like the semi-fabled “win-win” scenario, there’s actually a third “win” to be taken into consideration and that’s the environmental aspect.

It was one of the things that drew serial entrepreneur Godsy to Exro in the first place.

“I was attracted to Exro as I am concerned as much now about the health of our planet as I am about the health of people. Exro has an opportunity to change the way we create and use energy, which can help our planet and reduce the other related issues connected to energy. The win-win here also includes the opportunity to build value for our shareholders,” Godsy says.

Company founder Ritchey believes the drive to a clean power world will eventually come down to economics.

In other words, the bottom line will be the bottom line or, if you prefer, it will happen because “torque is cheap”.

“So, if we’re able to make that economically viable now, it’s not a carrot and the whip; it’s not the subsidies, the tax credits; it’s because it is also the best financial decision.”

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

Learn more about Exro Technologies Inc. at http://www.exro.com/ and on the CSE website at http://thecse.com/en/listings/technology/exro-technologies-inc.

DOJA Cannabis building value quickly with artisanal quality, expert branding

If there is one thing that Trent Kitsch ingrained in himself while building SAXX Underwear into a multi-million-dollar company, it was the value of a brand.

SAXX entered the men’s underwear market with an innovative line of undergarments sold online at higher than average prices and margins.  The premium quality appealed to plenty of men who were willing to pay a little extra to take care of their bodies, with clothing they felt was made with more care and attention than they could find elsewhere.

It is precisely this approach that Kitsch and his team at DOJA Cannabis Co. (CSE:DOJA) intend to follow in building their newest venture: a collection of cannabis and lifestyle products created with  meticulous care.

“Our background is building brands in the fashion and wine worlds,” says the DOJA CEO, who founded not only SAXX Underwear but also award-winning Kitsch Wines.

“DOJA is a brand built around the uncompromising quality of its product.  We do things differently than most of our peers in how we cultivate, hand-trim and cure the cannabis we grow.”

Kitsch explains that hand-trimming retains the look of the flower better than the more popular approach of machine-trimming, while keeping more of the terpenoids and other desirable components machines tend to rustle off.  Rather than removing buds from plants the moment harvesting begins, DOJA hang-dries and cures its product on the stalk.  “You get a better finish that way,” says Kitsch.  “It brings out superior flavors, trichomes and aromas.”

DOJA is headquartered in British Columbia’s picturesque Okanagan Valley.  With 2mln visitors that come to the region each year, the company plans on leveraging the vibrant tourism market to build a far-reaching brand.

The company also believes it will soon have the opportunity to show the rest of Canada the difference its artisanal approach makes.

DOJA received its license to cultivate under Canada’s ACMPR (Access to Cannabis for Medical Purposes Regulations) framework on June 16 of this year.

Soon after the first harvests, a request to Health Canada for a Pre-Sales License Inspection was submitted.  The inspection is the final step ahead of the government issuing DOJA a Sales License under the ACMPR.

With license in hand, DOJA’s primary distribution channel would be online sales direct to the customer.

“Channel two will depend on how the provincial governments announce their planned sales structures,” says Kitsch, alluding to the expected legalization of cannabis in 2018.  “We are hoping some of the provinces see opportunities similar to those in the wine industry or agriculture tourism and that some of those channels open up to us.”

DOJA is planning for its products to be very popular, having already invested in a second growing facility that will expand its overall production capacity by more than 700% to just over 5,000kg of dried cannabis per year.  The new 22,580 sq. ft. Future Lab facility, located close to the Kelowna International Airport and the University of British Columbia’s Okanagan Campus, will be home to DOJA’s research into new and unique cannabis strains, processing, as well as exploration of the edible and oil extract markets.

The proximity of the Future Lab to the airport will not only reduce both cost and time required for delivery but the 60,000 travelers who traverse the road in front of the facility each day will be exposed to the DOJA brand on their commute.  Estimates around permitting and construction time have DOJA intending to open the Future Lab in the summer of 2018.

There is one other DOJA initiative helping to create awareness around the brand and the various aspects of cannabis. The DOJA Culture Café in downtown Kelowna will act as a hub for cannabis information within the community.  Here, customers can have a coffee or a meal, while also learning how to access and use cannabis safely, depending on their particular needs.

DOJA, whose shares began trading on the CSE on August 9 of this year, is well capitalized to execute on the first phase build-out of the Future Lab.  Plans also call for borrowing against their newly acquired facility to further bolster the company’s working capital position.

When asked about the outlook for DOJA, Kitsch responded, “The sky is the limit.  Our brands and unique advantages will differentiate us from the pack, and in one to three years I could see us being acquired by a larger company who wants to have a B.C. footprint and a premium lifestyle brand in their portfolio.”

Near term, though, Kitsch believes the investment community would do well to keep some potential share price catalysts in mind.

“Once we receive our sales license I would say we’d be quite undervalued at our current share price and there would be a strong investment thesis for DOJA on a relative valuation basis,” says Kitsch.  “Ahead of legalization, I think positive sentiment will continue to pick up and an increasing number of people will start to see cannabis as a viable investment opportunity.”

This story was originally published at www.proactiveinvestors.com on December 6, 2017 and featured in The CSE Quarterly.

Learn more about DOJA Cannabis Company Limited at https://doja.life/ and on the CSE website at http://thecse.com/en/listings/life-sciences/doja-cannabis-company-limited.

