All posts by Peter Murray

CSE Issuer Stories, Magazine

Critical Infrastructure Technologies: A Communications Solution for Disasters, Defence, Mining and More Prepares To Break Into the Big Time

One can hardly turn on the news these days without learning of some event around the world that has displaced large numbers of people and knocked out essential services.

While some debate the cause, one thing’s for certain: climate change is occurring. Armed conflicts play havoc with communications and power networks as well, of course. Getting communications back up and running in these environments can literally be a matter of life and death.

Critical Infrastructure Technologies (CSE:CTTT) is ready to help with a platform that lifts itself off a flatbed truck and sets up in extreme conditions, launching a communications network from atop a 16 metre mast so that residents, emergency workers and others can easily connect with one another again. Nexus 16, as the platform is called, has everyday commercial applications as well.

Chief Executive Officer Brenton Scott recently joined Canadian Securities Exchange Magazine from the company’s head office in Fremantle, Australia to discuss the many uses of Nexus 16 and the outlook for adoption by the industrial and government sectors.

It is not uncommon these days for unforeseen events to cut off power and electronic communications. What products do you offer to help companies and countries manage these situations?

You raised emergency services, in essence, and then there is also mining, and the third sector we are targeting is defence.

With emergency services, any natural disaster is likely to knock power out, and when power goes down, your fixed infrastructure goes down with it. Fixed communications towers generally have a four-to-eight-hour backup power supply, but after that you are going to lose those towers.

Telcos over-cater with their cellular networks such that operating radiuses overlap. If one goes down, another one can pick it up. But with a widespread power outage, it can all go down.

We provide a solution that is a fully autonomous, self-deploying mobile communications platform.  You can deploy it within 30 minutes and restore a whole communications network, using satellite if need be, or we can tap into a fixed communications tower that is operational about 50 kilometres away and bring the signal back. And if you put multiple platforms around, it will form a mesh network that creates a much broader telecommunications system.

Our platform basically gets moved around on a flatbed truck and will lift itself off the truck. The driver does not have to get out of the vehicle to deploy it in bad conditions. External systems can monitor and control everything.

The emergency application is clear. What about in mining?

As miners move more and more toward autonomous haulage, which is driverless vehicles, they need a stable communications network on site. Effectively, they need a 4G or 5G network to operate their vehicles.

If they have a communications blackout, and this happens in pits occasionally as the pit expands and deepens, they will experience black spots. If an autonomous vehicle goes through a black spot, communication is cut and every single vehicle in the train of vehicles stops. Big miners value stoppage in production in the millions of dollars per minute, so they can’t have this happen.

A lot of them put as many fixed towers around sites as possible. But as pits expand, they can’t put a fixed solution on the edge because the shape is constantly changing.

Our system is easily moveable, so if the platform is near a blasting area, for example, you just move it out of the way.

How about on defence?

Let’s use Ukraine as the defence example. The Russian Federation is targeting fixed infrastructure, so they are taking out power sources. That creates a communications problem both on the battlefield and from a humanitarian perspective.

We have had multiple meetings with the Ministry of Defence of Ukraine. Ukraine’s Ambassador to Australia has been to our office and seen a demonstration of the product. And last September, I went to Poland and met with members of the Ukrainian defence ministry attaché and showed them the product. We are in frequent contact to see how Nexus 16 could help and how we might get platforms to Ukraine.

The beauty of the product is that we supply a platform that goes up 16 metres, and it is fully mobile with a retractable mast. We are marketing it as a communications platform, so we put our radars and everything on top to provide a telecommunications network.

We were asked what else could go on top of the mast. The answer is anything that weighs less than 250 kilograms. It could be used as a surveillance system with cameras on it. You could put it up 16 metres to have a look around, and you could pull it back down and move the platform, just like a periscope in a submarine. You could put a drone detection system on top. You could have a mobile airport control tower.

Where do you see immediate demand coming from, and will there be ongoing demand from one sector and then event-driven demand layered on top of that?

We are moving from R&D into commercialization and are building our first two platforms. We have shown the product to a number of large mining companies in Western Australia and are in discussions with one of them to purchase one of the first platforms for a specific need they have.

The first unit sold to a big mining company would be a significant event, and we think we are close to achieving that. Once that happens it should give us traction in the mining field. And then we’ll build based on demand. We see mining being a big market for us.

On emergency services, we have met with the Western Australian Minister for Emergency Services and also with representatives from the Department of Fire and Emergency Services. They are fully aware of the problems in the event of a natural disaster. When the fires spread around Western Australia, townships were concerned there was no communications network to be able to warn first responders and residents of fires that were coming. The government should be buying platforms to cover the whole region.

The recent budget from the West Australian Premier revealed that during the last year, the state government received AU$11.1 billion in mining royalties, which works out to $30.4 million per day. If a cyclone hit the northwest of Western Australia and took out infrastructure at mine sites or at the port, every day they can’t load a ship it costs the state $30.4 million. They can buy 10 of our platforms and it is an insurance policy against $30.4 million per day.

With defence, we are working with Ukraine. We are talking with Australia’s federal government as well, which is looking to increase its defence capabilities. The government just brought out a strategic review and part of that is ensuring that the northwest of Western Australia has adequate infrastructure in place.

Because of the AUKUS agreement between Australia, the US and the UK, the three countries are working to provide much better protection in the Indo-Pacific region. We think there is potential to sell product into the AUKUS partnership as they take up occupancy in remote islands, for example, to make sure they have a presence and eyes and ears in the region.

Talk to us about the design challenges you overcame to ensure Nexus 16 was ready to work in tough environments.

The team came together about two years ago with lots of experience in communications. Our design challenges were around making it the size of a 20 foot sea container, and having four robotic legs that lift it off the truck and settle it back down and stabilize it to hold a 16 metre mast. Some people liken it to a Transformer – it comes out of this 20 foot shape and the whole thing comes to life with the push of a button.

We created a walk-in control room to house batteries and any other computer equipment required. There are dual generators with diesel tanks in case the batteries go down. We have a solar array on the roof.  

The tower can withstand near-cyclonic winds up to 140 kilometres per hour. And if the wind gets over a certain level, the mast will automatically retract to protect itself. We have more redundancies built into this product than you can imagine.

How does this all come together as a story that people should follow?

We think the product speaks for itself. Is the product going to sell? Absolutely the product is going to sell. It is a true global product targeting three very good sectors: mining, emergency services and defence.

It’s a product that is also recession-proof, in our view. Mining doesn’t stop. Miners continue to look at creating efficiencies within their networks to get their commodity out at the lowest possible price in the shortest possible time frame. When commodity prices weaken, they don’t stop. They keep producing but they look to improve their margins, and we are a product that can help them with that.

Emergency services will always be there. Natural disasters seem to be happening more and more often. We are in the right place to be able to provide a local solution for communications outages.

On defence, every single Western military is improving defence capabilities and looking at having redundancies in place. And we fit well within the defence sector.

Any investor is going to look at what the company does, what are their opportunities, what is their product, is it any good, is it scalable, do they think they can sell the product.  I think we tick a lot of boxes. We have good forecast margins, and we hope to sign our first contract soon. And our upcoming secondary listing on the OTC will give US investors easy access to our shares.

Now is the time that investors would be looking at us and doing their due diligence. We are pre-revenue but have de-risked the business and things are moving quicker than we thought. As we do generate sales and contracts and all of that, I would hope to see that reflected in our valuation.

This story was featured in Canadian Securities Exchange Magazine.

Learn more about Critical Infrastructure Technologies at https://citech.com.au/

CSE Issuer Stories, Magazine

TANTALEX LITHIUM RESOURCES: ENJOYING “BEST OF ALL WORLDS” AS TWO PROJECTS MOVE TOWARD PRODUCTION AND INITIAL DRILLING BEGINS IN LARGE LITHIUM CORRIDOR

Lithium is all the rage these days and for good reason, with the world going increasingly electric and viable sources of near-term lithium supply insufficient to meet projected demand. There are plenty of lithium exploration projects on the go, yet grade, location and other factors suggest few will go into production anytime soon.

Tantalex Lithium Resources (CSE:TTX) is in the enviable position of having a tin and tantalum project readying for production in Q1 2023, a lithium project heading for production by 2025 and a huge lithium pegmatite exploration project soon to see its first drilling ever. And expectations for the pegmatite project are high, sitting, as it does, near one of the world’s largest undeveloped hard rock lithium resources.

Tantalex President and Chief Executive Officer Eric Allard is a veteran of mining in Africa and knows well the country in which his team operates, the Democratic Republic of the Congo, or DRC. In a recent interview with Canadian Securities Exchange Magazine, Allard discussed working in the DRC and outlined timelines to production and exploration for the company’s projects.

Tantalex has three projects that collectively involve lithium, tantalum and tin. All are in the DRC and two are progressing toward production. Tell us about your experience in the DRC and the various aspects of working there.

The DRC is a very mining-focused country, so the procedures, regulations and administration for mining companies are clear. There is a mining code, a mining law and many mining companies operate there: Barrick is one, Glencore, Trafigura, ERG.  They focus mainly on copper and cobalt.

