Tag Archives: cse quarterly

CSE Issuer Stories, CSE Quarterly

Laguna Blends – Combines Unique Product, Technology Edge to Put Own Spin on Network Marketing

This story was originally published at www.proactiveinvestors.com on May 25, 2016 and featured in The CSE Quarterly.

Technology companies are renowned for their rapid growth rates, but apparently even they can’t keep up to successful groups in a tried-and-true business that many of us are in contact with all the time.

Network marketing, also known as multi-level-marketing (MLM), is the practice of individual direct sales coupled with recruitment of new direct sellers by existing salespeople.  If you are thinking Amway, you’re on the right track.  With some 3 million salespeople worldwide, Amway is the MLM king, recording US $9.5 billion in sales in 2015.  Avon (NYSE:AVP) and Herbalife(NYSE:HLF) are among other big MLM names.

Laguna Blends (CSE:LAG) is the latest entry onto the MLM scene and the potential to go from zero to 100 overnight was one of the key factors that convinced its founder to go all in.  “I have put over $1 million of my own capital into the company,” says Stuart Gray, Laguna’s CEO.  “Successful MLM groups grow faster than tech companies so one of the nice things about Laguna is that we have the ability to get bigger really quickly.”

Laguna began its sales quest in March focused on the nutritional and health benefits of products containing hemp.  Hemp is known for being rich in protein, as well as omega fatty acids 3, 6 and 9, plus magnesium and other nutrients important to a balanced diet.  Gray summarizes the product category as “functional beverages” given that a hemp-infused instant coffee and four flavours of a sports drink mix called Pro 369 (after the omegas) comprise the initial product line.

Gray originally learned about the benefits of hemp as a consultant to several companies in the medical marijuana industry.  But while the health benefits of hemp strains used for food, as opposed to intoxication, were obvious, he felt that the approach to selling these products could be improved upon.

“We see hemp-based products on the shelves at many of the biggest food retailing names in the world, but in some cases the product has not sold through as well as the producers thought it would,” says Gray.  “There remains a lot of education that needs to take place as to the true value of hemp, so we chose direct marketing because it enables potential customers to really learn about what they are buying.”

Gray understands that MLM is an ultra-competitive universe and as such is relying on more than just unique products to set Laguna apart.  “We are definitely differentiating ourselves by pioneering hemp-based products that nobody else has,” explains Gray.  “But really, how we separate ourselves is through technology.  We have virtual 3D technology that replaces the need to go to hotel meetings to learn how to recruit.  Everything you need to build your business is on there.”

The objective of a company such as Laguna is to provide products, infrastructure, support and training for independent affiliates, he explains, whose role it is to then go out and build the business through sales and recruitment.

Gray says the combination of unique product and what might be the industry’s only 3D training and administration platform enabled the company to grow its affiliate network from zero at the beginning of March to 700 members in Canada and the US less than one month later.  “We have proven that we can do this,” he says.

It is not only affiliates that Gray has been able to attract to Laguna.  In early May the company announced that Ray Grimm had agreed to come on as president.  Grimm has some 25 years of experience in direct sales of weight loss and nutritional products, and is credited with leading three companies in the space to north of $50 million in sales in their first five years.

“Ray is considered a legend in this industry and he told me we have not only great products, but the best technology he has ever seen,” says Gray.  “I really think that if you look at digital disruption, we are one of those companies that changes the game.”

Another key member of the team is Stuart Kawasaki, president of wholly owned subsidiary Laguna Blends USA, who has been in network marketing since 1988.   “One of the companies he was a consultant with early on did $1 million of sales in its first year, $15 million in the second, and by year five was over $300 million,” explains Gray.

Experience is deep on the technology side as well, with Martin Carleton and Charles Carleton – early contractors to the team that built Skype – overseeing technology for Laguna Blends.  Martin also sits on Laguna’s board of directors.

The company has inventory ready to go with a retail value of about $1.65 million, so at a 40% payout on sales to its affiliates, Laguna looks set to generate good numbers as product begins to make its way out of the warehouse.

With proven management in place and product straining at the gate, Gray anticipates meaningful levels of revenue are just around the corner, following in virtual lockstep with expansion of the associate network.  “It is no different than when a stockbroker goes to a new firm, his clients follow him,” says Gray.  “If you are an MLM leader and you move, some of your people follow you.”

Given the company’s technology leanings, social media is also proving to be a worthwhile recruiting tool.  “With Laguna having the leading technology, a lot of people found us through social media,” explains Gray.  “I ask newcomers who they were referred by, because we always want to make sure that the affiliate gets credit, but in many cases they just found out through an article or a video.  MLM can now even spread through networks where people e-mail their base a video or put it on social media and it goes viral.”

Not on that dangerous edge where you are re-inventing the wheel, nor on the lost-in-the-crowd track of doing the same thing as everyone else, Laguna Blends has apparently positioned itself in something of a sweet spot by introducing modern tools and unique products to an established industry.  With an experienced executive team in place and sales underway, the company and its investors will soon find out just how many tech companies Laguna can leave in the rear view mirror.

Learn more about Laguna Blends Inc. at http://www.lagunablends.ca/your-company and on the CSE website at http://thecse.com/en/listings/diversified-industries/laguna-blends-inc

CSE Performance, CSE TV, Press Release

Strong second quarter for CSE leads to record first half of 2016

CSE is proud to present its most recent quarterly update video and press release below highlighting the record first half of the year at the Canadian Securities Exchange:

Growth in Trading Volume and Financings Highlight Productive Q2

CSE Posts Record Activity in First Half of 2016

The Canadian Securities Exchange (CSE) is pleased to release an update on activity of the second quarter of 2016, resulting in a record first half of 2016 highlighted by record trading volume, changes to listing requirements, and initiatives to help CSE issuers build on recent positive momentum in financing and other aspects of corporate development.

Key Statistics

  • Trading volume in CSE listed securities grew 64% compared to the first half of 2015 to 2.01 billion shares;
  • The CSE finished the first six months of 2016 with 328 listed securities, up 12.3% compared to the same period the previous year;
  • CSE companies conducted 178 financings for total gross proceeds of $123 million, up 28.4% over the first half of 2015;
  • Trading on the CSE in securities listed on other exchanges totaled 1.82 billion shares, an increase of 19.1%.

