Tag Archives: cse issuer stories

Torino Power Solutions nears turning point with unique approach for better power grid efficiency

There are more than a few companies worldwide selling equipment to monitor the transmission lines that deliver power to our offices and homes, but none has products like Torino Power Solutions (CNSX:TPS). It should come as little surprise, then, that Torino CEO Rav Mlait speaks excitedly about the company’s outlook, fully understanding, as he does, the clever technology that makes its products so unique.

Before getting to that technology, however, a revealing story about the electricity we use every day is in order.

Power transmission is not nearly as efficient as the general public might think. From the time electricity leaves a power plant to the time it reaches its end user, it is common for somewhere between 6% and 15% of the power to be lost, and many estimates reach even higher. The losses occur for a variety of reasons.

One of these is that the company managing the transmission system needs to make sure its power lines don’t run too hot. Not only can excessive heat damage equipment along the transmission pathway, but when lines get too hot they can damage power lines that are very expensive to install and maintain.

So, how do many electrical utilities gauge the temperature of their lines to optimize the amount of power flowing through at any given time? Would you believe by referring to historical weather pattern charts and ambient temperature readings?

Despite the imprecision inherent in such an approach, Mlait confirms that the practice is common. Now, what if the utility were able to know what the temperature actually was along different sections of a long transmission system such that it did not have to underutilize its infrastructure?

That’s the issue that Torino addresses. And with over $10 million spent on R&D, plus patents in place, the time to push for widespread adoption of the company’s solution is at hand.

Torino’s “Powerline Monitoring System” is a combination of a hollow aluminum sensor placed on a power line, combined with a nearby “interrogator” that reads microwaves bouncing back from the sensor. The sensor expands and contracts according to the heat of the line, and an algorithm in the interrogator converts the signal to a temperature reading that is then relayed to the utility in real time.

“As populations grow and distributed connection resources such as wind and solar gain prominence, it is putting the existing electrical infrastructure under more strain and causing wear and tear,” Mlait explains. “Part of the solution is better data, and it all ties into the industrial Internet of Things concept whereby real-time information enables system administrators to make better decisions.”

Torino is not the only company to conclude that there must be a better solution for monitoring line temperatures, but it is the only one with a passive sensor. Mlait says that all competing line sensors require power sources, in the form either of batteries or the power lines themselves. “So, if a power line goes down, their sensors can go down with it. Ours won’t, and that is part of our competitive advantage.”

Another advantage comes in the form of economics. Torino will deploy a system, which is comprised of three sensors and one interrogator, for between US$40,000 and US$50,000, or approximately half the cost of its rivals’ installations.

“Having more data from more lines, and thus a richer data set, is a better way for utilities to manage their assets and conduct dynamic line ratings,” explains Mlait. “That is one of the reasons we priced our technology where we did, so that utilities can deploy more sensors for the same cost.”

Mlait claims that utilities can quite easily recover up-front costs within 12 months, enabling the return on investment to stack up quickly.

Consistent with the early stage of the product roll-out, Torino’s solution is being used by a single utility at present. Tri-State Generation and Distribution Association installed the system on a trial basis last year in eastern Colorado. In what can only be taken as a good sign, it added to the trial in June of 2017 by moving a second system to a more critical location in western Colorado.

“Utilities are conservative when it comes to adopting new technologies, and understandably so,” says Mlait. “They want to really examine new equipment before deploying it extensively throughout their expensive infrastructure.”

Mlait says that he and his team are in discussions with a number of utilities both in North America and overseas, and while nothing has been finalized, observers shouldn’t be too surprised if additional installations make news before long.

Another component of the marketing strategy is to potentially ally with distribution partners with reach into markets that Torino has yet to develop. “We are a relatively small company, so the idea of partnering with a large distributor is pretty significant,” Mlait says.

Word is definitely getting out because Torino has started developing new products based on feedback from potential users. The company recently initiated development of a system for distribution lines, which are the smaller power lines operating inside urban areas. Urban power lines often heat up and sag, causing a host of challenges such as power outages and clearance issues, so a robust solution in this environment would be most welcome.