Ortho Regenerative looks to prevent surgery by turbocharging joint recovery process

Innovation is oftentimes the result of people approaching a problem from an angle that others haven’t considered.  That’s precisely what the team at Ortho Regenerative Technologies (CSE:ORTH) is doing as it tackles some of the world’s most common surgeries – tendon, meniscus and cartilage repairs in shoulders, knees and other joints.

Chief Executive Officer Brent Norton explains that the long-term result of removing damaged cartilage or meniscus is about the same as not having any procedure performed at all.  Similarly, studies show that shoulder tendon repairs fail at an alarming rate.  Missing its natural elasticity and shock absorber, a joint can deteriorate to the point that arthritis sets in, and if things get bad enough movement is very limited and full joint replacement often becomes necessary.

Ortho’s technology is all about leaving these soft tissues in place and treating them so they repair themselves.

“Long term, if we can treat injury versus treating the complications of the injury, that’s the better way,” says Norton.  “The opportunity is to heal the soft tissues, and the result is that we no longer treat complications such as pain and arthritis, have people miss work and be inactive, nor have to bear the expense of introducing an artificial joint.”

Tendons, cartilage and meniscus are close to the last in line to receive blood supply in our bodies and are relatively avascular, meaning they have few blood vessels. The bottom line is that because blood gets little chance to bring revitalization to these body parts, they do not heal well and thus need assistance.

There are medicines that promote healing in tendons and meniscus but they have to remain in contact with them for a meaningful period of time.  Not only do joints naturally involve internal motion, they also contain lubricants, which usher medicines away from the locations that need them.

Ortho’s solution is to apply what in industry parlance is called a scaffold to hold the medicine in place long enough for it to work.  Essentially, it is a special compound made from a naturally occurring protein that a surgical team mixes with a patient’s blood to ensure efficient delivery.

The scaffold will remain in place for several weeks before naturally dissolving, but in the meantime it ensures the medicine is hard at work on the body part that needs to heal.

“Years ago, when we took pills we took them several times a day,” says Norton in drawing an analogy.  “Then someone invented the sustained release formulation, which allowed you to take a pill only once or twice a day because it was sustained release.  It is a similar principle.”

The technology was borne of studies conducted by two of the world’s most prominent researchers in soft tissue repair: PhDs Michael Buschmann and Caroline Hoeman.  Their initial scaffold for joints had promise, but it took 30 or more minutes to prepare for use when the patient was in the operating room, a factor reducing efficiency and contributing to it being cost-prohibitive.

Norton is a medical doctor himself who practiced largely in the field of sports medicine.  Early on, though, he knew that he wanted to mix actual practice with directing innovation to have the greatest impact.  “I decided to do an MBA at Western University because I wanted to be a driver of technology rather than a clinician seeing one patient at a time,” he says.

Norton’s career path would lead him to be that driver in several corporate settings, including with Novadaq Technologies, a medical imaging solutions company acquired in 2017 by Stryker Corp.

“With Novadaq, at times I felt like I was the coach, and was a founding director,” says Norton. “I helped with strategy, building the shareholder base, the board, hiring a professional CEO, recruiting the investment banks to take it public, and ultimately helping to lay down the strategy to get third-party validation and revenues.  We created multiple partnerships, got FDA approval and a TSX listing and then it went on to have a Nasdaq listing and was sold to Stryker for C$900 million.”

All of which, including the chance to return to his career starting point in Montreal, would seem to make Norton a good fit at Ortho.  “When I took this role, I got messages from friends and colleagues saying ‘right back to your roots’.  It is more than coincidental, it’s optimal,” he observes.

Ortho’s product performed well in pre-clinical studies and is now in the final stages of animal studies, with expectations that it will move to human trials in 2018.

Given that Ortho’s product is in the biologic category, the first step with human studies requires the company to prove that it is safe to use, something Norton expects the product to achieve with ease.

The second study in a biologic is the main study, or pivotal trial, which regulatory bodies use as the basis for their effectiveness assessment.  The pivotal trial would likely begin within two years from now.  After that the company would apply for FDA (US Federal Drug Administration) approval.

But that timeline hardly means investors will be left without milestones to cheer on in the near future.  When asked, Norton lays out a pretty full slate.

“This is the first fully patented product of its type in the world and we have an evolving patent family for it,” Norton explains.  “Over the next year we expect to see patents issued around much of the world for this product.”

“Key studies have also been accepted for publication in multiple scientific peer reviewed journals.”  Norton says this means that some of the images and information on the product will take center stage in the related scientific community.

“In my experience, having five papers in the queue to be published is something I have never heard of,” he says.  “In the next short while we will have multiple papers and studies published, and we can anticipate our approval to begin human studies, which typically drives a lot of corporate value.”

Norton emphasizes that it is up to the researchers to assess whether a product works, whereas management’s role at a biotech company is to minimize other risks and drive the strategy.  He points to responsibilities such as making use of capable intellectual property firms, bringing in skilled accountants and hiring an experienced management team.

“In Ortho’s case, the risk profile of getting through to a pivotal trial is nominal,” Norton concludes.  “You can never guarantee biology or the ultimate results, but our goal is to optimize the process in the most cost-effective manner to get through to an FDA approval in the next three to four years.  We are managing the company to reduce the risk of everything else, so that the only thing we are betting on is the results.”

This story was originally published at www.proactiveinvestors.com on December 7, 2017 and featured in The CSE Quarterly.

Learn more about Ortho Regenerative Technologies Inc. at http://www.orthorti.com/ and on the CSE website at http://thecse.com/en/listings/life-sciences/ortho-regenerative-technologies-inc.