Growth in trading volume and financing proceeds during the first half of the year reflected both the increased number of securities listed on the CSE and noticeable improvement in Canadian investor sentiment across all sectors. The 2.01 billion shares traded in CSE listed securities in the first six months of 2016 puts the exchange well ahead of its pace of 2015, when a record 2.47 billion shares traded for the full year.

The CSE is proud to highlight a busy first half supporting issuer outreach to the financial community with a variety of activities. These include CSE Days held in major cities where executives enjoy the opportunity to present to audiences of financial industry professionals, retail investors and issuer peers.

The exchange also published new issues of its CSE Quarterly magazine, the most recent leading with a profile of the CSE’s top performing companies as measured by growth in market capitalization (the CSE Quarterly magazine can be viewed at https://cseblog.wpengine.com/2016/06/01/cse-quarterly-issue-9-now-live/).

In addition, the CSE launched a new website in April. The modern format makes it easier for investors to gather information on CSE companies, and for both existing and prospective issuers to access the resources they need to make interaction with the exchange as efficient and cost-effective as possible. The CSE’s new website can be accessed at http://www.thecse.com.

Other achievements in the first half of 2016 included a comprehensive update to initial listing requirements. Proposed changes were published for comment in February and following feedback the modified rules were submitted for regulatory approval. The new requirements will become effective in Q3 upon publication of a notice from the exchange.

In the second half of 2016, the exchange will work to finish a review of continued listing requirements for listed companies. A list of proposed amendments will be published for comment in the near future.

“The CSE team is constantly working on new and dynamic ways to drive our mandate, which is supporting entrepreneurs and lowering the cost of capital for early stage companies,”

said Richard Carleton, CEO of the Canadian Securities Exchange.

“The activities we undertook in the first half of 2016 made our offering as an exchange stronger, as evidenced by growth in both trading volume and financings closed by our issuers. We will continue to support CSE listed companies with a variety of public efforts, and by working with regulatory authorities to improve the operating environment for Canadian financial markets as a whole.”

For the full-length semi-annual interview with CSE CEO Richard Carleton please click here for the transcript.

CSE Issuer Stories, CSE Quarterly

Beleave – advancing smoothly through medical marijuana approvals with eye on big sales, margins

This story was originally published at www.proactiveinvestors.com on May 17, 2016 and featured in The CSE Quarterly.

Marijuana sales reached nearly US$1 billion in 2015 for the state of Colorado, where the drug was cleared for recreational sale just over two years ago

As the social narrative and legal argument surrounding marijuana continues to evolve, an intriguing dilemma is posed for a typically conservative mainstream investment community.

Investors looking at Beleave Inc. (CSE:BE) will likely have polarised opinions depending upon their age, politics and life experience.  Indeed, the issue of marijuana’s decriminalisation and commercialisation is very much loaded.

But, whatever an individual’s standpoint on the moral or ethical merits of this emerging industry, one thing is quite clear; a pragmatic look at the business case reveals a compelling argument for the growing sector.

Marijuana sales reached nearly US$1 billion in 2015 for the state of Colorado, where the drug was cleared for recreational sale just over two years ago.  According to the state’s authorities some US $135 million was collected in taxes and fees related to the pot business that year.

Colorado is one of four US states to legalise marijuana for recreational use (the others are Alaska, Oregon and Washington).  Twelve others, including big markets such as California and Nevada, now allow consumption for medical purposes.

In Canada, the medical marijuana business has legalised progressively over the past 15 years.

But, the major turning point came in 2014 with the introduction of the Marijuana for Medical Purposes Regulations (or MMPR) by the government’s Health Canada arm.

Newly-elected liberal Prime Minister Justin Trudeau in November announced that marijuana would be legalised for recreational use in Canada during 2017.

It represents a major opportunity, particularly for Beleave.

Although there’s a lot going on around the edges for Beleave – with the company working on various research and development projects – at the moment the story is quite a simple one.

Beleave is the next man up for regulatory approval

Around 30 companies have been given the regulatory green light for medical marijuana.

And as Beleave chief executive Roger Ferreira explains it, his company is currently in the advanced stages of the regulatory licensing process with Health Canada.  Being in the final stages of the approval process, the regulatory decision is expected soon.

With the help of chief operating officer Bill Panagiotakopolous, and his construction industry ties, the company has now built at low capital costs a 14,500 square foot production facility designed to meet Health Canada’s requirements.

The facility, in Hamilton, will be capable of producing some 550,000 grams of marijuana each year and, crucially, it is designed to be scalable so that the production line can grow in lock step with the commercial side of the business.

That scalability will be key. Ferreira says initial market research to date indicates Beleave could sell out its entire capacity within a year from the start of production.

Prescribed patients on average consume between one and three grams of marijuana per day, he explains.  As such just 270 to 800 registered patients would be needed to max out the group’s supply in year-one, giving the company revenue of $4.2 million with margins of 72%.  As demand for the product increases the company has already laid the groundwork for expansion of up to 270,000 square feet with margins increasing to 83% and revenue growing past $100 million.

At the same time the demand for licensed marijuana in Canada is forecast to soar.

The number of registered patients has grown at a rate of 20,000 patients per year since the regulatory framework was brought in during 2014, and the introduction of a recreational use market is expected to see customer numbers swell further.

So what’s next in the medical marijuana licensing process?

To be green lit in Canada, a grower has to complete a three step permitting process.

First, the company needs Health Canada to approve the drug for cultivation (i.e. growing). This is what Beleave is currently waiting for.

Once licensed for cultivation the company will then be able to legally obtain already sourced seeds and ‘clones’ for planting and begin the process of growing cannabis plants.

Health Canada assesses and reviews the operation throughout as part of the new regulation process.

A separate license is then required for harvesting.  Without a harvesting license the plants cannot be cut, dried or processed in any way.  After that, a third license is required to allow the company to commercialise the product.

From an investor’s point of view this represents a critical focus for the next year.  Ideally, Beleave will want a seamless transition through each of the three stages – as bottlenecks through permitting could see harvests missed and the loss of potential sales.