The other development program announced recently involves underground sensors. Mlait says that potential clients have asked if products are possible for applications such as subways and other underground infrastructure.

“People in cities such as New York, London and Toronto know that there are significant down times associated with underground systems, largely owing to deterioration of aging lines,” says Mlait. “We have heard about the need to better monitor these cables as they continue to deteriorate and are looking to provide a solution down the road.”

With a cost/benefit ratio that makes sense and a need within a crucial industry that cannot be denied, the potential clearly exists for Torino’s sensors to gain broad acceptance. Installation of a mere 100 systems could bring in over C$5 million on the top line, and there is the possibility for ongoing revenue streams from installations as well.

“It is not too often that you see new technology in this industry. We have something that is unique and some highly respected companies have suggested to us that we might have a game-changer on our hands,” according to Mlait. “From an investment standpoint, we have an advanced product starting to make headway, but a pretty small market cap. Throw in our ability to develop new products as well and we feel very positive about our future.”

This story was originally published at www.proactiveinvestors.com on August 29, 2017 and featured in The CSE Quarterly.

Learn more about Torino Power Solutions Inc. at http://www.torinopower.com/ and on the CSE website at http://thecse.com/en/listings/technology/torino-power-solutions-inc.

Deveron UAS’s drones helping agricultural efficiency to reach new heights

Deveron UAS helps agricultural efficiency reach new heights with a data-gathering drone fleet.

New trends in technology are penetrating every conceivable part of our daily lives, and the food on our table is no exception.  What many shoppers might not know, however, is that technology is now making a difference right at the very source of our food – the farmer’s field.

The agricultural sector is experiencing a rapid digital revolution, with some farms these days run more like high-tech outdoor factories.

Right place, right time…

Deveron UAS Corp (CSE:DVR), an enterprise drone data provider targeting agriculture, would thus seem to be at the right place at the right time.

This use of drones, or for the uninitiated, unmanned aerial vehicles, is a nascent industry, yet one where the potential rewards are enormous, explains Deveron’s co-founder and Chief Executive Officer David MacMillan.  Put simply, the company’s pilots ‘fly’ farmers’ fields, mainly over mass crops like corn and soybeans, and provide follow-up analysis to help increase yields and reduce costs.

Services include thermal imaging, data analysis and drainage identification – in other words, Deveron’s technology is able to tell a farmer what is going on in his field, something that is oftentimes difficult to determine by working strictly at ground level.

Macmillan says that in discussing Deveron with potential users, the emphasis must be on explaining the advantages of this new type of analysis, rather than trying to tell people that they’ve been farming the wrong way their whole lives.

“Essentially, we’re trying to enable decision makers in agriculture to make more efficient choices,” he says.

For farmers eager to embrace the concept, Deveron is one of just a handful of entities with a permit to fly drones across Canada.  There are 15 pilots available as and when needed in eight of the country’s 10 provinces (having started in Ontario with just two).

MacMillan explains that it makes more sense for farmers to hire Deveron than to buy their own drones at great expense, particularly if field analysis is needed only a couple of times each year (as is often the case).  The fact that farmers need to make key decisions on a variety of crop planning issues every year is a strong selling point, both for farmers who might use the service, as well as to investors considering whether to back Deveron with an equity purchase.

A strong recurring revenue model…

“Our hope is to continue to show the investing public that there is a strong recurring revenue model here,” MacMillan says.  “Corn grows every year and the farmers need the data every year to make informed decisions.”

Currently, the group is targeting large agricultural operations as customers – those which might manage a million acres or more –  as well as smaller outfits.  At this point, it is all about encouraging a network to develop.

While it is still early days, Deveron is already seeing engagement expand as bigger players increasingly sell its services ‘downstream’ to their customers.  At present, there are around 30 such partnerships with big farm managers.

Recent collaborations include the retail division of GROWMARK Inc., vegetable producer Bonduelle North America and major farming services and grain retailer Thompsons Ltd.  Everyone gains in the network, explains MacMillan, as the large entities get Deveron’s services at a discount, and then in turn make some money when they sell it down the line.

