All posts by Peter Murray

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

CSE Issuer Stories, Magazine

Kuya Silver: Near-term production, exploration shape a game plan based on a proven path to the big leagues

When putting together the business plan for a new company, incorporating lessons from the leaders in your industry is always a good idea. David Stein worked as a mining analyst beginning in the early 2000s and was among the first to initiate coverage on marquee names such as First Majestic and Fortuna Silver. When he decided to establish an exploration company of his own, he understood the models that tended to position small companies to become billion-dollar players.

Focusing on high-grade silver projects with the potential for near-term production, Kuya Silver (CSE:KUYA), where Stein is Chief Executive Officer, is active in Peru and Canada, two of the world’s most prolific jurisdictions for precious metals production. With a healthy treasury, a balanced approach to its projects and a strong silver market, the company is ready to begin putting its plan into action. Stein shared his strategy of silver production and ongoing exploration with Public Entrepreneur in mid-February.

Kuya is obviously silver-focused. Before we get into your two projects and the outlook for each, tell us why you chose silver.

It really comes down to finding an exceptional project and it just happened to be a silver project. I found the Bethania Mine opportunity in 2017, and while my background is in all sorts of different minerals, precious metals are the main ones.

As I started looking more into the silver mining industry, I noticed there was a huge opportunity because many of the intermediate and large silver players from 10 or 15 years ago had diversified away from silver and more into gold. Now there is this sort of a void in the industry where if you want to invest in a primary silver mining company there are very few options. The opportunity to have this exceptional project and be able to get into production quickly made it all the more exciting. 

Your plans for Bethania call for putting a local mine back into production and at the same time doing exploration to help with mine planning and resource expansion. How did you come across Bethania, and can you talk about the thinking behind this two-part plan?

In terms of how I found it, I went out on my own after being in the industry on the investment side for 15 or 16 years and was looking for projects, mostly privately owned opportunities. During the bear market I had focused on private equity as a niche within the mining sector. Bethania was one of the projects that came up.

In terms of the business plan – restarting the mine, putting our own plant there and increasing production – that evolved over the course of negotiations with the former owners. Initially, they were really looking for someone to put a little money in for a minority interest and help them with some financial issues. It didn’t interest me as a minority investment, but if we could take control, there was a chance to do something special. I saw the potential to get enough silver production from this mine to make it into a meaningful public company one day.

I was a sell-side equities analyst in the early 2000s and one of the first analysts to cover some of the important silver companies. To me, this opportunity reminded me a lot of those: start with a high-grade silver mine with low capex that you could put into production quickly and easily. Then, by bringing better access to capital through the public markets, you could grow production, reduce costs, do more exploration – all those good things we plan to do.

If you look at the genesis of First Majestic or go back even further to the first projects that Pan American acquired in Peru, these very big and successful multi-billion-dollar companies all started with a single high-grade silver project. That was the beginning of the journey.

Peru has a long history of mining. What is the plan for community support and sharing the benefits with the people who live in the region where Bethania is located?

Peru is a very diverse country with different communities and types of environment. We are in the high Andes in central Peru, so we are in an area that is very accustomed to mining. As a recently producing mine, there is already acceptance of Bethania and a culture within the local community to support it. The community that has jurisdiction over the mining area is Poroche, and we are still in the process of working out what the people want to see over the longer term. The community has been very helpful, and I think they believe in the benefits of having more activity in the area and would prefer that the mine be operating.

One noteworthy aspect of our relationship is that we were able to receive our environmental impact assessment approval for the new plant and tailings storage. In order to do that you essentially have to get approval from your local community before you submit your paperwork to the government. There are site visits and other aspects of a legislated process. So, you work with the local community and essentially earn its support before permits can be granted. I think that demonstrates we are on a strong footing.

Your other project is located in northeastern Ontario. It has some very nice silver numbers and some cobalt in the mix as well. What is your plan there?

There are two parts to that deal. There is a part where we are buying a section outright, which is the Kerr Project. It represents about 10% of the First Cobalt land package and is the most advanced part. It is where most of the historical drilling is.  We have most of the data, and most of the high-grade silver hits are in that area. We see that as the part we can potentially get into production first. The other 90% goes into a joint venture.

This means there are two strategies. With the Kerr Project, we are looking to follow up on historical high-grade silver intersections and look for extensions of some of the known mines. There have been more than 70 million ounces produced in the area we are buying. We would like to find potentially some new veins and get them into production, at a similar scale to what we are doing in Peru.