The DRC is a very favourable jurisdiction in that regard. The challenge is administration. Because mines in the DRC are so rich, and mining represents such a large portion of the government’s annual revenue, they don’t so much see the difference between junior exploration companies and producing companies. Moving forward as a publicly listed junior mining company can be challenging in the DRC because they are used to overseeing producing companies, and it is a different mindset.

Looked at another way, the DRC resources are so rich that they do not really look for investors either. Investors come to them.

We are fortunate because the DRC has stated that it is very interested in developing the electric vehicle battery metals space, lithium being one of the big elements. The biggest hard rock undeveloped resource was discovered a few years ago in the Manono area: 400 million tonnes at 1.65% Li2O, which is one of the most incredible LCT (lithium-cesium-tantalum) pegmatites ever. And that’s in the region where we are.

Because we are operating tailings reclamation projects, our speed to market and ability to bring our projects to production is a big advantage. Seeing as we will likely be the first lithium producer in the DRC, we are getting a lot of support from the government.

What about obtaining permits and finding skilled workers?

There are no surprises as you go along. As long as you follow the procedures, the government will act upon them. As an example, we recently obtained a mining permit for our TiTan tin and tantalum project.

As far as human resources, Manono is a fairly remote area, but because the DRC is a mining country, there are a lot of very qualified technicians, engineers and tradespeople available. That’s a big advantage compared to many other mining jurisdictions around the world that are suffering from serious labour shortages.

You just mentioned receiving permits for TiTan.  What comes next?

We had to work with the government on getting a better road to reach the project, and that is almost complete. We will be pouring the concrete foundations in December. It is a $10 million investment, and we anticipate two to three months for construction. Commissioning is scheduled for March, and the start of production shortly thereafter.

Can you walk us through TiTan’s economics and what this does for the company’s financials?

Production is planned to be 120 tonnes of tin concentrate per month and 20 tonnes of tantalum concentrate per month with a plant capacity throughput of 130 tonnes per hour.

On average, we are looking at about US$2.5 million to $3 million of revenue per month at today’s commodity prices, which would generate around $1 million to $1.5 million per month in net cash flow. The objective is to use it for the development of our other projects and also phase two and three of TiTan.

Talk to us now about the Manono Tailings project and the pegmatite corridor. Looking at maps of the projects, they seem to sit in a line.

They do, and that is a big advantage because our team can be working simultaneously on all three projects. The TiTan project is 40 kilometres southwest of the Manono Tailings project, so it’s all in close proximity.

Our flagship is really the Manono Tailings project. It comes from an old tin mine that operated from 1913 to the 1980s. The mine focused on tin and tantalum and never exploited the lithium. We bought into the tailings licence in 2018, and there are 11 dumps and processed tailings terraces. We conducted a drone topographic survey of the entire concession area and confirmed 105 million tonnes of material on surface.

A year and a half ago we identified where we would start drilling, targeting dumps with a higher presence of pegmatite, and we drilled on about half of the total dumps. We identified from our 13,000 metres of drilling a very interesting resource in the southwest portion.

We released the maiden resource for the Manono Tailings project on December 15 of this year, with 12.09 million tonnes at an average grade of 0.64% Li2O and a little under half already in the Measured and Indicated category. This allows us to proceed immediately with our phase one project to produce about 100,000 tonnes of spodumene concentrate per year at 6% Li2O (SC6) for an initial mine life of six to eight years. 

With SC6 lithium concentrate foreseeably selling above US$4,000 per tonne for the next six to eight years and extremely low mining costs, you can see why we are so excited.

We are aiming to be in production by 2025.

And the pegmatite corridor is pure exploration at this point, is that correct?

Yes, our focus is to get the Manono Tailings project into production as soon as possible and take advantage of the supply shortage in the lithium space to generate substantial revenue for the company. We have already initiated a feasibility study and environmental and social impact studies, and we are targeting the completion of the feasibility study by June 2023. A PEA (Preliminary Economic Assessment) will likely be issued in March.

The pegmatite corridor is the blue sky potential. It is a 25 kilometre corridor immediately adjacent and down strike to the 400 million tonne 1.65% Li2O hard rock resource I mentioned earlier. All geology indicates the pegmatites that formed the historical mine extend to the southwest onto our properties. There are showings on surface of the pegmatites, but the corridor on our properties has never been drilled. We actually just started drilling there. 

Let’s look beyond just mining for a moment. Tantalex supports community efforts in the DRC. What can you tell us about these and your motivation for being involved?

It’s a win-win. We are in partnership with the government with these efforts. The government relies on us to help NGOs and local populations, and by us doing so, it brings everyone closer.

It’s a case of becoming a citizen of the country. We are not there just to prove up a resource. The ultimate goal is sustainability.  And to have a sustainable operation when we plan to be in the DRC for the long term, we have to work with the community and help people as much as we can, and they will help us in return. That’s what we are doing right now, and it is wonderful to see.

This latest medical campaign that we’ve supported, involving an NGO called Upright Africa, is just fantastic. It involved medical teams coming in and providing health care. Founder John Woods is a retired US doctor and has been in and out of Africa for the past 10 years, in war zones and lots of situations.

The Manono area was a thriving mining community for 80 years, and when the mine stopped so did everything else. Manono was forgotten by the rest of the world, but because there is more mining now, there is more hope. Doctors came in, and they were able to inaugurate a new hospital and get operations going.

To see this happening not only helps people who are ill but gives hope to others. That’s what they need – they need to feel that somebody is there to help them out. The mortality rate for children under 12 is close to 40%. And they are dying from things that don’t make sense in 2022.

You are based in Canada, but the projects require a lot of expertise on the ground, and I see you had metallurgical work done in South Africa. Talk to us about operating advanced projects overseas.

I’ve spent most of my career on the ground, and our team is also very experienced in Africa. Most of the members of our board have worked or are still working in Africa. We have a team of about 100 in the DRC, so we have surrounded ourselves with experienced managers, operators and workers. For us, it is nothing new. It is just our normal area of work. It is very remote, and there are always the challenges of Africa, but it is our experience that enables us to operate there effectively.

Is there anything we have missed?

To summarize, we are a company which is a near-term cash flow producer for three extremely strategic commodities: lithium, tin and tantalum, and also one with blue sky potential for much more discovery on our additional 1,200 square kilometres of exploration concessions around Manono. I think we have great assets and great people, and the timing could not be better for us. It is the best of all worlds.

This story was featured in Canadian Securities Exchange Magazine.

Learn more about Tantalex Lithium Resources at tantalexlithium.com. 

CSE Issuer Stories, Magazine

InnoCan Pharma: Combining Cannabinoids and Cutting-Edge Science to Deliver Drugs on Target

Smart drug delivery systems that deliver medications to specific sites in the human body are on the leading edge of science.

This type of biomedical engineering focuses on maximizing drug efficiency and minimizing possible side effects, while reducing the overall amount of medication used and frequency of treatment.

Cannabinoids play a crucial role in regulating the immune system and have been shown to suppress inflammation through multiple anti-inflammatory pathways. Their high safety profile makes them an appealing alternative to many traditional drugs, according to Iris Bincovich, Chief Executive Officer of InnoCan Pharma (CSE:INNO). 

InnoCan is working to harness the unique qualities of cannabinoids and combine them with the latest in drug delivery systems. The goal is to deliver cannabinoids such as CBD so that more of it becomes available for the body to benefit from than with current platforms.

Bincovich recently spoke with Canadian Securities Exchange Magazine about working with university researchers on the combination of cannabinoids and innovative delivery systems, as well as the direction in which the company’s technologies are heading.

InnoCan recently reported the results of preclinical trials on dogs, using injections for both pain relief from osteoarthritis and for the treatment of epilepsy. What did you learn from these trials?

We learned that we can bring a substantially better bioavailability of CBD to the bloodstream.

The low oral bioavailability of CBD in people, at 6.5% to 20% of administered dosage, is a result of first pass metabolism in the liver and considered to be variable and dependent on fasting and fed conditions.

Together with The Hebrew University of Jerusalem, we’re developing injectable liposomal CBD formulations (LPT) that have already shown higher bioavailability of CBD and prolonged release to the bloodstream.

In a recent study, we’ve learned that the LPT showed close to 100% bioavailability of CBD and prolonged release for at least four weeks after one LPT subcutaneous injection.

In this preclinical trial, a dog with drug-resistant epilepsy was treated with InnoCan Pharma’s LPT injections. The results demonstrated that the frequency and intensity of the dog’s epileptic seizures decreased significantly. Since the last LPT injection, the dog has not had a seizure for over 10 weeks.

In another preclinical trial, six dogs suffering from osteoarthritis and treated with oral analgesics, but still experiencing pain, were administered a single LPT subcutaneous injection in addition to their routine analgesics. CBD concentrations were observed for six weeks following the liposomal CBD injection in the dogs’ plasma. Owners reported that the dogs’ pain and wellbeing scores improved for several weeks after the injection. The results show that the LPT technology has the potential to provide additional analgesia in dogs suffering from pain.

You’re starting by treating dogs for these conditions, and eventually moving on to the human side?

We’re gathering data for this purpose. We chose a big animal model for developing a drug and a treatment model. And yes, the veterinary industry is a potential market whereas the regulatory barriers are marked for the human pharma side.