The grow op

Previously, Canadian patients were legally allowed to grow marijuana for their own medical purposes.

New regulations, introduced in 2014, aimed to create larger scale third-party suppliers to deliver a safer and more medically appropriate product.

“They wanted to establish an infrastructure whereby there was a commercial base, with a lot of quality assurance oversight to ensure that the product is safe for use,” Ferreira told Proactive Investors.

“With what patients were growing themselves, in their basements, it was unclear what the quality was in terms of potency, contaminations and consistency.”  Furthermore, there are other inherent public safety concerns associated with such a system, including diversion of plant material to illicit markets, as well as the potential for gang-related violence.”

He added: “Our facility is pharmaceutical-grade in terms of quality assurance procedures and manufacturing practices. We’re taking extremely heavy security precautions, and putting in place extremely stringent reporting requirements in terms of inventory and surveillance.”

“All of that is being done to ensure a clean, safe and high quality product.”

“It is a state of the art facility that encompasses all of these things.”

Research & development is a key focus for Beleave

Ferreira, a Phd who has authored peer-reviewed papers on neuroimmune pharmacology, highlights that research and development and academia are a key focus for Beleave.

By concentrating on science he expects the business to produce a clinically efficacious drug, as well as creating consistently potent and safe marijuana products.

Central to its R&D effort is a collaboration partnership with researchers at Ryerson University, Ontario, and parts of this work is grant-funded.

“We are working on extraction and drug standardization of cannabinoids and other pharmaceutically relevant compounds in the plant material, with the aim of developing exciting and innovative IP surrounding cannabis-based pharmaceutical therapies” said Ferreira

“Standardisation of cannabis based medicines will allow them to be considered more than just a crude plant or extract, and more as a regulated substance that’s highly characterised and has a composition that’s suited to pharmaceutical use.”

He pointed out that while cannabis is being used to treat the symptoms of multiple-sclerosis, and as ad-hoc pain relief in cancer care, it still is not an approved drug.

It remains a narcotic where the evidence of its effects is mainly anecdotal.

“There’s emerging clinical evidence of its usefulness for certain illnesses,” said Ferreira.

“But, you cannot advertise it right as a specific treatment yet. It hasn’t really been proven out, there isn’t a lot of evidence data. And there are reasons for that.

“When you look at availability in the market, there are so many different strains with all these different names and varying qualitative aspects to them – to do with aroma, flavour, strength and effects.

“These things attract a consumer’s eye, but what the clinical community is more concerned with is to do with potency and therapeutic benefits.

“So we have been looking at how we can establish a production facility that, with good working practice, can ensure reliability, repeatability and a uniform product.

“And that is what is going to make cannabis a more standardised medicine, and help move perceptions away from the idea of it being a crude plant material.”

Learn more about Beleave at http://beleave.com/ and on the CSE website at http://thecse.com/en/listings/life-sciences/beleave-inc

CSE Issuer Stories, CSE Quarterly

VirtualArmor – advanced network and cybersecurity

This story was originally published at www.proactiveinvestors.com on May 26, 2016 and featured in The CSE Quarterly.

VirtualArmor debuted on the CSE in November of last year at $0.25.  It sat quietly for its first couple of months before starting to build a following that has since seen the stock close as high as $0.75 (a 200% gain), and more recently at $0.65 (up 160%).

A basic analysis of the company yields some familiar themes, including experienced management and rapid growth underscored by hard-won advantages in a large, fast-growing market.

Founder and Chairman Christopher Blisard explains the challenges facing every entity with a presence on the Internet, and thereby the opportunity for VirtualArmor, in a manner hard to dispute.  “Where we are going as a world is that everything is being moved to the edge,” Blisard explains.  “You as a consumer or business want everything available all the time at any location.  We’ll continue to grow because technology is pushing the boundaries of where data is stored and those areas can become very vulnerable very quickly.  You really have no choice but to call companies like ours to take care of your problems.”

Established in 2001, VirtualArmor has crafted a business model over the years that Blisard says literally has no peer within the industry.  It involves working closely with hardware manufacturers so that the VirtualArmor team can go beyond providing a security overlay “a mile wide and an inch deep” and get inside the actual hardware, where the most talented of hackers often go to lay their traps.

“We work hand in hand with the manufacturer, plugging their software into our platform so we can go incredibly deep into every piece of equipment we are managing on your network.  It is not just a reactive environment at that point, but also a proactive environment.”

When VirtualArmor discusses security with a potential client, it insists on bringing the hardware that will serve as the backbone of the entity’s computer network.  Instead of trying to fix the myriad bugs inherent in a system that should have been designed better in the first place, VirtualArmor brings in what it knows will work.

Looking at the financial picture, accrual earnings were skewed in 2015 by non-cash items related to the go-public effort, but cash flow was positive for the year, and that’s the number that really counts.  Fiscal 2016 should be more indicative, and thus far is shaping up nicely.  The company announced on March 8 that it had booked US $2.4 million in sales in the previous 90 days.  Given that revenue for full-year 2015 was US $7.4 million, VirtualArmor is so far on pace to beat handily year on year.

Matthew Brennan, Vice President of Sales, points to the importance of convincing investors that growth in revenue and earnings is sustainable.  “When you have an organization as successful as ours and all of that revenue came from two salespeople, to know we are going to end the year at between six and eight salespeople suggests you will see things move in a positive direction,” he says.

Blisard adds that part of the benefit of listing on the CSE has been to broaden the understanding of VirtualArmor and give it new tools to conduct the full extent of the expansion it envisions.  “Looking at 2016 to 2017, the objective will be to expand our reach internationally,” he says.  “That includes going into Canada and Europe, and particularly the London market.”  Blisard goes on to explain that the company has a 10-person Security Operations Center, or SOC, just outside of London that can play a very helpful role in landing and serving local customers.

The revenue outlook is further enhanced by the stickiness of the client base, which is actually very easy to assess: “We have never lost a managed services customer and our longest one has been with us for 10 years,” says Blisard.