And that is the link for us from Peru to Ontario, that the history of the Cobalt Camp is this super high-grade mineralization mined at a small tonnage. We want to produce a lot of silver but not necessarily go through a lot of rock. And we feel we can do that in the Kerr area.

With the joint venture, the opportunity is to find another collection of veins. If you look at the whole camp, the 400 million or 500 million ounces produced historically from this part of northeastern Ontario is in clusters of 50 million to 100 million-plus ounces of silver. With the joint venture we want to find a new cluster.

Do you have any closing thoughts, perhaps something we’ve missed or a statement that encapsulates how investors should think about Kuya Silver?

I would highlight that we are very focused on restarting production and becoming a profitable silver mining company in Peru. But we also feel that we have exceptional exploration potential with our property there. In 2021 and beyond you’ll essentially see us on two parallel tracks: one will be mine development and getting into production, and the other will be drilling and working to find the resource that underlies production for another decade or more. And we think we can do that in the next year or two.

This story was featured in the Public Entrepreneur magazine.

Learn more about Kuya Silver
at https://www.kuyasilver.com/

CSE Performance

Year-End 2020 Interview With Richard Carleton

Earlier this month, CSE CEO Richard Carleton sat down with Peter Murray of Kiyoi Communications to recap an eventful 2020 and discuss the coming year for the exchange.

Scroll down to read the full transcript of Part 1 of this interview. For ease of navigation, a list of hyperlinked topics is included below.

1. Leading through COVID-19

2. The role of Initial Public Offerings (IPOs)

3. What was funded in 2020

4. CSE’s contribution to the mining industry

Leading through COVID-19

PM: We spoke in the summer about leadership in the COVID-19 environment. Do you have any new observations to share from the past six months?

RC: The themes are basically the same as we talked about over the course of the summer in that we have done an excellent job – and not just at the Canadian Securities Exchange but the securities industry in general – to provide a high level of service while dealing with the staff dislocation caused by the lockdown orders, bans on non-essential travel, and so on.  That has certainly continued through the fall and now the winter.  We have a small team onsite in Toronto, primarily on the technology and market operations side.

We have transitioned most of our business development and education capabilities – all of them really – to virtual events.  And we concluded in late 2020 the Mining Over Canada project where we created more than 60 hours of content over the course of five or six weeks, which is available on our YouTube channel and various other social media platforms.  That was a wonderful collaboration with thought leaders and issuers from the mining industry.  It was a tremendous amount of work and kudos to Anna Serin and her team for putting the program together.  I think people in the mining industry really took note of our encouragement and support for the sector and we look forward to building on those relationships in 2021.  The landscape continues to be very favourable for mining and it’s a sector of the market we have high hopes for this year.

The role of Initial Public Offerings (IPOs)

PM: IPOs have gone from being very infrequent just four years ago to a listing approach of choice today.  Talk to us about how companies are coming to market and what the CSE feels the most efficient approaches are.  Also, are there any misconceptions that need to be set straight?

RC: The IPO was almost dead three or four years ago, and as you mentioned we now see the IPO as an increasingly common route to market.  I think there are a few drivers behind that, but every situation is unique, and for me to say the IPO is superior to the RTO in all circumstances would not be accurate.  Each company has to figure out in the context of their financing what the lowest cost of capital is, what approach will provide the best post-listing liquidity profile – there are a lot of considerations that go into it.

But historically, the concern has been that the IPO takes longer, costs more and introduces significantly more risk into the transaction because of the time it takes from the decision to launch the IPO to actually getting there.  There is also the side benefit that if you do an RTO and are able to get the growth capital required through a private placement supported by a relatively small number of investors, the management team is not having to lose focus on the day-to-day business of the company as they might spending time on the road selling the securities being qualified by the prospectus.  That is a significant consideration for some companies when they decide to do an RTO.

I think it is becoming better understood that there are a number of dealers who are in a position to handle IPOs and they have a lot of investors in place ready to support certain types of companies.  As a result, their sales effort may not be as challenging as it has been in previous market cycles.  And I think post-listing price performance and liquidity can be better with an IPO because you have investors who considered the company and have made the decision to invest in it.  With an RTO, the target can be in a completely different industry.  We  saw a lot of companies that had been mining companies and turned into cannabis companies overnight.  The original shareholders bought into a mining company, not a cannabis company; that can create an overhang that impedes price out of the gate.

So, there are many different considerations.  I think it is healthy that we are seeing more IPOs because that gives people broader access to investment opportunities.  You don’t have to be an accredited investor to invest in securities that are being qualified by a prospectus, and the more people who are able to participate in the growth of these companies, the better off and the healthier the public capital markets will become.