In both pathways, veterinary and human, we see a lot of potential for the LPT technology to improve patients’ quality of life.

CBD-loaded exosomes (CLX) may hold the potential to regenerate cells. Could this work for conditions associated with the central nervous system?

Exosomes are small particles created when stem cells are multiplied. Lately, they are considered a very promising delivery platform for different molecules. The exosomes can be used as a delivery vehicle that can deliver cannabinoids to diverse target sites in the body.

Various cannabinoids were shown to protect neuronal cell death following their exposure to various oxidative stress damages.

We’re collaborating with Ramot at Tel Aviv University to develop a revolutionary cannabinoid-loaded exosome technology that may hold the potential to provide a highly synergistic therapeutic effect. This effect utilizes the regenerative and anti-inflammatory properties of exosomes and cannabinoids to target various conditions associated with the central nervous system.

What’s next for InnoCan?

The LPT platform development is now in the stage of collecting more safety and efficacy information, with a view toward human clinical trials.

From Q4 2022 going into 2023, we will commence targeting pharma veterinary companies, especially in the companion animal arena for pain management and epilepsy drugs, to initiate negotiation of licensing agreements.

In the three years since we went public, we’ve done an early exercise of warrants. Nearly 90% of our investors chose to exercise the warrants for total proceeds of C$9.2 million. We’re collaborating with leading scientific institutes, focusing on the development of the LPT and CLX drug delivery systems, to achieve our goals of presenting the market with more efficient and accurate delivery systems of cannabinoids to the body.

This story was featured in Canadian Securities Exchange Magazine.

Learn more about InnoCan Pharma at innocanpharma.com.

CSE Performance

Year-End 2022 Interview with Canadian Securities Exchange CEO Richard Carleton

With 2022 drawing to a close, the global financial community is looking back on yet another year of unprecedented activity across markets. Governments relaxed pandemic restrictions and wound down historic financial support for individuals and companies, just as interest rates surged in response to inflation concerns that proved to be highly warranted. Shifts in the geopolitical and security landscapes added to the uncertainty.

As always, volatility means difficult times for some and opportunity for others. The mining industry was in the spotlight to be sure, as prices for some metals weakened modestly, while others rose or remained strong. Cannabis rode expectations for regulatory change in the US to both the upside and downside.

The Canadian Securities Exchange took this environment in stride, leveraging competitive advantages that have underpinned its success by making it a popular listing destination for entrepreneurial companies from around the world. The year 2023 looks set to be transformational for the CSE, with several major developments on the horizon that are important for investors, issuers and the financial professionals who serve them to know about.

Canadian Securities Exchange CEO Richard Carleton sat down recently to discuss key accomplishments during 2022 and their meaning for the CSE, as well as to explore some of the changes on deck for 2023.

We have a number of important topics to cover, including some substantial developments set to take place at the CSE early in the new year. But before getting to these, it’s important to set the table with some thoughts on financial markets in 2022. Markets seemed more challenging to figure out than usual. What is the view at the CSE?

Well, I guess there are a few themes. The first is that mining is really driving the bus in terms of capital raised and generating the vast majority of our new listings. And different from some past mining cycles we have seen at the Canadian Securities Exchange, there is investor interest across a range of metals.

Rather than the traditional emphasis on precious metals exploration, we have seen a focus on battery metals: nickel, copper, zinc, cobalt, as well as lithium, graphite and rare earths.

Many of these companies are exploring sites where historic drilling took place. World prices for those metals could not support or commercialization of these deposits some years ago. I think it’s fair to say that given the increases in commodity prices, particularly when we consider them in Canadian dollars, the likelihood of producing mines being developed on these properties is higher than perhaps we have seen in earlier mining cycles.

On the other hand, we are seeing lower levels of trading activity on the exchange. Far fewer people working from home at this point, and I think the increase in interest rates has put a lot of investors in defensive mode, particularly retail investors. The decline in major indices, especially those tracking large technology companies, has also made people somewhat more conservative in terms of risk profile in my view.

The amount of money raised by companies on the exchange is also smaller than we have seen for the last few years. This can be explained by the fact that early-stage mining exploration companies are coming to market with relatively modest market capitalizations; they don’t need a lot of money to fund the initial phases of drilling they are looking to carry out. This contrasts with the large, integrated US cannabis companies coming to market a few years ago where single companies were raising several hundred million dollars in one go.

Overall, financing activity is robust, but it is not accounting for anywhere near the total sums of money that we saw in the latter part of 2020 and early part of 2021.

The CSE continues to pursue issuers from jurisdictions outside of Canada: Australia, Israel and the US are prime examples. Why these markets in particular and what are the plans for 2023?

I believe that one of the best things that Canada does as an economy is to provide public venture capital to early-stage companies. When we are looking at applying the services and skills we offer, we view, in particular, Israel, Australia and the United States as three dynamic places that support start-up companies. But in Israel and the United States, there isn’t a marketplace like the CSE that services early-stage companies with the focus that we bring to the table.

In the case of Australia, we have real interest from the mining community, especially with mining very much back on the minds of investors in North America. We can help Australian companies, that have maybe raised their preliminary capital in Australia, to access more of the global markets through a listing on the Canadian Securities Exchange. This makes them more accessible to investors in Canada, the United States and Europe. What we are looking for are dynamic economies generating lots of start-up companies, but where the companies are perhaps underserved by local markets in their effort to raise public capital.

The CSE has been working on a blockchain-based system for the clearing and settlement of tokenized securities. Where does the project stand and have recent developments outside the Exchange influenced your strategy?

We’ve made good progress on the technology. In fact, this summer we tested the full cycle of a trade with one of the dealers. That would be the trade, through clearing and settlement to all of the back-office processes that need to be completed in order to finalize a transaction. From that perspective, we have continued to make good progress.

It is fair to say that the crypto winter, or whatever you might call it, has influenced how we are thinking about this effort as we move forward. We have a lot of very credible people who are looking to tokenize securities to take advantage of some of the strengths of the technology, and we are continuing to work with regulators on a framework for that.

I think regulators will be conservative in their approach to tokenized securities in view of the situation with FTX and the knock-on impact on a number of participants in the crypto space. None of these, to be honest, are all that relevant to the traditional securities world, which is what we occupy. But, as I say, I believe it will make the regulators more conservative in terms of their approach with regard to thinking about some of the things that we are looking to achieve.

There are a number of job postings on the CSE website, mostly in customer support and regulation. What specific needs will the exchange be addressing with these hires?

A lot of the growth is taking place in our Vancouver office, and it is very much tied to the changes we are looking to implement in our listings policies. We have been working with the regulators and believe we are very close to coming to terms with the British Columbia Securities Commission and the Ontario Securities Commission on the approval of these policies.

The commissions are asking us to take on a larger role in overseeing a number of aspects regarding issuers listed on the exchange. For example, we will be launching a senior tier, which perhaps 80 to 100 companies will qualify for.

The way the regulations work, and exchange policies, is that these companies will be subject to closer scrutiny than the more junior companies. That is more labour intensive from the exchange’s perspective, and we have been staffing up to meet the obligations we are undertaking as a result of these policy changes.

The CSE team participated in several cannabis industry events in 2022, and you were recently named “Capital Markets Advocate of the Year” by the American Trade Association for Cannabis and Hemp. What is the exchange’s motivation to devote so many resources to the cannabis industry?  And what have you learnt about the cannabis industry that the market doesn’t know but needs to?

I think roughly 85% of the market capitalization on the exchange is in the cannabis space. They are our largest companies, our most mature companies, and they account for the vast majority of the revenues generated by companies on the CSE. So, it is a very important community for us to work with and to recognize and support.

There are also a significant number of private companies in the United States in the cannabis sector who don’t like the asset values being given in the public markets right now, especially in light of the decline in share price for many of the companies after Senator McConnell indicated that he was not going to support the SAFE Banking Act, which is liberalization of the rules around access to banking services for the cannabis industry. He suggested he would not be backing that during this session of Congress, and perhaps beyond.

In any event, there is a significant additional number of companies in the United States that we believe will be candidates for listing at some point, so we are trying to keep those relationships warm, even though valuations are not as attractive at the moment as they once were.

I will focus on some of the challenges the US cannabis industry faces in the capital markets. It is unique in the sense that, particularly for the US companies, about 97% of the shares are held by retail accounts. For a number of reasons, there is very little institutional participation in these names. For some it is because they are not listed on a national securities exchange in the United States, because their custodian refuses to keep shares of US cannabis companies in custody, because of volatility, or because they are operating in a state where cannabis is illegal. Many institutions have determined that it is not an investment they are prepared to make.

What that means is that there just isn’t the kind of long-term institutional holding of these shares, which I think has made them considerably more volatile, both up and down, than some of the other companies in their consumer-packaged goods peer group.

When people look at these big price swings, it is important to understand that this is not a Procter & Gamble or something along those lines, where you have a significant percentage of the stock held by institutions, fund managers or ETFs. This is all pretty much retail activity, and retail investors may not have the patience, investment horizon or approach that you would see from an institution. That’s fine, but people need to understand that the profile of these companies may be a little different when it comes to secondary market trading activity as a result.