Also helping the share price was the announcement March 16 that the company was cancelling just under 3 million of its shares outstanding, and that several third-party shareholders had agreed to put a total of 3 million shares into escrow.  The resulting reduction in dilution, not to mention clear vote of confidence, set a positive tone that the stock price responded to immediately.

Blisard is happy with the way the stock has performed to date but points out that he knows education is a process and that it will take time for the company to build the following it thinks it ultimately deserves.

“For the Canadian markets a company like this is unique,” Blisard explains.  “The investment community understands the importance of cybersecurity in their lives.  The people we talk to understand the way our company is structured, how it drives revenue, how it drives profit, and where it sits within the cybersecurity world.”

Concludes Brennan, “It is very important that an investor understands there is a roadmap.  We made a good decision in not growing too quickly, taking our proceeds and placing smart bets on particular territories and hiring the right people.  I think it is key that the investment community understands this.”

Learn more about VritualArmor International Inc. at http://www.virtualarmor.com/ and on the CSE website at http://thecse.com/en/listings/technology/virtualarmor-international-inc

CSE Issuer Stories, CSE Quarterly

Pudo – Pick it up. Drop it off.

This story was originally published at www.proactiveinvestors.com on May 26, 2016 and featured in The CSE Quarterly.

PUDO Inc. debuted on the CSE on July 28, 2015 at $0.70, proceeded to drop to $0.18, yet within two weeks was conducting a private placement of 1.1 million shares at $0.63.  Using that as a reference price, the stock has closed up as much as 443%, and as of publication date is up a still respectable 280%.

“While you are out and about, we’re here accepting your deliveries” reads the tagline on the company’s website, and that pretty much captures the essence of the PUDO service.  We all know how frustrating it is to be waiting for a package, only to arrive home and find that someone tried to deliver it, but unable to do so left a sticky message indicating that you cannot obtain your parcel until the following day.  Even more annoying is learning that the package had been delivered, only to be stolen off the front stoop.

PUDO completely eliminates this inefficiency by creating locations called PUDO Points where customers can specify their parcels be dropped off so as to be picked up at their convenience.

The benefits to all participants in a transaction run deeper than that, but at its core the service makes life more convenient for consumers.  It is the simplicity and connection to all of us that PUDO CEO Frank Coccia believes is behind the impressive performance by the company’s shares in the short time the company has been public.

“It is a story that everyone understands,” says Coccia.  “It is not a biotech company or mining exploration where it can be difficult to see the real potential.  I enjoy going out and speaking with investors.   They see that couriers, retailers and consumers can have a field day with this.”

Digging a little deeper, one learns why the concept would have more natural allies than competitors.  Coccia explains that PUDO seeks nothing more than to provide pick-up points inside convenience stores and other established physical locations.

Couriers thus know they have a guaranteed delivery and save money by not having to attempt re-deliveries after a failed visit.  Retailers that ship product to fulfill customer orders gain flexibility to negotiate with multiple couriers and thereby reduce their shipping costs.  The consumer gains the peace of mind that comes with knowing a parcel is available to pick up at a convenient location whenever they like.  Convenience stores and other PUDO Points not only earn fees for holding and putting parcels in the hands of their owners, but also from impulse buys thanks to the extra foot traffic.

Coccia says that investors also like the fact that PUDO keeps its costs under control by needing little more than to maintain and support the technology behind the service.  “The beauty of PUDO is that we don’t own anything outside the technology,” explains Coccia.  “The bricks and mortar is already there.  We are just taking advantage of the elements in an ecosystem that already exists.”

Growth on the ground has been quick to date, with Coccia saying that the company has already established some 800 PUDO Points in Canada and the US and over 6,000 registered locations, this latter category being locations signed up that have yet to go through training so they are fully ready to roll.

“Once we hit 3,500 to 4,000 locations in Canada then we should be exactly where we want to be,” Coccia says.  “In the US we have over 3,700 registered locations at present and ultimately want 16,000 to 20,000.  Once we reach those two numbers we will have a fixed cost with a control centre that manages everything.”

Experience helps small companies avoid costly mistakes, and fortunately for PUDO Coccia has been at this for 35 years.  “I built niche courier systems, which basically are courier systems for one industry.  We did it for the travel industry and the financial services sector and for lawyers serving one another documents and papers.  It is all about consolidation where people can pick up mail and drop off their mail.”

Coccia expects growth to continue apace, thanks in part to several potential partners he is talking to in the US.  “We’d suddenly have a network in the US that could rival that of any national carrier – UPS or even the post office,” he says.

With just 15.6 million shares outstanding, PUDO has plenty of room to maneuver if Coccia deems it necessary to raise equity capital for supporting growth.  And while the company is not flush with cash, liabilities are fairly low as well, so with revenue beginning to come in Coccia has a good shot at preserving a nice share structure until PUDO reaches the point at which it becomes self-funding.

Experienced management, enviable share structure, rapid growth, consistent communication.  Does that qualify as a formula?

Learn more about Pudo Inc at http://www.pudoinc.com/ and on the CSE website at http://thecse.com/en/listings/diversified-industries/pudo-inc

CSE Issuer Stories, CSE Quarterly

Urbana’s mix of private and public holdings beats street, appeals to deep value investors

This story was originally published at www.proactiveinvestors.com on May 26, 2016 and featured in The CSE Quarterly.

One would think that with a track record like Urbana Corporation’s (CSE:URB; TSE:URB) the chance to buy its shares at a discount would be almost non-existent. At an annual return based on net asset value exceeding 14% since it was launched in 2002, Urbana easily ranks as one of the better performing investment companies on the block.

Puzzling then that its stock is priced around $1.97, while its per-share net asset value is closer to $3.50. “Since October 2002 the rate of growth has been just under 14.54% but the share price is at a significant discount to the asset value, to an extent due to lack of coverage,” explains Thomas Caldwell, Urbana’s President and CEO.

Caldwell, of course, is also Chairman of investment dealer Caldwell Securities Ltd. He is well known on Bay Street and Wall Street for making big returns from investing in stock exchanges. “At one point we owned 37 exchanges,” Caldwell notes.

That legacy remains a major part of the Urbana investment approach, reflected these days more so in the heavy portfolio weighting in companies involved with the financial industry, be they major banks or service providers to the mortgage business. “That is where I spent most of my career and is an area we like to think we understand,” Caldwell says.