What Was Funded in 2020

PM: The stock market in general was robust through much of 2020.  CSE data shows financings and trading volume in particular at strong levels for yet another year.  Walk us through some of the numbers, and also discuss some of the internal achievements that people might not necessarily be aware of.

RC: The principal takeaway from the numbers is that financing activity was extremely healthy for the year beginning around late April.  That continued through the course of the summer.  There is often a drop-off in July and August, but in 2020 there was no such effect.

As I mentioned a moment ago, from a dollar perspective the cannabis industry was the largest fundraiser on the exchange.  However, in terms of the number of individual financings, the mining industry was by far the leader.  It’s not surprising, given concerns about incipient inflation brought about by the enormous monetary creation by central banks in developed economies.  As a result, we have seen a tremendous amount of investment activity in the precious metals space.  There is also the expectation that coming out of the pandemic, governments will invest significant amounts in infrastructure, and that means commodities such as iron, copper and other components of steel are going to be in high demand.  We are already seeing spot prices of these commodities increase quite nicely.

There are also concerns about supply chains, where people would prefer to source materials from jurisdictions that are more politically stable than others.  So, people looking to rationalize supply chains and shorten their delivery cycles are encouraging a lot of activity in the North American mining space in particular.

PM: Let’s look a little more at this continuation of strong financing activity on the exchange.  Aside from mining and cannabis, was their notable investor interest in any particular sectors?

RC: For obvious reasons healthcare technologies, and telehealth in particular, are industry categories in which companies performed very well over the course of the year.  It’s not something we would have predicted to that extent going into the year, but when the pandemic began to really take off it was a timely area for these companies to be in.

As far as psychedelics go, we have around 30 companies pursuing different business opportunities in the space.  We first began to hear rumblings in 2019 that people were going to be looking to advance the cause for psychedelics, particularly as a treatment for substance abuse, anxiety and depression.  I’ve had the opportunity in my position to learn from the industry’s thought leaders and the takeaways are fascinating.

There is a meaningful body of clinical research dating from the 1920s through the 1950s for substances such as LSD, psylocibin and ketamine.  The clinical indications were incredibly positive for some of these therapies on depressive illness that had resisted other kinds of treatment.  It was really the war on drugs that pushed these substances into the background and ended research into the space for the last 70 years.  We are now in a position where researchers will be able to continue that work.  I’m confident that we will see supervised therapies involving these compounds achieve important breakthroughs on multiple illnesses that have been very challenging for traditional pharmaceutical companies to appropriately address.

PM: The growth in aggregate market capitalization on the CSE in 2020 was exceptional, and as of early 2021 it has surpassed $50 billion.  Walk us through the reasons for the increase and your thoughts on growth in the years ahead.

RC: For us, the significant increases in market capitalization are almost entirely due to the US multistate operators in the cannabis sector.  The top ten operators in the United States are listed on the CSE and they contribute a significant percentage of that $50 billion.  Curaleaf, which is our largest company by market capitalization, as well as by revenue and some other measures, passed $10 billion in market capitalization just the other day.  It’s fascinating to see the growth in these companies.

It’s going to be interesting with the political changes in the United States, with the Democrats now controlling the Senate.  A lot of these companies have been on a tremendous run on the belief that the Biden administration will oversee liberalization and potentially the de-scheduling of cannabis from the Controlled Substances Act.  My take is a little less bullish. I think there will be liberalization of banking and potentially tax measures associated with the industry, but I don’t believe that either Mr. Biden or Ms. Harris have full support from their party to make new cannabis laws a central piece of their legislative program.  I think a number of longstanding issues will be addressed, but I’m not sure we are going to see full-on de-scheduling of cannabis in the United States, certainly during the first two years of the administration.

In the meantime, progress continues at the state level, with New Jersey having voted to legalize, and New York and Connecticut appear on track to legalize cannabis for adult use in the coming year.   We’ll probably see recreational legalized in Pennsylvania at some point in the next year or two.  These are really big populous states, and the companies that have real scale will have the opportunity to expand their businesses as a result of work at the state level.  These companies will likely continue to grow at significant rates.

CSE’s contribution to the mining industry

PM: I want to go back to Mining Over Canada, as there was so much to learn from the series, and it will have significant educational value for investors for years to come. Talk to us more about how it developed internally and some of the insights that came out of it.