Mining is another sector that is historically important to the CSE. In 2022, over 70 new mining companies have listed on the exchange. What makes the CSE such a good home for resource companies?

There are two things that I would highlight. The first one is that our team has a really good reputation with leaders in the entrepreneurial community, as well as the investment bankers and the accountants and the lawyers who service that community. We have surveyed these groups over the course of the year to get a better understanding of how they see us and our competitors. We see not only a high level of satisfaction, but a lot of repeat business from these professionals who have had a positive experience as they bring a company to market on the Canadian Securities Exchange.

That experience includes everything from the analysts reviewing files to our accountants. As one example, Francis Manns is an experienced consulting geologist who was extremely influential in the development of 43-101 reports for mining. He is now a resource at the CSE available to our issuers as they look to improve the quality of their public disclosure through technical documentation. He is a highly regarded individual and someone whom people in the industry look forward to working with.

The other piece is that our pricing is very amenable and responsive to the needs of the mining community. It is less expensive to list on the Canadian Securities Exchange than on other markets via IPOs and RTOs. We have long had a policy of providing cost certainty for companies. We are not looking to charge fees as a company raises money, for instance. We are not in the situation where we are nickel-and-diming our companies. They know at the start of the year what their budget is for maintaining a listing on the Canadian Securities Exchange and we stick to that. This is something the companies appreciate because they apply more of the money raised to advancing their projects, as opposed to putting it in the back pocket of the exchange where they happen to be listed.

I think the combination of those two things gives us a powerful leg up when it comes to attracting new business from the mining industry.

In October, the exchange launched the CSE2 trading venue. What exactly is CSE2 and what led you to launch a new venue in what appears to be a fairly crowded landscape?

This is a difficult question to answer quickly because it involves a grasp of evolving Canadian equity market structure. But I’ll give it a try.

An increasing number of brokers are providing zero-commission trading for their clients. People wonder how they get paid if they are not charging clients anything for the trading services they provide.

One of the ways is to monetize order flow from their clients. So, how do they do that?

Markets in Canada typically incent the provision of liquidity by providing a rebate to the party that posts an order that eventually trades. And they charge a higher fee to the party who accesses that liquidity by causing the trade to happen. It is known as “maker-taker” because one party makes the liquidity and the other party takes it. The maker gets a rebate and the taker is charged a fee.

All markets now have a second book which has an inverted price method in which the party who takes the liquidity receives the rebate and the party who posts the order is charged a fee. That way, the discount broker, let’s say, receives a rebate when they post a non-marketable order, and they receive a rebate in the inverted market when they trade against an order that is already there. That way they get rebates on their active orders and they get rebates on their passive orders.

Now, remember how important retail is to the Canadian Securities Exchange, and a lot of that order flow is coming from discount brokers that have reduced or eliminated trading charges over the last few years.

It is thus critical for us, if we are to maintain our price discovery role in the marketplace, to ensure that we continue to gather as many of the passive and active orders for companies listed on the CSE as we possibly we can. Yes, it is a crowded marketplace, but we are the listing exchange and we need to maintain that price discovery for determining the market value of securities at any given time. The alternative is to potentially lose that to marketplaces that are not having to absorb the expenses and regulatory responsibility to actually list the company. That is where we are coming from with CSE2.

One of the biggest developments slated for 2023 is the introduction of a CSE senior tier. How will this differentiate the exchange and what other activities are you planning to support this evolution?

There are really a few things, but I guess the first misconception I want to clear up is that this involves us somehow declaring war on other exchanges in Canada and making a pitch to a company like Royal Bank to delist from the Toronto Stock Exchange and come over to the CSE. It really isn’t that at all.

We have a number of companies on the CSE that would meet the admission criteria on senior exchanges in Canada. And we don’t want to be in a position where those companies are able to follow lesser standards of corporate governance, or longer periods to provide quarterly reporting to the marketplace as well as their annual audit results by virtue of the fact that they are listed on the CSE.

We are trying to put those companies on a level playing field with their peers that are listed on the other senior markets in Canada. We also, obviously, want to retain these companies. I sometimes speak about the Nasdaq back in the 1970s and the 1980s as one of our inspirations. They did such a good job working with Microsoft and Cisco and Oracle way back when they didn’t qualify for the New York Stock Exchange because they lacked tangible assets in the form of factories and steel mills and those sorts of things. All they had was intellectual property and engineers working to improve it.

When the New York Stock Exchange tried to attract Bill Gates and the rest of the senior leadership of the young tech companies in the United States, they told them they were not going to move because they’d had such a positive experience working with Nasdaq as public companies.

That’s the kind of approach we would like to take. We have worked with many companies that have succeeded and are growing. We want those companies to stay and continue to prosper on our marketplace and not go somewhere else simply because they qualify.

The other part is that we are interested in the opportunity to list ETFs and structured products. Looking at some of the other markets in Canada, they have robust structured product and ETF offerings that attract a lot of new listing activity. That is something that has not been available to us in years past, and we hope to open that capability and compete on a level playing field with other exchanges in Canada for that business. We think there are a number of products, such as a true cannabis ETF, that really do have a natural home on the Canadian Securities Exchange.

Let’s close on a look back and a look ahead. Talk to us about what it took to build the CSE to its current status, and what amongst your team’s accomplishments makes you the proudest. What should the financial community expect from the CSE over the next two or three years?

I’m going to work backward and start with the question about what to expect. The answer is not all that exciting, but I’d say to anticipate more of the same. That means the CSE grows quickly and we continue to be responsive to the needs of the corporate finance community in Canada, and particularly to entrepreneurs. That way, whatever industry sectors are receiving support from the investor community in Canada, we will be here to support them and provide them with fair, transparent and accessible trading markets for their securities. And then overlay that with the opportunity to compete for more structured products and ETFs.

What did it take for us to get here?  It is very much the team we built and the reputation it has earned through hard work and engagement with people across Canada, the United States and beyond. They achieve a very high level of customer satisfaction and repeat business – all of the indicators suggest that we will continue to be very competitive with our peers in bringing new companies to market, and really what it rests on is the people we have had around us for years. Our bench is deep and experienced. And we continue to add to it with people who are excited to join a group that did such a good job of building an exchange that is now a material part of the Canadian financial landscape.

There are not many other examples in the world of an alternative exchange like ours being successful and having the impact that it has had. I think that while all of us can take some pride in that, what we definitely can’t do now is to take it easy. It is still a very competitive landscape in Canada and beyond.

CSE Issuer Stories, Magazine

International Battery Metals: Technology to support clean, consistent lithium supply takes a big leap forward

Technological breakthroughs are where the big money is often made in the stock market, and International Battery Metals (CSE:IBAT) is a perfect example. As it entered the fourth quarter of 2020, the company’s shares could be picked up for around $0.10. More recently, those same shares have changed hands as high as $7.40.

It is a success story based on solutions in an industry crying out for them, one where inefficiency is clashing with a generational shift in consumption to create high prices and serious concerns about future supply shortages. Given the move toward greener economies, not to mention regional resource security, it might not come as a surprise that lithium is the prized product we are talking about.

International Battery Metals Chief Executive Officer Dr. John Burba can truly be described as a technology pioneer in the lithium extraction industry. Now at the helm of his own company, the pace of his achievements is only picking up momentum.

Dr. Burba spoke with Canadian Securities Exchange Magazine in late March about the company’s technology and how he sees it contributing to a better macro climate for the lithium industry, and the global environment, in the years ahead.

We will explore your technology and the company’s success in a moment, but can you begin with your view on the state of lithium supply and demand and how it shapes your strategy?

I’ll start off by saying that I think the lithium industry today is where the oil and gas industry was in about 1910. There are strong analogies.

If you go back to what was happening in the early 20th century, people did not really know much about how to get oil and gas out of the ground successfully. The process was very dirty. Pollution was ignored. It was just a nasty process. Of course, that has improved in the decades since.

The lithium industry is not that different. There are two major supplies of lithium today. There is hard rock mining, which is spodumene. Basically, companies are mining this in a variety of places and sending it to China for processing.

Then there is lithium extraction from brines, and you either have solar evaporation, which is very damaging, or you have FMC’s process, which I invented when I worked for FMC. That approach is better but still has drawbacks.

The industry has old processes that are not as efficient as they need to be, and significant issues on top of that with environmental damage. That is the backdrop to where we are. We have a tremendous shortage looming over us, and that is why prices are so high for lithium right now.

If the world continues producing lithium the way it does, the shortages are going to get worse. It will negatively impact the number of vehicles that can be produced and the number of batteries that can be produced. People will start using less efficient batteries and that is not going to be good for the transition we hope to see.

Can you quantify industry efficiency for us?

To give you a few examples, recovery rates for these processes are not very high. If you look at solar evaporation in Chile, they only recover about 20% to 30% of the lithium and the rest is wasted on the desert floor. FMC’s process recovers around 40% to 45% of the lithium.

Lithium is the only industry I’m aware of that tolerates such abysmal recovery rates. Most industries would be going crazy if they were wasting over 50% of their desired product.

So, these are the burdens that this industry is bearing right now. And the answer is not going to come from big established companies. They are simply not capable of, or not interested in, radically changing the industry so that it becomes efficient and responsive to the needs of the world.