In many ways, Urbana is structured to offer investors the best of all worlds. It has just shy of $200 million under management, about 55% in public investments, plus 45% in private investments that its shareholders would almost certainly be otherwise unable to access.

Another benefit is that the closed-end nature of the fund is a perfect fit for Caldwell’s investment strategy. “A closed-end investment corporation like Urbana is a great way to manage money because the capital we have is permanent,” he explains. “The problem with mutual funds is that you get your money at the worst time – at the top of markets – and you lose it at the best time – at the bottom of markets. But that is when you should be doing the opposite – you should be selling at the top and buying at the bottom. If a market is going down I am not worried about a run-off of assets and that’s where I make our money. I’m a bargain hunter.”

Well-represented sectors these days include US financials, which Caldwell says make up 32% of the portfolio, while a recent move into a set of holdings he calls “Canada Inc.” saw Urbana take meaningful positions in Barrick Gold (TSE:ABX), Suncor Energy (TSE:SU) and Teck Resources (TSE:TCK.B). “Our Canadian banks are up 10%, Suncor is up a few percent, and Teck is up 100%,” Caldwell explains.

One of the CEO’s favourite holdings is a private company called Real Matters. Real Matters runs a technology platform and network of more than 100,000 independent field agents that help financial institutions and other entities in the real estate business perform appraisals, insurance inspections, title searches and mortgage closings. Its customers include 60 of the top 100 mortgage lenders in the US and a number of large insurance companies.

“Real Matters is run by an extremely bright executive named Jason Smith,” says Caldwell, noting that he invited the Real Matters President and CEO to speak at Urbana’s annual general meeting this year. “I say now that I am not interested in ideas anymore. I am only interested in people who can execute on ideas. He can do that.”

Caldwell sees Real Matters eventually listing in the public realm via an IPO, a path that Urbana likes its private investments to move along as they grow and mature.

Another successful holding on the private side that anyone who follows Urbana will be aware of is the Canadian Securities Exchange, in which the investment company holds a major stake. Caldwell also serves as the exchange’s Chairman.

“The CSE fills a role that I believe, and my directors and partners believe, is important to Canada,” explains Caldwell. “Canada is an entrepreneurial country but it is very hard to build a company here because we are losing a lot of independent dealers and don’t have the big venture pools like they have in Silicon Valley. So what the CSE can do as an exchange is to simplify the role of accessing capital.

“Ned Goodman (Deputy Chairman of the CSE and founder of Dundee Corporation – a significant shareholder in the CSE) and I both say the same thing – we feel the CSE is an extremely important link in Canada’s prosperity going forward. We pursue this with almost religious fervor because both Ned and I feel so strongly in terms of helping Canadians. Remember, the large financial institutions and many of the resource companies are going to be generators of unemployment in the years to come. New jobs and head offices are only going to come from new enterprise. That’s where the CSE lives and that’s what we try to nurture.”

Fervour certainly is an apt word to describe the way Caldwell feels about the industry he has built his life around, and it troubles him to see certain pillars of the financial community struggling so mightily. “Independent brokerage firms are being massacred and that is going to impact Canada’s standard of living, the number of head offices and new companies,” he explains. “It is a difficult environment right now for new companies trying to raise money. Regulators don’t see that they are addicted to evermore regulation and the damage they are doing to the economy.”

Asked about the possibility of Urbana seeing this as an opportunity, Caldwell suggests he needs to know more. “I’d love to sit down with regulators at some point and find out what their intention is. If they are planning to wipe out an industry, which it appears they are, then naturally I would not be doing bargain hunting in it.”

In the end, he suspects the over-regulation he witnesses does not even achieve its intended objective. “Quite often in an onerous environment the people who will work hard to jump through the hoops are the ones with the more speculative deals. So it does not even mean that you are thinning the ranks of the villains because those are the ones that will bend the rules.”

Regulation run rampant is an issue Caldwell sees as a threat to the Canadian economy but, paradoxically perhaps, he sees strict regulation of the financial industry in the US creating an investment opportunity. “There has been tremendous regulatory pressure on US banks and it is the shareholders who suffer,” says Caldwell. “Our feeling is that they will have to ease up, which would be good for the banks. If they don’t then US banks may unilaterally break themselves back up into commercial and investment banks, which I think would also be good for the stocks. If history has shown us anything it is that when you break up a company, the parts are usually worth more than the whole.”

With the discount to net asset value at Urbana so significant, it makes sense to use a portion of the corporation’s capital to buy back its own shares. “We have been very aggressive buying back stock and cancelling it,” says Caldwell. “We have bought back about 37 million shares at a discount, and this has benefited the remaining shareholders.”

The buyback has doubtlessly contributed to share price stability, but there still remains a gap wide enough to present opportunity for new investors. “The great bargain right now with Urbana is that for $2.00 you get $3.50 working for you, and that $3.50 has been growing at over 14% per annum for the last 14 years. The stock price will eventually catch up with it but I think in the meantime you can get pretty good management and assets at a discount.”

Learn more about Urbana Corporation at http://www.urbanacorp.com/ and on the CSE website at http://thecse.com/en/listings/diversified-industries/urbana-corporation

CSE Issuer Stories, CSE Quarterly

Lite Access lights it up

This story was originally published at www.proactiveinvestors.com on May 26, 2016 and featured in The CSE Quarterly.

Lite Access Technologies listed on the CSE in a transaction that saw the company raise just over $1.84 million at $0.25 per share, with its first trade printing on June 1, 2015.  Since then, its stock price has closed as high as $1.80, up 620%, and at time of publication was $1.61, or 544% higher.

Lite Access could hardly have chosen a better time to go public, what with a worldwide “supercycle” in optical fibre installation by large telecoms driving growth for the company’s products and services.  And if that cycle is, as the company suggests, merely in the second inning, it is easy to understand why investors have gotten so excited about the prospects for strong, sustained earnings.