RC: Mining Over Canada was really the culmination of other virtual events we had done earlier in the year.  One of the things that struck us early on was that everyone is working from home, so these highly respected investors and company leaders, they are available – we can call them up and get 15 or 20 minutes for a video segment with them.  I think back to an interview that our James Black did with Howie Mandel early in the pandemic in support of Howie’s charity, which helps provide personal protective equipment to healthcare professionals in North America.  James was thanking Howie for his time and he said, “Hey, I’ll give you as much time as you want.  I’m just here, you know.”

We had a similar experience with Mining Over Canada.  We approached a number of thought leaders – whether it be analysts, investors, or leadership at our issuers – and they were extremely cooperative and generous with their time and guidance.

One of the things we really wanted to help emphasize is just how important the mining industry is to the Canadian economy, not only in historic terms but in the present day as well.  And how Canada can leverage its leadership in public finance for the industry to service the wave of demand coming from the industry.  Whether it’s significant increases in infrastructure, desire to shorten supply chains, new demand for minerals brought on by the electrification of the economy – mining is going to be at the forefront of a lot of thinking and investment in coming years.

Check out Part 2 of the interview here.

CSE Performance

Year-End 2020 Interview With Richard Carleton Part 2

Earlier this month, CSE CEO Richard Carleton sat down with Peter Murray of Kiyoi Communications to recap an eventful 2020 and discuss the coming year for the exchange.

Scroll down to read the full transcript of Part 2 this interview. For ease of navigation, a list of hyperlinked topics is included below.

1. Changes at the board level for the organization

2. Outlook for 2021

Changes at the board level for the organization

PM: Thomas Caldwell stepped down as Chairman of the CSE’s Board of Directors in September after spending almost eight years in the role. Talk about his contribution to the Exchange as an investor and also as Chairman. How will he continue to support the Exchange’s efforts going forward?

RC: I think it’s fair to say that the Canadian Securities Exchange would not exist in its present form without Tom’s leap of faith back in late 2012 to lead an investment round that provided the exchange with the capital required to continue to offer its services.  In his capacity as chairman, Tom was a relentless advocate for the CSE in his work and with his contacts, which of course are incredibly broad in the exchange world.  He is tremendously supportive of our management team and very inspirational with his “relentless optimism” as he calls it.  His energy, his commitment and his passion for the business were an inspiration not just to me, but to the entire organization.

Tom is not far away, because he is the chairman and principal of Urbana Corporation, which is the largest shareholder of the Canadian Securities Exchange.  In that capacity, we will continue to look to Tom for the benefit of his guidance and wisdom, and his continued support for our organization in its work.

PM: Other changes were also made to the board, with four new members elected at the annual general meeting. Tell us about the new board members, why the time was right to welcome them, and what it means for the CSE.

RC: There were a couple of drivers at the annual general meeting in September, which is when these changes took place.  The first was that we entered into  new recognition orders with the Ontario Securities Commission and the BC Securities Commission, our two principal regulators, and those orders required the exchange to have an independent chairperson.  Mr. Caldwell, by virtue of the shareholding of Urbana, was not considered an independent director of the organization.  Steve Blake, a continuing member of the board, graciously agreed to take on the responsibility of serving as chair.  Steve was elected by the shareholders at the AGM and we look forward to an excellent working relationship with him in his new role.

In addition, we were shorthanded, as former board member Mary Anne Palangio had become our chief financial officer earlier in the year, so we had a vacancy to fill.  And we also had some directors who had indicated to us that they were looking for different challenges, and they moved on with our best wishes.

Our new directors include Hema Barkhouse.  Hema is in the treasury group at Canadian Tire, where she is a senior officer and  has experience in accounting and finance in a public company setting.  Hema is chair of our audit committee and we look forward to her advice in managing the financial situation of the company.

Eric Sites is a resident of Chicago.  He works with Horizon Kinetics, which is one of our significant shareholders.  In his work with Horizon Kinetics, he has overseen investments in a number of exchanges around the world, so Eric is a wonderful addition to our board, both to advise management and potentially to open doors for us as we spread our wings internationally.

Brendan Caldwell, Tom’s son, is a new member of the board.  Brendan has been very closely aligned with his father at Caldwell Investment Management as well as Urbana Corporation.  Brendan also has worked with exchanges around the world and is extraordinarily knowledgeable about the space.

And last, but certainly not least, Michael Bluestein is a lawyer who founded a firm called Corporate Counsel just north or Toronto.  Michael has been a marvelous supporter of the Canadian Securities Exchange in his practice and he is the chair of our regulatory committee, which oversees the policymaking work of the exchange.  Michael is someone we have known well for quite a while.  We look forward to working together closely, particularly on our new listing rulebook.