In a recent press release, Universidad de Santiago de Chile stated that your technology is the “only one capable of separating lithium without leaving a significant impact on the environment.” Walk us through what differentiates your approach.

When you look at lithium extraction, one hears a lot about direct lithium extraction (DLE), and many start-up companies preach that as if it’s some new thing. The DLE concept actually began at Dow Chemical in the late 1970s and the 1980s, so that idea has been around for a long time.

Basically, it is about having a technology that can selectively pull lithium from the brine and let everything else go by. We are using a proven form of direct lithium extraction that is based on an absorbent that a friend of mine and I invented back in the 1990s. We have improved it since then, but it was groundbreaking at the time.

This material will selectively recover lithium from a saturated brine. And the selectivity is astronomically high.

The reason that matters is because there is not that much lithium in even the best resources. In that Atacama brine that everybody loves, you have about 2,000 parts per million lithium. If you look at Alberta, you are talking about 50 to 80 parts per million.

The lithium concentrations are low and you have to have something that will pick up the lithium and leave behind everything else.

We have improved our process so that – and we still have to prove this – but we are expecting to see recovery rates substantially higher than 60%. And we are hoping for recovery rates in the range of 90% to 95%.

The second thing is we intend to inject the brine back into the formation rather than putting it onto the ground and letting it evaporate. The problem with letting it evaporate is that you create salt flats all over the place, and salt is very detrimental to ecology.

The third thing, and perhaps the most important for jurisdictions such as Chile, is that our technology enables us to recover vast amounts of water. We will be recycling about 98% of our process water. In the Atacama, for example, they don’t recycle any water with solar evaporation.

What about the equipment itself? Are there positive environmental aspects to your physical footprint at a project?

We have been able to shrink the size of the processing equipment and that has allowed us to modularize and develop a mobile plant concept. We can put modular equipment in place, assemble it, turn it on and begin processing lithium in a short period of time.

When we are done, we pick up the equipment and eventually you won’t be able to tell that we were ever there. We can build one of these plants in months, rather than years.  

I will add that our omnibus patent for this mobile and modular process has been issued.

What is the status in terms of commercialization? And what is the commercialization plan?

I’m glad you brought that up, because if we can’t make money, we can’t do a good job on the environment. We have two contracts with a company called Scorcia Minerals. They have substantial resources and we have a contract with them in Chile and Argentina providing exclusive rights to use our equipment there.

Our arrangement sees us receive a royalty on final sale of the product. They buy the equipment from us on a cost-plus basis, we operate on a cost-plus basis, and we own 10% of each project.

We are focused on North America right now and I would say that in the next two years we intend to have one of our units extracting lithium in the United States. We also intend to build a lithium carbonate hydroxide facility in the United States so that we have a North American base for significant lithium production.

Once we are established in North America, we are also open to Africa, Europe and other places where they have good resources.

Give us a look at your future and where the industry is going. How big do you think you can get and how does your company maintain a leadership position?

We have passed a tipping point from the standpoint of transportation and electrification. In the first question, I made the analogy to the oil industry a hundred years ago. I think lithium is going to see a lot of the same drive that oil did.

Some people will ask why not sodium, or why not potassium? It comes down to basic chemistry. Lithium is the best. Its transport numbers are the fastest, which means it will zip across a cell very rapidly, and go into crystals very rapidly, and it has a very high half-cell potential. So, when you look at this, all of it bodes well for powerful, high-capacity batteries. It is not likely we are going to find a battery chemistry that works better than lithium.

And then how do we remain relevant? We have to do every one of our projects in a credible and honest way and we have to be successful in everything that we say. We are not into predicting. We want to do it and then explain what we’ve done. Our accomplishments need to be real and measurable. That is the kind of thing that serious investors like.

Anything we have missed?

Right now, the biggest driver of success in the industry is time to market. We have exceedingly high prices. If I can start today and have a plant operating in 18 months, as opposed to six years, I have already won the game. That is where the mobile and modular extraction comes into play. We can get in rapidly, and we can expand a facility rapidly. It is like LEGO – you just plug it in.

I’d also point out that high recovery rates and things of that nature flow through to low operating costs. And something we have not talked about is that capital costs for our modular system are substantially lower than for traditional plants. We don’t have to put in foundations or construct big buildings. We don’t have a cast of thousands to support 24 hours a day. This makes it much easier to finance a plant and that makes it easier for us to expand. These are the reasons I am very optimistic about our future.

This story was featured in the Canadian Securities Exchange magazine.

Learn more about International Battery Metals at https://www.ibatterymetals.com/.

CSE Issuer Stories, Magazine

The Yumy Candy Company: Healthy candy becomes a reality thanks to a team that does the right things for the right reasons

In today’s food and beverage marketplace, consumers demand healthy choices in all product segments. Candy is an item defined in many people’s minds by recipes laden with sugar, which is not exactly what one tends to associate with good health. But change is underway, and at the vanguard of this evolution is Erica Williams, Founder and Chief Executive Officer of The Yumy Candy Company (CSE:TYUM).

Vancouver-based Yumy Candy Company is a leader in better-for-you candy, not only because it is an emerging category ripe for new entrepreneurs, but also because it fits the kinds of goals that Williams and her team are committed to accomplishing.

In a wide-ranging interview with Canadian Securities Exchange Magazine in early December, Williams discussed her strategy for launching The Yumy Candy brand, the market it plays in, and why the company’s products are already segment leaders.

The better-for-you category is self-explanatory on the surface. But how big is this segment of the food and beverage industry and what drives a successful product and brand?

The better-for-you confectionary market is just getting started. It is not a trend. I think that is the number one thing I am asked. We are the first and only vegan and better-for-you confectionary company to go public, which is a huge accomplishment, and it gives investors and opportunity to invest in the future of the confectionary sector.

I think we will see more and more better-for-you candy companies IPO, as this is a growing space and still has lots of upside potential.

The better-for-you space has been growing substantially over the last five years. I’ve seen it with the shift from high-sugar products to low-sugar alternatives, and then it was from meat and dairy to vegan options, with initially the plant-based meat, and now the plant-based dairy industry taking off. I believe the vegan confectionery sector is just at the beginning of its growth.

In 2020, the global health and wellness food market was valued at US$733 billion and projected to increase to $1 trillion by 2026. In 2019, the sugar-free market in the US alone was a $1.88 billion industry. Over 60% of consumers say that working toward a more plant-based diet is the trend they are looking for.

What drives a successful brand is a winning product and a winning team, and I think we have both. At the end of the day, it comes down to what the consumer wants, and listening to what they are looking for. Innovation is key and that’s exactly what we’re doing here at The Yumy Candy Company.

Candy is a large and competitive market segment. What advantages do Yumy Candy products have? How did you decide on these and then develop products based on that insight?

I’ve been in the health and wellness space for a long time and have my finger on the pulse of what people are looking for, and that is essential to give your brand that edge.

One of the biggest competitive advantages is that we are really focused on taste and texture. Not only are Yumy Bears the best tasting, but they are also much softer and don’t get stuck in your teeth like other candies. You no longer have to sacrifice taste and satisfaction when choosing a better-for-you candy.

Going into our launch, we did extensive market research in the confectionery space and it showed that consumers are looking for new vegan and environmentally sustainable options that are better for human health and animal welfare. We realized there was a significant gap on the shelves. Being one of the first better-for-you alternatives in the aisle has given us a huge competitive advantage. Companies like Hershey’s and Haribo are slowly starting to make adaptations to come into the space, but hopefully by that time we have claimed the unclaimed market share.

The second competitive advantage of our products is that we are up to 92% less sugar than traditional candy. There is a huge trend toward low-sugar items. Most people are aware of how overconsumption of high-sugar products has negative impacts on overall health, especially for children.

And the third competitive advantage we identified is the movement away from sugar alcohols and artificial sweeteners, because they have been shown to influence blood sugar levels. We cater to the demand for great tasting, naturally sweetened products without using any sugar alcohols or artificial sweeteners. And then over the last two years, immunity and health has been at the top of people’s minds. Consumers are becoming more conscious of what they are putting into their body and that is another reason we are seeing people gravitate toward healthier confectionery options.

The distributors you utilize supply many of the largest food and pharmacy retailers in Canada. How extensive do you see distribution of your products becoming in terms of store numbers and over what period?

We wanted to make sure we partnered with distributors that have strong retail partners. We recently partnered with a couple of Canada’s largest distributors of quality health and confectionary products. That will bring us significant growth in sales and increase market share. Working with distributors with all of the major retailers in Canada, such as Whole Foods, Loblaws, Sobeys – they have distribution to over 7,000 vendor locations – we expect to be in thousands of locations in the next 12 months.

One of our distributors has been the main factor in establishing and distributing many great bands and companies in the confectionary space, one of which was recently acquired for US$360 million in our direct better-for-you space. Star Marketing, our other main distributor, has won awards for their relationships with retail chains such as London Drugs. We are excited that The Yumy Candy Company is well on its way to gaining tremendous market share in a relatively short period of time.

Walk us through sales to date and your marketing strategy. How important is brick-and-mortar retail compared to online sales?