“Everyone today is touched by the digital world and realizes that high broadband speed and capacity is essential to a modern economy, economic growth and the daily lives of most consumers,” says Michael Plotnikoff, Lite Access co-founder and Chief Executive Officer.  “And as rapidly as fiber optic deployment is growing in a general sense, the micro-trenching and air-blown fibre sub-sector that Lite Access specializes in is growing faster.  We not only offer pure-play exposure to the space, but our total integrated solutions are based on both proven technologies and widely accepted installation methodologies considered to be the solution of choice for fibre-optic connectivity – that is pretty difficult to find.”

Lite Access uses specially designed proprietary equipment to create “micro-trenches” into which it places exclusive crush-proof microduct (micro-conduit) designed for all types of telecom applications, both for today’s needs and those of the future.  The microduct serves as a medium through which optical fibre is blown using compressed air to create high-speed broadband connectivity in a matter of minutes and at a cost far less than with traditional cable installation methods.

The beauty of the system, and a main factor driving demand, is the lack of interference with the local environment and archaeologically sensitive areas both during initial installation and any subsequent upgrade cycle.  As the micro-trenches are narrow, Lite Access installation teams can be in and out of a site quickly (micro-trenching and installing up to 1 metre per minute of microduct) and at a cost much lower than more disruptive conventional methods.

Later, when fibre needs to be replaced due to technological obsolescence or upgraded in support of future growth requirements, there is no need to dig up the roadway again.  Lite Access simply blows new fibre from the starting point through to its destination at the other end and, voila, there is your upgrade.  Nobody outside of the companies involved even knows it took place.

As Plotnikoff explains, Lite Access is a pioneer in the micro-trenching and air-blown fibre business, and as the industry shifts into high gear he has a proven team behind him that has successfully completed dozens of projects globally, some quite challenging from an engineering perspective and at times not possible using traditional installation methods.  Well-rounded project and management experience is serving Lite Access well from both an operations standpoint and in the market with investors.  It is one of several important boxes it has ticked.

Good people?  Check.  And that includes over a dozen partners around the world certified to install microduct and handle air-blown optical fibre installation.  These partners will contribute to a re-balancing of the revenue stream in future years as they collectively come to install more of Lite Access’s patented equipment and supplies than the company does itself.

Good financial management?  Check that box, too.  Lite Access has just 30.6 million shares outstanding and no financing has been conducted since the initial $0.25 round.  A corporate update released February 1 explained that milestone payments had been received on a $7 million project for BC’s Haida Gwaii community, plus there was over $1 million in receivables and inventory on the most recent balance sheet.

Another key point to note is that with the types of customers Lite Access has – which include cities and municipalities, First Nations and Native Americans, as well as private enterprise and local governments – odds are the company rarely, if ever, finds itself chasing anyone for payment.

Plotnikoff speaks warmly about shareholders he has interacted with over the past year, saying some have essentially become advocates for the brand, helping build awareness and even calling in with business opportunities.  Shareholders are welcome to visit the company’s headquarters and main warehouse in Richmond, British Columbia, if that level of contact is important to them.

“Our shareholders are comfortable because they have an open line of communication and clear, transparent access to information,” explains Plotnikoff.  “I like to think that if we preserve that approach as a principal component of our corporate culture and continue to deliver growth, we will always have a strong degree of support in the market.”

Learn more about Lite Access Technologies Inc. at http://liteaccess.com/ and on the CSE website at http://thecse.com/en/listings/technology/lite-access-technologies-inc

CSE Issuer Stories, CSE Quarterly

Supreme Pharmaceuticals Inc shapes medical marijuana strategy around Canada

This story was originally published at www.proactiveinvestors.com on May 18, 2016 and featured in The CSE Quarterly.

Legalising marijuana for medical use can still be a thorny topic in some countries.

But Supreme Pharmaceuticals Inc. is hoping to lead the way in harnessing its acceptance and benefits in Canada.

Supreme obtained regulatory approval to grow medical marijuana at its site in Kincardine, Ontario, in March.

The company is on track to harvest its first crop in the summer and hopes to get final approval to sell it in September or October.

In the US, four states have legalized the plant for recreational use and 12 others allow its consumption for medical purposes, although that remains a relatively small proportion of the country as a whole.

But in Canada, the medical marijuana business has legalised progressively in the last 15 years.

A key milestone came in 2014 when the government’s Health Canada arm introduced the Marijuana for Medical Purposes Regulations.

The government also said last month it will press ahead in 2017 with plans to legalise marijuana for adult recreational use.

That market is expected to be worth US$5bn a year by 2020 according to leading industry analysts.

Supreme is targeting a domestic medical market, which it expects to be worth about US$100mln by the end of this year and US$1.2bn by 2020.

Supreme’s president and chief executive, John Fowler, said he believed Canada was doing better than some other countries in overcoming concerns about using the plant for clinical purposes.

“I wouldn’t say the stigma has gone but we’re moving in the right direction,” he said.

Fowler began working in the medical marijuana sector more than 10 years ago.

He pursued a legal career to help medical marijuana patients with legal challenges relating to access, jobs and tenancies, working on major cases.

He now sees his mission as being not only to provide Canadians with access to high-quality, low-cost medical marijuana, but to work with physicians to improve their awareness and support for it.

“The hope is that the doctor will be more educated and more willing to subscribe to the company’s products,” he said.

Bottom line

Supreme and its wholly owned subsidiary, AMMCan, have set up a federally-licensed, seven-acre greenhouse in Kincardine on the shores of Lake Huron.  When fully operational, the company expects to be able to produce in excess of 50,000 KG per year.

Supreme has obtained exclusive rights to work with international seed supplier Dinafem.  The arrangement will provide Supreme with access to over 100 unique cannabis strains to put into production in the Kincardine greenhouse.

“Choosing the right genetics is one of the most important aspects of producing high quality cannabis for both medical and recreational markets,” Fowler said.

“It was important we seek out a partner like Dinafem to ensure we grow only the best genetics in our greenhouse which will maximize output, increase quality and have a direct impact on our bottom line.”

Supreme has raised more than US$10mln, three quarters of which it has spent on fitting out the greenhouse and the rest of which it still has in the bank.

It expects those reserves to sustain it until it starts earning revenue from marijuana sales later this year.