“There are 400mln acres of farmland in North America so it’s a huge addressable market,” adds MacMillan.  Some 88mln of those are in Deveron’s home Canadian market.

What could that translate into in dollars and cents? At Deveron’s standard $3 an acre charge, 2-3 flights a year over 400mln acres, and an assumed adoption rate of 20-30%, that’s a potential annual market of $700mln, reckons MacMillan, and likely to increase in the future.

First mover advantage…

For now, though, revenue and earnings are less important to the group than consolidating its first mover advantage by investing and scaling up the business.

MacMillan’s background is in public venture capital and he came to research drones three or four years ago after looking to invest in new technology which could be supported by Canadian companies.  Rather than obsessing over the ‘flying robot’ concept, he was interested in how data collected by the vehicles could be used intelligently, and agriculture was a good place to start.

“Historically, network plays end up having very high IRRs (internal rates of return) for the first people in the space,” he explains.  Behind all that, the idea that by 2050, with a global population of 10bln people, the earth’s food security may be an issue if agricultural yields don’t increase only added to the drive to establish the company, he says.

Business partner and co-founder Norm Lamothe is himself a farmer and manages 500 acres of land, so is ideally placed to know what famers need and want.

If valuation is any guide, it would seem this combination has the company heading in the right direction.  From around $2mln in 2016, Deveron is now worth nearer to $8mln, and recently raised $2mln, says MacMillan.  The idea now is to continue to grow organically, scale up the business and gain credibility via more collaborations and partnerships.

Canada is the focus for the time being, but to increase the amount of drone flights possible (they can’t fly fields in the snow) developing more of a presence south of the border is appealing, says MacMillan.

There is also the possibility of news flow over the next year around further partnerships, new revenue streams, and intellectual property value related to the company’s analytics technologies.

The seeds now planted, careful nurturing of Deveron’s business has the potential to yield robust returns for shareholders in the years ahead.

This story was originally published at www.proactiveinvestors.com on August 15, 2017 and featured in The CSE Quarterly.

Learn more about Deveron UAS at http://www.deveronuas.com/ and on the CSE website at http://thecse.com/en/listings/cleantech/deveron-uas-corp.

Tower One Wireless the one North American microcap tapping int’l cellular tower build-out

Often in the investment world, a long-term business trend is easy to identify, but finding the right stock to buy to take advantage of that trend is anything but.  Fortunately, the choice is simple for microcap investors looking to hitch a ride on the rapidly expanding need for cellular network capacity by owning shares in a cellular tower company, as there is only one such stock in North America: Tower One Wireless (CNSX:TO).

Fortunately, too, the basics of the business are easy to understand.  In many regions, mobile network operators don’t own the towers to which their antennas are fixed, but rather lease space on them.  This approach essentially enables a carrier to share tower costs with other carriers serving the same area.

For a tower company, then, owing the structure that wireless carriers need today, next year and into the foreseeable future can be a stable, and lucrative, proposition.

“What makes this business interesting is that a tower costs between $50,000 and $70,000 to erect, but the monthly lease payments come in at $1,000 to $1,500, and that is just for one mobile network operator,” explains Alejandro Ochoa, Tower One Wireless Chief Executive Officer.  “We sign 10-year lease contracts, with a 10-year option, but companies in the tower sector are valued highly because in essence use of the towers is perpetual.  And if we add a second or third carrier to use the tower, there is no marginal cost to us.”

Reflecting the Colombian-born Ochoa’s 18 years of investment banking experience in Latin America, Tower One Wireless is focusing its early building efforts in Argentina and Colombia, with Argentina expected to account for about 80% of activity.

“Argentina went through some challenging times, but now the country has elected a new president and is back in business,” Ochoa says.  “There will be demand for 10,000 new towers in Argentina.”

Ochoa tells an impressive story of competing with a large pool of rivals for the Argentine business before winning a spot on a shortlist of 15 companies, and finally being among the four companies awarded the right to build towers.  “We all got awarded the same number of towers, which is 100 to begin with,” he says.

So far, the company has 20 towers up, and anticipates having the first 100 hundred built sometime around the end of 2017.  The early exercise of warrants combined with a $5mln credit line will see the company through that planned construction.