Our sales strategy was to go directly to consumers. We wanted to get into the hands of consumers, let them taste the product and then let them decide. We conducted in-store product tastings, attended trade shows, went to local markets – every community event possible to get in front of our target customers. The feedback was overwhelmingly positive and we knew we had a winning product.

Our sales strategy was to establish a strong retail presence in a short amount of time and that was really to start with brick-and-mortar retail, and that allowed us to grow across Canada and establish that strong retail presence.

We also launched our e-commerce. Given recent events, people have stayed home and are looking to shop online, so we did them in tandem. We recently scaled into a large nationwide distributor, which allows us access to the large retailers in the country, as well as the largest volume of brick-and-mortar businesses. That has brought us double-digit percentage growth each quarter and we expect to see that well into 2022 and beyond.

Being a young female founder, I knew it was important to be omnipresent throughout our marketing strategy. We engaged in multiple layers of strategy, from influencer marketing with both macro influencers, or people with over a million followers, and micro influencers with more intimate but loyal followings. And we drove traffic through social media advertisements.

We also leveraged tried and true methods such as traditional product tasting teams across the country, in-store print advertising, billboards, and physical guerilla marketing like vehicle wraps. We see both brick-and-mortar and online sales as important, with an obvious trend toward online shopping, which is why we are currently scaling to different online platforms using traditional and new technological methods such as obtaining a large Instagram and Facebook footprint, SEO, online PPC and geotagging. But our product is a convenient grab-and-go snack and will always excel in the grocery, pharmacy, convenience and retail channels which we will continue to expand throughout the leading national retailers.

It would be great to hear some of the feedback from retailers and consumers.

We’ve got a lot of positive feedback, which is amazing. One of our main sources is product tastings on social media and strong relationships with our retail partners. Everyone enjoys the delicious fruity flavours we offer and the soft and squishy texture that does not get stuck in your teeth. People also love the variety of low-sugar candy and that we are 100% vegan. Overall, people love to have healthy treats that they can enjoy and feel good about eating, and that’s what we’re all about at Yumy Candy.

This story was featured in the Canadian Securities Exchange magazine.

Learn more about The Yumy Candy Company at https://yumybear.com/. 

CSE Performance

Year-End 2021 Interview With Richard Carleton Part 2

Earlier this month, CSE CEO Richard Carleton sat down for an interview to recap an eventful 2021 and what is shaping up to be the CSE’s biggest year ever in 2022.

It is fair to say that the CSE is moving to a new level in the global exchange ecosystem – it’s like the next generation of the CSE. A senior issuer designation is part of this evolution. Can you update us on its status and the importance of the new designation, both to CSE issuers and the Exchange itself?

I think I should start by explaining that there is no such thing as an exchange designation being senior or junior. The way securities regulation works in Canada is that it is the companies that are characterized as being senior or venture issuers.

On December 9, we formally announced a project in the form of a request for comment published by the BC and Ontario securities commissions. What this entails is a significant rewrite to the listings rules of the Canadian Securities Exchange.

There are two major facets to the project. The first one is that we are updating our requirements for junior companies, both at the entry level and to continue to be listed on the Exchange. We have worked with our regulators over the last couple of years to revise these rules.

The second part, which is grabbing all of the headlines, is that we are creating a senior tier of the exchange. This is not a new exchange or separate trading facility, but a designation for a certain number of our issuers who have achieved a certain size and maturity in terms of the development of their business. Do they have revenue? Do they have significant assets? Is their sales trajectory rising? Do they have a significant market capitalization?

We’ve identified some 60 to 80 companies that would qualify to list on similar exchanges in Canada, and we’ve also seen a move by companies to dually list with Nasdaq this year. So, we are creating a rule framework that will regulate these companies, in effect as senior issuers.

The new framework will require these companies to have larger boards, bring more prescription around corporate governance procedures, plus set shorter timeframes to complete quarterly and audited annual financial reporting. There are also a few other measures that the companies will have to abide by, including more supervision of their continuous disclosure to the market.

In return, we believe there are multiple benefits for issuers designated as members of the senior tier. The first is that we have been working with IIROC to ensure these companies will be included on IIROC’s list of securities that are eligible for reduced margin when in dealer inventory. Right now, when dealers are holding CSE issuers in inventory, they have to take a charge against their regulatory capital of 100 cents on the dollar. Companies trading at more than $5.00 per share will only have to have a charge against regulatory capital of 20 cents, which is equivalent to that on other exchanges in Canada that serve as a senior company marketplace. It sounds technical, but it will have a practical impact on reducing the cost of capital for these companies when they are raising money.

We’re also working with international index providers to ensure that these companies are eligible for inclusion in different indices. For example, the US multi-state operators, which in many cases have market capitalizations in the billions of dollars, could qualify for inclusion in one of the MSCI or FTSE US indices. We have companies operating in Israel that would qualify for inclusion in the Israeli indices. We have been working with the index companies to provide for this capability.

We’ll also have, as part of the senior designation, the ability to list SPACs (Special Purpose Acquisition Companies), exchange traded funds, and structured products. And that’s important because we know that there are a number of ETF manufacturers that would like to launch products that are US cannabis-oriented, and they could launch those products on the CSE. There may not be much room left to run in the SPAC space, but we also know that there are some interesting structured products that are being developed, and we think we are the logical home for those instruments.

That is all part of the Exchange competition to come, where we will be working with the creators of these products to provide an appropriate home for their new listings.

Read Richard’s latest blog post here to learn more about issuer designations and the request for comments on the CSE’s proposal to revise its listing policies.

The senior designation is obviously going to be a very important development. Considering this, the impressive financing activity, the consistent growth in both institutional and retail investor participation, and other factors we have discussed, can you talk to us more about your views on the CSE’s evolving position within the broader global financial marketplace.

It is very much an evolution. We have been at this for 20 years and have the benefit of a very experienced team, whether it’s on the trading, market information, or listings regulation side, who understand at a very deep level what it takes to provide successful exchange services to the issuer, investor, and trading communities.

What it has really been is a series of efforts by us to eliminate all of the barriers and friction points for our issuers in the provision of those services. If I think back some years ago, we weren’t accessible by the online discount brokers in Canada. That was a huge issue that we devoted a great deal of time and energy to, and then five or six years ago, we managed to overcome that hurdle. Of course, that had a big impact on turnover, accessibility, and the appeal of a listing on the Canadian Securities Exchange.

Now that we have a cohort of larger, highly successful companies that have achieved a significant level of development in their lifecycle, we are looking at the friction points there. I talked about membership in international indices. We also need to improve access for international investors, one example being brokers who provide access to Canada for accounts in Europe, Asia, the Middle East, and other regions. We have to ensure they have access to these names.

There are institutional investors who claim they won’t invest in the small-cap space and have concluded that anything listed on the CSE is small-cap in nature. We have to work with these institutional investors to educate them about the success that many of our issuers have had, and the fact that they have attained market capitalizations in excess of a billion dollars in a number of cases.

At the end of the day, it’s a case of keeping our nose to the grindstone. It’s doing the hard work, making the trips, representing the issuers, identifying the hurdles, and developing plans to overcome those challenges.

It really sounds like 2022 is going to be one of the most important years in the CSE’s history. Let’s conclude with your thoughts on what companies listed on the CSE can anticipate in terms of service enhancements in the new year.

In the first part of the year, we are going to be working with the industry on completing the comment period for the new listings manual project. And in conjunction with that, we are going to be quite vocal across a variety of channels, explaining to people that we have succeeded with a number of very large companies, so the marketplace can expect some promotion and information related to that.

As our customer base grows and our regulatory obligations and connection with the framework for the senior issuers grows, we will be enhancing the teams who work with our issuers and their advisors, in our Toronto and Vancouver offices in particular. It is incredibly important that we continue to maintain our service levels, which is a really important part of what we do. I have received tremendous feedback over the years regarding both the personal service levels people feel they get at the Canadian Securities Exchange and the very positive problem-solving culture within our group. And we are certainly looking to maintain that as we continue to build out the team in order to provide high levels of service.

And I know we have talked about it for some years now, but we will see settlement and clearing services from the Canadian Securities Exchange in 2022. In fact, I have just come from a demonstration of the real, live system which is up and running in our testing environment. So, that is something I think will give us a significant advantage, in particular when we are working with the industry on listing structured products and taking advantage of the benefits of tokenizing their securities.

Obviously, there is lots going on. As we know, there is also motion in the global securities world. We’ve got Cboe Global Markets, which has acquired the NEO Exchange locally, and they will be closing that transaction at some point next year. And so that really leaves us as the only Canadian listing venue, along with the TMX Group, being locally owned and operated. That is an advantage we will be continuing to present to the industry in 2022.

Check out Part 1 of the interview here.

CSE Performance

Year-End 2021 Interview With Richard Carleton

Anyone keeping an eye on developments at the CSE over the past several years has watched the Exchange go from strength to strength, with the number of listed securities, capital raised by CSE-listed issuers, trading volume, and other performance measures climbing sequentially without interruption.

As exciting as the growth in CSE performance and services has been to date, the Exchange is preparing to take things to an entirely new level in 2022. Key to this is a senior designation for larger issuers who meet certain criteria. The new designation, and the regulatory framework that comes with it, also means that ETFs, SPACs, and structured products will be able to list on the CSE for the first time.