Supreme is among about 25 companies holding 31 licences to produce medical marijuana.

The current market of about 45,000 patients is increasing at a rate of about 5,000 per month and is on track to more than double in this calendar year.

Supreme’s primary aim was to supply the consumer market direct by mail order.

But it is exploring the possibility of becoming more of a business-to-business supplier of licensed marijuana to other companies that would retail it.

Fowler said: “The benefits of that are long-term, stable revenue based on supply agreements, rather than volatile revenues from retail.”

Supreme has had to take extensive security precautions at Kincardine to prevent theft, such as high fencing and cameras, and the end product is stored in a vault.

“We like to joke that our marijuana in the vault will be more secure than our money in the bank,” Fowler said.

Fowler also acknowledges the general risk of abuse of the product. However it is worth pointing out marijuana consumption is seen to be less dangerous than tobacco or alcohol with few reported side effects, he said.

Strict regulation compels the company to ensure its products are not contaminated by pesticides or other substances that may be in marijuana bought from street dealers.

Supreme has international ambitions and is eyeing opportunities in countries such as Australia, Germany and Austria.

Canberra recently legalized marijuana for medical use and Berlin and Vienna are considering doing the same.

The company believes it will be able to generate US$200mln in annual domestic revenues within the next decade.  This keeps the company’s focus on executing on its domestic business as a top priority.

Fowler said: “It’s very important to me as the chief executive that we don’t allow the prospect of new markets to in any way negatively affect our primary market, which is right here in Canada.”

Learn more about Supreme Pharmaceuticals Inc at http://www.supreme.ca/ and on the CSE website at http://thecse.com/en/listings/life-sciences/supreme-pharmaceuticals-inc

CSE Issuer Stories, CSE Quarterly

MGX Minerals thinks outside the box in pursuit of grand goal

This story was originally published at www.proactiveinvestors.com on March 1, 2016 and featured in The CSE Quarterly.

The stated goal of MGX Minerals (CSE:XMG) – to put seven to ten mines into production over the next decade – is as ambitious as they come.

But speaking to the company’s CEO, Jared Lazerson, a philosophy begins to show itself that is different than that typically followed within Canada’s junior mining community.　It is certainly one that fits the company’s objective.

MGX does not embrace an exploration model aimed at defining an ever-expanding resource, but rather a more standard business model with near-term profit as its core objective.  Thus the vision of bringing multiple mines on-stream, and doing so as quickly as possible.  Or what Lazerson refers to as a “right into production model.”

The first property scheduled for production is Driftwood Creek, a 776 hectare magnesium project located in the East Kootenay region of British Columbia.

Magnesium is a mineral most people have heard of but few probably know what makes it useful.

In different forms, magnesium can do everything from strengthening steel to fortifying vitamins, and is also used for wastewater treatment.

Lazerson believes magnesium oxide (what the magnesite at Driftwood Creek would become after beneficiation and secondary processing) is suited to yet another application which is still emerging but could grow to be huge.

“One of the potential game changers in the magnesium oxide market is that it can be used as a replacement for gypsum in drywall,” Lazerson explains.  “There is in Asia very heavily produced magnesium oxide wallboard and this is a market we are moving on quickly.”

He goes on to explain that wallboard out of China is characterized by “a wide variety of qualities,” which means there is opportunity for a company with a reliable source of high-quality magnesium oxide to address North American demand for wallboard.

“It is being used in high-rise buildings and also in Florida and other areas where flooding is common,” says Lazerson, explaining that drywall containing magnesium oxide has parallels to cement products, absorbing some moisture but not losing its structural integrity when it dries out.

“In terms of where the massive growth in market demand for the commodity is, we are betting on that,” he says.

Magnesium alloy is a different story and, for the time being, not something MGX wants to target.

Like various other commodities, magnesium alloy’s is a market somewhat controlled by large players and governments.  Lazerson explains that the US maintains high tariffs to discourage Chinese and Russian imports, leaving the country with the highest magnesium alloy prices in the world.  “You have one market that is fantastic and then the rest of the world is reasonably priced.  It fits more into that space where there is sufficient supply globally to support demand.”

With the end user equation seemingly figured out, the question of what hurdles are left to clear before reaching commercialization at Driftwood Creek is an obvious one.  MGX announced in January of this year that a mining lease had been awarded for the project by the province. Separately, it received a permit to conduct bulk sampling of 100 tonnes of material at the site in the fourth quarter of last year.  Its road permit came around the same time.

“In terms of getting stakeholder sign-off – government, First Nations, local community – the mining lease required everybody to sign off, so that is a big step in terms of not running up against any major delays,” says Lazerson.

The bulk sample, he explains, “will allow us to put some hard economics to it – we will see really what it is and what it costs to operate in a true mining environment.”

Major steps to go include construction, meeting capital requirements, environmental permitting, and then obtaining the actual mining permit.  Anyone who knows anything about mining understands that while that might be a short list, the timeframe to check all the boxes is almost always tremendously long.

But Driftwood Creek has a major advantage in that production will not result in any tailings to speak of.  “We don’t have any tailings – we will essentially sell 99.8% of our product,” says Lazerson, adding that “our permitting will be tied largely to showing the public and government and other stakeholders that there are no tailings issues.”

If all goes according to plan, the mine could be in production before the end of 2016.

Looking beyond Driftwood Creek, MGX recently entered a purchase agreement to acquire a 100% interest in 96,000 hectares of property in Alberta.  The land package contains multiple oil and gas wells that the company says contain brines rich in lithium, potassium and magnesium.  It comprises six permits and six permit applications.

Like Driftwood Creek, the Alberta properties reflect an approach of acquiring projects with fairly well outlined deposits that can be put into production for initial outlays of no more than $50 million.

Lazerson explains that lithium, similar to magnesium, is a fit for the company mandate: “industrial minerals, Western Canada, low barriers to entry, low capex.

“We are going back into existing oil fields that are essentially barren.  You are at a 98% water to oil ratio, so there is some oil in there, but it is nominal compared to the level of brine.”

Risk management is another theme that runs throughout a discussion with Lazerson.