Key to understanding the risk side of the equation is that Tower One Wireless never builds a tower hoping that a carrier will need it.  “We don’t build towers on a spec basis, but rather on a build-to-suit basis,” Ochoa emphasizes.  “Every tower I build has a guaranteed tenant.  My relationship with other carriers is my chance to add a second or third carrier to that tower.”

Once a site is agreed and permitted, construction takes 60-120 days, and some 30 days later payments begin to come in from the first carrier on the tower.  It is thus an easy business to model, and Ochoa’s model suggests very good returns indeed.

“With 100 towers we should have an EBITDA margin around 72%,” Ochoa says, adding that the company won’t see everyday expenses increase as it expands its tower pool further.  “The majority of the work is outsourced, so I can move from 100 towers to 500 towers and manage it with the same 15-person team I have today.”

Ochoa describes his team of accountants and other professionals as hailing from major wireless companies and tower builders, including a legal unit entirely from telecommunications giant Telefonica.

Ochoa has some interesting comments when asked why he chose to list the company on the public markets.  “When you sit across from the wireless carriers and they ask what makes you better than your 15 competitors with many times the capital you have, it is that I am not structured to sell my towers back to American Tower (NYSE:AMT).  Every other company out there is modeled to build their towers and sell them as their natural exit.  By being public, my investors have the embedded option of getting in and out of the company as they please.”

He also talks about the dynamics of capital in South America, where among his banking achievements is leading the team that listed Facebook (NASDAQ:FB) on Colombia’s stock exchange.  Institutional investors in Colombia and other Latin American countries must observe foreign investment limits dictating that a substantial portion of any equity allocation ends up in domestic stocks.  In some cases, this means a fund has fewer than 100 issuers to choose from.

Ochoa would one day like to provide them an additional choice.

“Canada has been very proactive in Latin America and is a market where investors understand the region through mining and oil and gas involvement,” Ochoa states.  “The potential to access capital by listing in another market is also a reason we decided to go public.”

The company Ochoa mentions absorbing other networks, American Tower, is listed on the New York Stock Exchange and sports a market capitalization of some US$60bln.  In 2017, it has outperformed the S&P 500 average at a triple-digit pace.

Putting Tower One Wireless and its C$13mln market cap next to American Tower makes for a lopsided comparison to be sure, but it illustrates the potential for value expansion as the former’s tower network builds out.  It also shows that demand for towers is nothing if not healthy.

“I think looking at our company today makes sense because with the 100 towers we should finish over the next six months we’ll have positive operating cash flow,” Ochoa concludes.  “On a discounted cash flow basis, every dollar you invest in a tower is worth three dollars the day you finish building.  Our company is well-managed and the business is simple.  And we are the only publicly listed entry point into the tower market at the microcap level.”

This story was originally published at www.proactiveinvestors.com on August 31, 2017 and featured in The CSE Quarterly.

Learn more about Tower One Wireless at http://www.toweronewireless.com// and on the CSE website at http://thecse.com/en/listings/technology/tower-one-wireless-corp.

iAnthus Capital bordering on big things

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

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

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

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

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

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

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

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

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

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

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

TGS deal

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

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

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

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

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

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

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

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

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

Massachusetts interest

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

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

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

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

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

Political risk limited

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

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

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

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

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

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

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

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

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

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

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

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

On the verge of turning a profit

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

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

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

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

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

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

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

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

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

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

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

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

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

First we conquer Canada, then we take Berlin

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

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

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

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

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

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

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

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

The Canadian Bioceutical Corporation profits from shift to US cannabis market

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

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

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

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

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

Unlike Canada, the US cannabis cultivation market is fragmented

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

CannaRoyalty charting own course in North America’s cannabis marketplace

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Interview with John Fowler, President and CEO of Supreme Pharmaceuticals

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

1.

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

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

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

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

2.

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

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

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

3.

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

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

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

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

4.

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

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


5.

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

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

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

6.

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

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

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

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

7.

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

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

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

8.

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

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

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

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

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

9.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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