In an interview conducted in mid-December, CSE Chief Executive Officer Richard Carleton discussed these topics and more, giving issuers and investors a preview of what is shaping up to be the CSE’s biggest year ever.

Companies listed on the CSE have enjoyed an excellent response to their capital raising efforts in 2021, with a total of $7.74 billion in financings completed in the 12 months to the end of November. We have seen equity raises of all sizes, and debt is becoming more prominent as well; in October, Trulieve Cannabis successfully marketed US$350 million in senior notes. The listing environment at the CSE is designed to facilitate a low cost of capital for the Exchange’s issuers. As larger fundraisings take place, is that advantage being maintained?

There is a lot of ground to cover there, but I’d begin by saying that the Exchange exists to remove as much regulatory friction from the capital formation process as possible, so there are advantages for CSE-listed issuers generally when they are raising capital. As an example, we don’t charge issuers a percentage fee of the amount raised each and every time they do a secondary offering.

In large measure, the decrease in capital costs we’ve seen is also a function of changing dynamics, in that capital is being provided to large and successful companies, particularly in the US cannabis space. For instance, some of these companies were able to launch debt offerings because they now have substantial revenues to secure the debt against. As a result, they have seen the cost of capital from a debt perspective drop to levels which begin to reflect companies of similar size and growth trajectory in the consumer-packaged goods sector.

It’s thus a function of how we operate as an exchange, but also an indication of how capital providers view many of the companies listed on the CSE.

At the end of November, there were 736 listed securities on the CSE, which is 17% higher than at the same time last year. Talk to us about some of the trends you have observed in companies coming to market in 2021.

The first thing is that we are likely to achieve a record in terms of the number of new companies that join the Exchange this year. Right there, that tells you that the market is very robust for companies looking to raise capital to go public. One of the interesting things is that it has been very broadly based. We have many new themes that people have been interested in.

The sustainable food movement is a good example of a sector where a number of companies have tapped the public markets this year. Obviously, the psychedelics industry has also captured a good deal of investor attention. And then there are long-standing industries, such as mining, which is back in a big way, not only because of the robust nature of precious metals prices but also because investments are being made in various industries to advance the electrification of the economy, or decarbonization if you want to call it that. This has a significant impact on the mining space because the demand for the minerals used to produce batteries is extensive. And, of course, companies are also looking to shorten their supply chains, so investments in projects located within North America, for example, have been accelerated.

We have also had a continuing robust marketplace in the cannabis space. We have seen some new issuers in this sector join the Exchange this year and significant amounts of capital have been raised.

In addition, there has been tremendous investment in technology, which provides us with esports, gaming, and the decentralized finance companies related to blockchain. From my 30 odd years of experience in the capital markets, this is really one of the few times I can recall when virtually every industry sector is firing on all cylinders.

There is potential to challenge another listings record in 2022 and surpass this year’s total. This is a very exciting prospect for me, as it shows there is a high demand for our services.

Explain the role of retail investors in the market in 2021. What impact did they have on trading and liquidity?

In a word, huge. The junior capital markets in Canada are traditionally dominated by retail investors. Retail participants have always constituted an extremely important part of the investing and trading community that supports the work of the Canadian Securities Exchange.

It’s no secret that there was an absolute explosion of retail trading activity, particularly in the first quarter of 2021. We’ve set records in terms of daily number of shares traded, transactions, and value traded. By any measure, we are significantly above any kind of activity levels seen previously. And that growth has been principally driven by the expansion of activity from the retail space.

When we talk to our colleagues, and particularly those in the discount brokerage sector, we’re hearing that a whole new generation of investors has joined the marketplace, and really just since the beginning of the pandemic. These newcomers skew significantly younger than the traditional retail investor population who were in the 55 and up category in the past. We have seen lots of new accounts opened with significant participation from people in their 20s and 30s. These are people who are investing in the markets for the first time, and they bring a different viewpoint. They were enormously important in providing capital to the cannabis industry. They are very focused on issues around sustainability and environmental impact, diversity, and helping create a better world. They want to invest in company stories they believe in and that are helping to shape that better world.

There are a number of longer-term outcomes we will see because of this. Things such as ESG (Environmental, Social and Governance) reporting from companies, as well as companies having to pay a significant amount of attention when presenting their stories to where they sit in the world of impact investing. I think it is healthy, it’s positive, and it’s going to introduce some important changes to the way in which companies raise capital and communicate with their shareholders.

Check out Part 2 of the interview here.

CSE Issuer Stories, Magazine

Entheon Biomedical: Data and DMT among the keys to creating safe and effective treatments for patients battling addiction

Entheon Biomedical (CSE:ENBI) Chief Executive Officer Timothy Ko speaks passionately about his company and its objectives within the burgeoning psychedelics industry, not only because he heads one of the most dynamic teams in the space, but also because he credits psychedelics with saving his life.

Following a childhood of challenges that continued into his adult years, Ko ultimately found peace of mind after psychedelic intervention enabled him to look at life differently than he had been, repair important relationships and, as he puts it, “learn to love again.”

Ko’s experience defined what is now a life mission for him. This shined through in an eloquent and authoritative discussion with Canadian Securities Exchange Magazine in mid-September.

It would be difficult to come out of a conversation with Ko not believing that there is something to psychedelic treatments for those working to overcome mental illness. It’s no longer about masking or dulling symptoms, but rather probing the drivers of problematic behaviour and replacing closely held, harm-inducing beliefs with new, healthier ones.

The specifics are best conveyed in Ko’s own words.

Entheon is researching and developing products to help treat addiction. There are already products on the market that are used for this purpose. What are you trying to achieve with your treatments that existing alternatives do not?

I think before I answer that directly, we first have to look at the treatment landscape for addiction as it currently stands. When we assess treatment options available for various addictions – be it tobacco, alcohol, or things like opiates – we see a rather bleak landscape where many of the treatments, though widely available, are not particularly efficacious.

And looking at the population, it is estimated that, globally, over 2% of the population struggles with an alcohol or illicit drug addiction. In spite of the options currently available for addiction recovery we still see hundreds of thousands, if not millions, of people die every year as a result of tobacco, alcohol and opioid use disorder. The reality is that many people are rendered treatment-resistant over the course of multiple failed attempts to address their condition.

Entheon believes that we can provide better outcomes for people who have not been helped by previous types of treatment. In our estimation, the treatment-resistant form of addiction is more common than generally thought, and Entheon treatments are designed for people for whom other forms of treatment have failed.

Entheon focuses on a fast-acting hallucinogenic known widely as DMT. Does DMT have advantages over other psychedelics for addiction treatment?

It’s important to demystify what psychedelics do. A really important observation of ours with DMT is that there is a feature that is present in other psychedelic molecules called entropy. Psilocybin, LSD and DMT can induce a state of heightened entropy, or randomness.

That might sound like a bad thing, but when you look at people with pathological conditions, there is often a degree of tunnel vision. These pathologies make it such that a severely depressed person, or an addicted person, is unable to look outside their normal frame of reference. Their reactions to stimulus or experiences are pre-determined, so you have this immobile state where they cannot envision a life outside of the one they have already experienced.

What DMT and other psychedelics do is to promote a state of hyper-connectedness. They allow individuals undergoing psychedelic treatment to enter a highly neuroplastic state that enables them to have entirely new experiences. In combination with therapy, they are able to experience old traumas, belief systems and memories, and rather than go to their pre-defined pathological reaction set, they are able to have perceptions that reshape their experience in a more positive way.

Where DMT is different is that it is very well metabolized by the body, which means the experience is short. Psilocybin is a bit of an unwieldy type of molecule to work with, as it is very powerful and the length of engagement is six to eight hours or longer. That window of engagement is commercially difficult to manage. And because these are such powerful experiences and the individual is often dealing with inherently difficult subject matter, the risk of an overwhelming experience is amplified.

With DMT, we can still facilitate powerful transformational experiences, but you have the benefit of being able to limit them to 30, 60 or 90 minutes. If we need to, we can stop the experience altogether and that person can return to a functional baseline in 10 to 15 minutes. If a person is having a difficult time with psilocybin, however, they are on that rocket ship for as long as the rocket has fuel.

In a recent news release, you discussed treatment algorithms through the Entheon IQ program. What is a treatment algorithm exactly, and what work is required to make the technology widely available?

The way Entheon sees the industry evolving is that there is a broad array of psychiatric conditions, as well as a broad spectrum of individuals appropriate for psychedelic use.

Not everyone will respond the same to different drugs. Different phenotypes will respond differently to different therapies.

What we are doing with Entheon IQ is taking a data-focused approach to look at what individual factors make different drugs and different treatment types appropriate for different individuals. We have acquired a company that has a genetic test that looks at a variety of mental health risk factors based on genetics, as well as a function of metabolic factors that dictate whether a person is more or less likely to have a strong or weak response to drugs. We believe genetics is a very strong component of ensuring that appropriate treatments are prescribed to the right people.

We are also on the verge of launching a study with a partner in Texas looking at different biomarkers associated with the ketamine experience, and we’re also looking at biomarkers associated with DMT.

Without generalizing too much, Entheon IQ and Entheon DNA are working to create biomarkers to help predict and direct appropriate treatments for individuals across a broad spectrum of psychedelic molecules and psychiatric disorders.