Outlook for 2021

PM: Let’s look at the CSE’s plans for 2021. What goals have you set for the team? And what initiatives, both ongoing and new, will the CSE be focusing its time on?

RC: Goal setting in this space is always a little tricky.  We are subject to the whims of the market and even if we think at the beginning of the year that we are going to be focusing a lot of energy in a particular industry sector, we may find that investors decide to support different sectors in the marketplace with their investment and trading.  So, we can’t get too granular in the goals we set for the organization.

Clearly what we are seeing, though, is a significant expansion in trading activity, not just on the CSE but across Canada. Earlier in the year we were seeing roughly a billion shares a day trading across all markets.  And over the last six weeks or so we have gone to 2 billion.  What I can say, as someone who has been around this business for more than 30 years, is that this tends to be the pattern.  Canada will turn over X number of shares, and without warning it goes to 2X.  The interesting thing is that it happens without any real warning, and then it becomes the new baseline.

We had our previous record burst of activity in 2017 and 2018, which was driven by the US cannabis companies that joined the CSE and the extreme level of investment interest in them.  The other markets were not in line with those increases, but this time they are.  Everybody  has seen a doubling in turnover.  Did we see that coming?  Not really.  Volumes were healthy over the summer and we noticed increased retail participation, and that’s true on our exchange and some of the other exchanges catering to early-stage companies.  

Obviously, we are going to continue to explore and expand our use of social media platforms and virtual sessions, to get our message out and engage with as many people as we can, whether it is issuers or investors or other stakeholders.  We have learned a lot about what works and what does not work and we’ll apply that knowledge to our programs this year.  It is certainly less expensive than being in an airplane all the time and you can reach out and touch a lot more people this way as well.  It is going to be a permanent part of our programs moving forward and I think that will be the case for almost every industry.

That having been said, as we get later on in the year, I think there are a lot of folks who are going to want to see us face to face so my expectation is that we will be on the road quite a bit from October.

Overall, the picture appears quite robust from a listings perspective.  Certainly, the mining industry is in good shape, as it was our strongest sector in terms of new listings in 2020 by number of individual financings.  By dollar total the cannabis industry is still the champion by a wide measure because you have a number of issuers that raised very large sums of money last year.  We are also seeing more activity in the technology sector, some of it oriented toward health care.  Communications has obviously been a big theme.  And we have also made an impression in the growing psychedelics market.

PM: What other growth opportunities are there for the CSE over the longer term?

RC: We are going to continue to look at different international jurisdictions.  Listing on the CSE is a very cost-effective means for companies to access not just the Canadian public capital markets but the US private placement market as well.  By virtue of being a Canadian reporting issuer, without having to also undergo the pain and expense of becoming a reporting issuer in the United States, it really is one of the great bargains in our world.  We’ve had good success attracting companies from different countries from around the world.  And we’ve seen real interest from different Asian markets over the last six months.  It’s been challenging to do the kind of business development we’d like because we are all locked down.  But I can see as we move out of the pandemic that we’ll begin to capitalize on that interest from Asia.

I’d also highlight Australia, which is obviously a very large mining market.  The Australian miners have always had a lot of respect for the ability of Canada’s public markets to provide financing.  And we’ll be exploring ways to facilitate Australian company access to Canadian public markets through a CSE listing.

PM: Any final thoughts on the year ahead or topics we have not touched on so far?

RC: We are continuing to work on the delivery of a clearing and settlement system for tokenized securities.  I always caution that we are not talking about bitcoin or ether or other cryptocurrencies, but securities which use the smart contracts originally developed by those in the blockchain and cryptocurrency world and applying them to solve problems in the cash equities world.  I have been heartened over the course of the year, as we have attracted a number of partners to work with us on achieving this goal. These organizations are expert in different components of service and have existing customer relationships with issuers and the Canadian dealer community.  We’ll be talking more about this as the year progresses and hope to be in a position to get it into people’s hands later in 2021.

 Check out Part 1 of this interview here.

CSE Issuer Stories, Magazine

The Very Good Food Company: The name says it all for this group taking veggie-based meat alternatives to a delicious new level

Investors in The Very Good Food Company (CSE:VERY) know a great opportunity when they see one. The stock keeps climbing to new all-time highs, at time of writing sitting some 340% above its debut price in June of this year. The Very Good Food Company has come to market just as plant-based foods are a hot topic, but this is no trend-follower. This is a leader, which the company’s product line (and a taste of some of those products) makes abundantly clear.

Lifelong vegetarian Mitchell Scott co-founded The Very Good Food Company in 2016, his marketing skills perfectly complementing the culinary talent of fellow co-founder James Davison. The rest, as they say, is history.