In discussing MGX’s commitment to operating in Western Canada he references his team at length.  “Everybody on the ground in terms of geology and engineering has done a tremendous amount of work in Western Canada and I can’t overstate how important an understanding of the local geology, community and infrastructure is – these are what allow　us to do things relatively inexpensively, but more importantly than anything, quickly.

“That’s what maybe sets us apart about the way we do business.  We consider time as the most expensive thing, and really the enemy of all that we do.”

Another pillar of the MGX strategy is a focus on industrial minerals with “a small footprint,” the reason being, according to Lazerson, that these types of projects tend to require smaller amounts of capital to put into production.  Driftwood Creek is a good example, and because it is a magnesium oxide resource there should be minimal environmental impact at the mine or in the processing.

Implied, if not directly stated, in all of this is the vision of establishing MGX as a company that walks the walk, if you will.  A company that gets mines up and running efficiently and makes money.  Once that track record has been established, attracting new projects and financing, not to mention all the other tasks that need taking care of in order to accomplish corporate objectives in this incredibly challenging business, would become that much easier.  Ambitious to be sure, but worth the effort.

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

CSE Issuer Stories, CSE Quarterly

Adaptability the watchword for Pasinex Resources

This story was originally published at www.proactiveinvestors.com on February 23, 2016 and featured in The CSE Quarterly.

“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change.”

The quote above is often wrongly attributed to Charles Darwin. But it does, I am told, summarise eloquently his seminal work ‘On The Origin of Species’.

It might equally be applied, in stock market terms at least, to the junior miners that have survived the recession that has decimated the industry.

Adaptability has been the watchword for Pasinex Resources (CSE:PSE), joint owner of the Pinargozu Mine in Turkey’s Adana Province.

It and local partner Akmetal set out in 2012 to compile a significant zinc resource – in the order 10 million tonnes – from claims staked around the historic Horzum Mine.

Pretty soon the cold harsh realities of life caught up with the companies, which luckily enough had a plan B to fall back on.

This was to mine high grade direct shipping quality zinc, crush it and send it off for export.

In a time where the capital markets have been shut to juniors such as Pasinex, the Pinargozu operation has provided manna from heaven – or at least a welcome source of working capital.

To date 16,000 tonnes of zinc material grading around 35% have been unearthed from this carbonate replacement-style deposit.

The extraction costs are currently around US$140-150 per tonne, while Pasinex and its partner receive “well in excess of US$200” a tonne for what they ship from Pinargozu.

With 120 people on-site, production is ramping up from 25-30 tonnes a day to around 60 tonnes.

This equates to output of around 20,000 tonnes a year. As capacity grows, so costs ought to fall.

Exploration work – the company carried out 12,000 metres of drilling last year – is aimed at finding and chasing high grade veins and delineating enough ore to keep the hoppers full.

“There was an old small-scale miner who went in and dug some high-grade zinc at very small tonnage,” says Pasinex chief executive Steve Williams, explaining how Pinargozu came into being.

“But that was clearly an indication that there was more high-grade zinc and that proved to be the case.

“We went in and started exploration and drilling. We found some very high-grade material and quickly realised there was the opportunity to get in and start mining.

“The horrible situation we have in the market and the terrible situation the exploration industry finds itself in was very much a driver for this.”

Located in the Taurus Mountains, Pinargozu is thought to be the sweet spot for a much larger zinc deposit.

In fact the area, which hasn’t been extensively explored using modern techniques, is itself a small part of a belt that extends into Iran and Afghanistan.

In a different world, one where the capital markets were open, share prices were buoyant and there was ready demand for new zinc projects, the Pasinex-Akmetal ground would have been comprehensively explored and its potential tested.

In the current environment compiling an independent resource estimate is a waste of time and money. When the wind changes Pasinex will adapt its plan of attack, says Williams.

In the meantime, it will look at methods to expand output a little further.

The commodity markets haven’t been especially kind to Pasinex. The price of zinc has come down to 77 cents per pound from around US$1.10 at its height last year.

Pasinex’s budgeting is done at 67 cents, which is more conservative than other operators out there.

But like its rivals it is operationally geared to an uptick in the price of the metal.

This could happen if the older, less economic mines continue to be shuttered. Glencore recently turn the spigots down – but then as Williams points out it could very easily push output up when the market conditions become a little more benign.

Demand for zinc might start nudging up in the latter part of 2016, but don’t bet on a recovery in the mining sector this year, says the Pasinex boss.

“Zinc I think will be one of the first metals to move; capacity is being removed.

“The [equity] markets? Well, I’m really not so confident. The big miners still have some big news to shake out. That will keep pressure on share prices.”

In Turkey foreign companies almost always take a partner. Pasinex’s Williams said he’s has had some minor differences of opinion, but the experience with Akmetal has been an “overwhelmingly positive” one.

The Turkish miner has been able to interact more astutely with the politicians than a foreign company might, while it has also been active and effective on the ground with the local population.

This expertise was used to good effect to fully permit and bring Pinargozu into production in about two years.

Practically, Akmetal had the plant and equipment needed to mine the deposit.

The country itself is caught on the fringes geographically but in the middle politically of one of the most volatile regions in the world.

Millions of Syrian refugees have flooded over the border since the hostilities began, and Turkey’s major cities are on red alert after a series of bombings.

But while Adana is near to the border, the mountain mine of Pinargozu remains isolated from what’s going on around it.

“We are in the northern part of the province so it is business as usual and we don’t see anything,” says Williams.

“But the country as a whole has been influenced by the conflict and in particular the refugee crisis.

“Turkey is a strong country, but in a difficult area of the world.”

Pasinex is an oddity on any exchange – a revenue generating mining junior that is able to survive under its own steam.

Is this recognised by the market? Definitely not at the moment. Neither is the long term potential of its zinc assets, or the copper property we haven’t even touched on.

But this is the harsh reality of life for the likes of Pasinex.

“This last three years have been very tough for us as it has for everybody,” says Williams.

“I think doing what we have been doing is the right thing for this moment in time.

“At some point we’ll get recognition for what we have done and the assets we have.”

Learn more about Pasinex at http://pasinex.com/ and on the CSE website at http://thecse.com/en/listings/mining/pasinex-resources-limited