Talk to us about your business model. At what point does monetization become a reality, and how do you scale the business?

I think that’s a question that the entirety of the psychedelic drug industry is looking at. The reality is that, as promising as the research is, in the interest of patient safety these development processes are bound to regulatory processes of governing bodies where we seek to commercialize.

We will need to make it through various stages of clinical validation, then have conversations with regulators and ensure our research is done in such a way that the data is irrefutable and highly understandable to the authorities that ensure these products are safe and effective.

The development timeline as it pertains to this approval process is five to 10 years, and we believe that we can have a timeline on the lower end of that range.

But in an earlier time frame, we think the development of tools to service the ketamine space should commercialize sooner.

You have a strong and growing advisory board of accomplished professionals in the addiction treatment space. Tell us how you choose new members for your team.

Our advisory board is among the best in the industry. It is populated by some of the most prominent and well-researched members in the psychedelic research space.

The psychedelic industry is under the general umbrella of science, yet it is highly specialized and the pioneers are limited to a very core group. When we started Entheon, we wanted to make sure we worked with minds that understood the unique properties of psychedelics better than other scientists.

Unlike other medicines that work in respect to brain chemistry, psychedelics take into account poorly understood features of the human psyche that are only now beginning to be characterized. We really wanted to select advisors with the most comprehensive understanding of the features of psychedelic medicine.

Let’s close with a look at the industry in general. Do you come across misconceptions in the broader audience that you feel need to be cleared up?

The stigma associated with psychedelics often unfairly highlights radicalism or esoteric belief systems. There was a comprehensive anti-drug policy in the 1960s and 1970s that sought to vilify psychedelic drugs as potentially catastrophic to society and having no therapeutic value.

Rather than us having to dispel these myths, I think the research is truly bearing out a rebuttal to the notion that there is no therapeutic value to psychedelics. With each passing month, we see more research that shows huge transformational capacity to help people with end-of-life anxiety, nicotine addiction, as well as major depressive disorders.

We exist within a very interesting moment where on a purely scientific basis, not only are these substances not addictive, harmful or detrimental, but they may actually be the molecules with the therapeutic potential to disrupt a system that has seen very little innovation in the past few decades.

This story was featured in the Canadian Securities Exchange magazine.

Learn more about Entheon Biomedical at https://entheonbiomedical.com/

CSE Issuer Stories, Magazine

Ayr Wellness: Success is the outcome when everyone buys into a great strategy

Jonathan Sandelman, Chief Executive Officer of Ayr Wellness (CSE:AYR.A), takes interviews in a decidedly different direction than most CEOs. Rather than highlighting his company’s assets and achievements, Sandelman prefers to talk about the thing that, in his mind, most determines commercial success: corporate culture.

Ayr has big goals, and with nearly US$1.5 billion in assets on its balance sheet is well on its way to achieving them. The company expands organically thanks to exceptional product quality, and also through acquisitions, which can be tricky at the best of times.

But at the end of the day, if everyone at Ayr embraces Sandelman’s philosophy, and everyone pulls in the same direction, that’s the edge needed to come out on top. It’s an old saying in the investment industry, where Sandelman rose to become President of Bank of America Securities, that if you can’t tell someone what your edge is in just a few seconds, you don’t have one. Sandelman knew what Ayr’s edge was the day he established the company.

We connected with Sandelman in early July to discuss Ayr’s growth to date and the foundations of his confidence about its future.

Ayr has a very clear vision of where it is going and how it intends to get there. Talk to us about Ayr’s mission as a company and the corporate culture you need to make it a reality.

Our goal and mission statement at Ayr is to be the largest scale producer of high-quality flower in the United States. We don’t mean to insinuate that there aren’t smaller, boutique growers that grow really high-quality flower. But in the large MSO arena, we think one of the things that differentiates our company is our cultivation of high-quality flower at large scale.

Now, why is that important? First of all, in business you need to do something that differentiates your brand. In business school, we were taught about the unique selling proposition – what differentiates your brand from all other brands?

When we think about the industry and when we listen to our competitors, they talk a lot about branding, being a CPG (consumer packaged goods) company, and they are very focused on their box. “How does my box look?”

At Ayr, we tell our teammates, those in the marketplace, and our investors that it’s not about the box, but what’s inside the box. We believe that any time you underestimate the consumer, who has choice, who has multiple alternatives to consider – and for sure this industry is going to get more competitive – when you underestimate the consumer, I don’t care what business you’re in, you’re making a mistake. Because they know.

When I started my career as an investor, I typically bought into companies I thought had the best product in that category.

A lot of people in business want to be like Nike and Apple. I don’t buy Nike because it’s in an orange box. I buy it because I’ve been a marathoner and what’s inside the box is what motivates me to buy their product. When I think about Apple, while I think they have beautiful white boxes, I buy it because it’s the best laptop or phone. If it was simply an orange box or white box without being the best product, I wouldn’t buy it.

In Pennsylvania, we had our first harvest, our first flower for wholesale and our store shelves. The market tried our product and it sold out in a week. The consumer knows. We aimed to produce the highest quality flower in a market lacking high-quality product and it sold out in a week.

And then we recently introduced our Seven Hills flower brand. Again, consumers recognized the quality of our product and it sold out in a week. That’s why our focus is on growing the best quality flower.

Acquisitions are an important part of Ayr’s growth strategy. How do you assess potential acquisitions, and how do you successfully integrate acquired businesses?

We identify early on which states we want to build our businesses in. Then we have our M&A and strategy teams go into those markets and try to find the best assets. I’ve said from day one that the way I want to build this business is to cluster and penetrate. I like contiguous states so that when the consumer travels into a nearby market, they may not know the brands, but then they see the Ayr brand and they know what that stands for. They are going to buy Ayr even when they have other choices.

Equally important, that seller, who will remain with the company in most cases, must believe in our ethos. They must believe in honesty, integrity and transparency, and have values consistent with ours.

With talent, you win. For me, the companies that have the best culture, the best vision and the best talent pool win. The perfect transaction is one where we get a great asset as well as more team members.

Ayr was incorporated in July 2017, yet you have hundreds of millions in revenue and some US$1.5 billion in assets. How did the company grow so quickly?

I’ve been an investor and an operator for more than 30 years, with a deep understanding of the capital markets. I told my investors that Ayr would be EBITDA positive and cash flow positive from day one. That’s the disciplined way to act.

We would be disciplined because we understood that the public markets are cyclical. We thought we could be more aggressive when a correction happened and assets got cheaper because we were EBITDA and cash flow positive.

That’s exactly what you saw us do. We bought our initial companies, we paused for 13 months, the correction happened, and then we got aggressive about certain companies. It’s my belief that this once-in-a-lifetime opportunity to buy assets at bargain prices will eventually go away. There will be some form of federal legalization, and then what I call the “wall of money” will come in. It will flood the market and these multiples we are buying at today will trade even higher.

We are still aggressive about buying because I don’t think this will last even another year or two. That is the thought process behind what the future will bring for Ayr.

Given your background in finance and understanding of the cannabis industry, what is your outlook for the next five years and how does that shape Ayr’s business strategy?

I expect federal legalization of this industry because it is irrational that it’s not already legal. When almost every state in the US has some type of cannabis program, does it really make sense not to be federally legal?

For those who are uncertain about cannabis, I would vote for the SAFE Banking Act because it puts controls around the industry and creates insight and transparency that doesn’t really exist on the federal level. If you bank this industry, you know all the cash flows, from where the money is coming and where the money is going.

If you think about where alcohol is trading in terms of multiples, there is a lot of upside in our industry’s multiples and in individual stock multiples.

Ayr news often highlights acquisitions or new retail locations. Talk about the team and the dedication it takes to operate successfully at the pace you set.

I’m a believer in a culture of excellence. I’ve always had this philosophy that talent is free. That whatever I pay, or our shareholders pay, the rewards they are able to produce are just spectacular. Even when we were just a two-state operator, we had some of the best EBITDA and cash flow in the industry.

I think about the vision, what talents are required, what are the job functions, and then I think about who that type of individual would be.

It’s culture. You can’t just be the smartest person in your lane, you also have to be an extremely respectful person. When we’re in a meeting and I’m pushing you, you always understand that I am not pushing you to herd you, but to get you to think at a pace, at a level that you haven’t been able to in the past.

When I hire people, I always tell them my goal is for them to say to me a year from now that they’ve become the best version of themselves. There is something about this culture and this team that inspires them to do their best work and be the best person they have ever been in business.

I think our culture is the secret asset on our balance sheet. If the 1,500th person has the same vision as the people at the top, and we have 1,500 pairs of oars all rowing in the same direction, toward the same vision, then we win.

You are talking to me for this interview, but I am getting too much credit. I am the one talking, but it’s because we have a great team. We have built the best operating system and tech stack so we integrate these companies seamlessly. The people are so talented, and the systems and controls are so good, that we make it look easy. But it’s not.

Ayr is its people, and its dedication to its teammates, to its community, to its shareholders. That’s the ethos of this company.

This story was featured in the Canadian Securities Exchange magazine.

Learn more about Ayr Wellness at http://www.ayrwellness.com