Scott spoke to Public Entrepreneur from his office in Victoria about the secrets to The Very Good Food Company’s success.

There have been plant-based meats on the market for many years, but you seem to be stepping it up a notch, with different product formulations and looks, and a wide product range. Walk us through the genesis of the company and its culture.

We got started in the summer of 2016. My business partner, James, was a classically trained French chef from England. He moved to Vancouver and began working in a plant-based restaurant, and that’s when he got turned on to the plant-based movement. He ended up moving to Denman Island, also on the West Coast, and went vegan around the same time.

When he got to Denman he realized there were not really any restaurants, so there was nowhere for him to cook. He decided to get entrepreneurial and start making his own meat alternatives. A lot of the products on the market at the time were over-processed and full of fillers and other ingredients he wasn’t comfortable with. He wanted to make something with great ingredients – beans, vegetables, herbs and spices.

The first two products were veggie burgers and English breakfast sausages. He took them to the local farmers market and sold out in the first hour. That summer, he and his wife spent the week making the products in the kitchen and then going to the market and selling out.

That’s when I got to try the product, at a family barbecue, actually, as we are distantly related. I had grown up vegetarian and eaten a lot of not-so-great veggie burgers over the years, and I was just blown away by the quality. My background was in business development and marketing, and I was ready for something new, so we teamed up.

Talk about the consumer landscape for your products. Vegetarians are obvious customers, but are you also trying to bring in non-vegetarians?

Vegetarians and vegans are our core customers. There traditionally have not been a lot of good vegetarian options, so when people find something they like they stay with it and share it with their friends.

Since day one, we have wanted to appeal to a broader audience, and that was one reason for the butcher shop angle, where you would expect to see an assortment of meats. We want products to be approachable. Not some strange vegan product, but a burger, a sausage, some pepperoni. We try to make the products similar to meat products in look, taste, flavour and texture so they can appeal to a broad range of people.

What are your personal favorites in the product line? Where should someone start if they are new to your brand?

My personal favourite is adzuki bean pepperoni. Our taco stuffer is super popular – it is like a lightly spiced ground round. Those are my two favourites.

As for the broader product range, we have six or seven in grocery stores because we make them on a larger scale, and these are two types of burgers, two types of sausage, the taco stuffer, pepperoni, and we are just launching a hot dog.

In total, we have 15 or so, and the others are smaller runs and available at our shop or online. Those would be ones like steak, ribs and a holiday season item called Stuffed Beast. More labour is required for those, and we haven’t had a chance to scale up yet.

Tell us about your supply chain. How healthy and local are the ingredients that go into your products?

We try to source as locally as possible, so all of our produce is coming from farms on Vancouver Island and BC’s Fraser Valley. For beans, we are going to the Prairies, so about 95% of our inputs are Canadian.

In terms of what’s in the products, it is primarily beans, veggies, herbs and spices, with a bit of wheat flour to bind it all together. Of those veggies, we are looking at onions, beets, celery, mushrooms, leeks – nothing super exotic.

You had strong revenue growth in the most recent quarter and a solid gross margin. A lot of your overall expenses are operating costs rather than product costs. Talk to us about costs and margins going forward.

Operating costs are fairly high because our production process is still quite manual. We used to roll sausages and press burgers by hand, for example, but now we have machines to help with that. Once we move to full-scale production we’ll have a line that outputs 10 or 20 times what a manual line does now.

We are hoping to have larger-scale production up and running in early February. Until then, we’ve got our Victoria production facility, where we’ve upped production to 5,000 kilograms per week, from 2,000 in the summer. The next big production step will cost a few million to get up and running. The big cost is equipment, but we can get that financed and pay it off over a five-year term.

How about three to five years out? Where do you see The Very Good Food Company?

Our major focus in the next one to two years is the North American market. We want to continue rolling out e-commerce and wholesale grocery store supply. And our butcher shop and restaurant we see as a flagship store concept, so perhaps set them up in Montreal, Toronto, Los Angeles – we’ll hopefully make money from them, but they are more brand-based marketing tools.

After North America we want to be in Europe, with a similar concept of setting up a flagship store and then local e-commerce and wholesale. And it would be the Asia Pacific region after that, so Australia and Asia.

Those are some big goals. One senses from your answers that there is still plenty of room for this industry to grow.

This market is really just getting started. It is not just a trend. All of the producers in the industry are running full out. Companies that have been around for 15 or 20 years are still experiencing double-digit or triple-digit growth.

Beyond Meat was the first pure-play meat alternative company to IPO, and we were the second. I think you will see more public company opportunities. But the market is growing at such a rate that there is still tons of upside potential for everyone.

This story was featured in the Public Entrepreneur magazine.

Learn more about The Very Good Food Company
at https://www.verygoodbutchers.com/

CSE Issuer Stories, Magazine

Sixth Wave Innovations: After taming mining, explosives and cannabis challenges, this PhD-filled team puts COVID-19 on notice

Almost everywhere you go these days, you come into contact with multiple products and services without knowing they are there. Some make life easier or more convenient, while others go so far as to keep you alive, or at least out of harm’s way. We don’t see these products because a non-expert would not even conceive of such things. But thank goodness some experts do, as some of these technologies are fueling the promise of overcoming COVID-19 and pandemics of the future.

Sixth Wave Innovations (CSE:SIXW) is one such group, where a highly accomplished team that includes seven full-time PhDs is adapting proprietary molecular identification technology to tackle COVID-19.

Sixth Wave’s COVID-19 research builds on its recent successes in partnering with the United States Department of Defense on explosives detection, as well as on its gold refining and its extraction of CBD and THC from cannabis. Its technology has consistently provided solutions to highly complex scientific challenges. Now, Sixth Wave is committed to successfully adapting its proprietary rapid-detection technology to the COVID-19 puzzle in time to make a difference.

More on that shortly. But first, the basis of Sixth Wave’s business: molecularly imprinted polymers. Few people know what these are, as only a handful of companies in the world even work on furthering such technology. It truly is science at the cutting edge.

Most people think of plastic when they hear the word “polymers,” but these large molecules are far more ubiquitous. For example, wood is a polymer (a natural one), as is protein. To put it simply, a polymer is a material made of long repeating chains of molecules. Each has unique properties, dictated by the types of molecules in the chain and how they bond together. The basic molecules that serve as the links in a polymer chain are referred to as monomers, a defining feature being their capacity to form chemical bonds with other molecules.

At its most basic level, Sixth Wave’s technology identifies specific molecules by creating a polymer with qualities that first attract the molecule in question, then see if it fits. Imagine, for example, a complex magnetic puzzle missing a single piece. The magnetic field draws certain types of pieces with opposite magnetic charges toward the puzzle. When one fits, the puzzle signals to the user that it has found the missing piece.

When a Sixth Wave product identifies its target molecule, it triggers a specific chemical reaction embedded in the polymer by Sixth Wave scientists. In the COVID-19 example, it might cause a colour change to indicate that the person being tested carries COVID-19. The applications are endless.

“The doctors are telling us that water droplets are transmitting COVID-19 from our mouths,” says Dr. Jon Gluckman, Sixth Wave’s Chief Executive Officer. “Once developed, we think we can take the new polymer and embed it into a variety of testing devices, including in an N95 mask or a breathalyzer. You could arrive at an assisted living facility, for example, and be asked to put on a mask as you check in. If it changes colour after several breaths, they know you are carrying the virus. You could do the same thing at airports, train stations or ferry terminals. This would provide a way for everyone to be tested so that even if someone looks good and does not show symptoms, they don’t get beyond the point of inspection if they are carriers and risk infecting others.”

The key to the concept is the ease of testing. No machines or bloodied fingers. No swabs poking into your nasal cavity.

The idea is to embed the polymer in testing form factors that are inexpensive, easy to self-administer and allow for immediate results. “The earlier and more frequently you can test, the better,” says Gluckman. “We need something you can use every day, so you can show up for work, be tested, and if you don’t have it, you’re good to go, and everyone is safe and comfortable with their environment.”

As mentioned earlier, the Sixth Wave team – many of whom Gluckman has been working with for over 15 years – has a proven track record of commercializing molecularly imprinted polymers.

Explosives detection was the largest success, seeing Sixth Wave develop and sell wipes for military applications that could detect TNT, ammonium nitrate and other explosives at extremely low concentrations. “If you wiped a surface and there was a nanogram worth of explosives there, you would see the colour change,” explains Gluckman.

More recently, the team has developed products for the mining industry, conducting lab and field trials with some of the world’s top gold companies, the current focus being pilot plant testing with Kinross Gold Corporation.

“We moved into mining with a cheaper, more efficient and environmentally friendly way to conduct gold and silver extraction when companies use our polymer in place of activated carbon,” says Gluckman. One of the main advantages is that Sixth Wave’s IXOS product has been capturing more precious metals, and fewer of the unwanted minerals that come along with them, than when activated carbon is used.

Similar technology is used in another new Sixth Wave product called Affinity, which extracts CBD from hemp, or CBD and THC from cannabis. High efficiency and high purity are the selling points for Affinity, and Gluckman says the company is ready to start recognizing revenue in this segment during 2020.

“On the cannabis side, our development work is largely done, and we are finalizing supply agreements with our manufacturer. Affinity will also be manufactured at our facility in Lafayette, Louisiana,” Gluckman explains. Extensive test work was conducted with cannabis producers, and Sixth Wave is confident the demand is there.

“With mining as well, very little additional development is needed,” Gluckman continues. “We have already taken the production to commercial levels, and our focus now is getting the product to market. We see a lot more drive for innovation at gold mines, which leads us to have more customer opportunities.”

But it is a slow cycle. “A company might choose our technology but still be in the pre-feasibility stage,” Gluckman notes. It’s a market worth the wait, mind you, because a scenario assuming 10% adoption across global gold production suggests the potential for hundreds of millions of dollars in revenue to Sixth Wave annually, according to Gluckman.

With the scientists who develop the core polymers freed from having to do modifications and test work for the mining and cannabis markets, development resources are becoming more focused on COVID-19 detection. “The world has an immediate and dire need to manage COVID-19,” says Gluckman. “There will be more deaths and little economy left if we don’t figure this out as a society. We’re proud to do our part to help the world get healthy again.”

To that end, chemistry work on the COVID-19 product has begun. Importantly, Sixth Wave can use synthetic molecules for development so that it does not have to work with the live virus. This is another benefit of past product development – handling live explosives is equally undesirable when working on products that involve chemical reactions.

As for the timing of COVID-19-detection products, “I think we are about four or five months away from having particles that would have gone through some testing and internal verification,” says Gluckman. “We are putting together a team that will include external laboratories to provide testing with the live virus. We have several universities we are talking to, and they have access to what we would need to test with.”

Sixth Wave is also partnering with companies that could manufacture products featuring the polymers, including a producer of N95 masks. “I would think in a six-month time frame that we could have the first test units available for approval by the Canadian government, and we’d submit them for approval in the United States.”

At this point, it should be clear that Sixth Wave is not just some company jumping on the COVID bandwagon. It is using proven in-house technology to tackle the COVID-19 chemical structure in more or less the same way it has approached other complex scientific challenges that have continuously resulted in successful solutions.

“In the space of seven years, Sixth Wave has developed and sold millions of dollars of explosives detection products to the US military, and we have created markets for molecularly imprinted polymers in the mining and cannabis industries,” Gluckman concludes. “Our products all lead to lower costs, are easy to use and feature capabilities unavailable with any other technology. We are a young company, but we are solid. We are not in this for a quick buck. We want to make a positive difference in the world.”

This story was featured in the Public Entrepreneur magazine.

Learn more about Sixth Wave Innovations
at https://sixthwave.com/.

CSE Issuer Stories, Magazine

Blue Lagoon Resources: One of 2019’s hottest exploration stocks has quite the entrepreneur at its helm

What is the profile of a “typical CEO” in the mineral exploration industry?  There isn’t one really, though you often find a mix of geology and public markets experience that covers most of the bases.  Rana Vig, President and Chief Executive Officer of Blue Lagoon Resources (CSE:BLLG), is cut from a somewhat different cloth, though. He’s listed some of the biggest names in cannabis and runs a highly successful magazine, and that’s just scratching the surface of a very impressive entrepreneurial resumé.

Mining exploration is the outlier in Vig’s career. It’s the one and only sector where commitment and hard work has not resulted in major business success. He plans to do something about that with Blue Lagoon and is off to a good start, with shares in the company gaining 573 percent in 2019, following a July 4th trading debut. Public Entrepreneur shared lunch with Vig in Vancouver recently to learn about the company’s progress so far and what lies ahead.

Let’s begin with a little bit about your background. What brought you into the mining business? And what are some of the career experiences that led to the creation of Blue Lagoon?

Basically, I am an entrepreneur.  I have been in business for almost 35 years, and in those years I had five start-ups in different verticals – all private businesses and all family businesses. Around 2010, I connected with a very successful businessman who had made most of his money in mining. He recommended I try something different from the private business world and work with him in capital markets.

I was looking for a change. That 2008/2009 period had just happened when everything was collapsing. It was a dismal time in the business world. So, I got involved with him, invested well over $1 million, and in about six months, it was worth around $10,000, because the mining industry imploded.

Long story short, I don’t know all there is to know about mining, but my goal in every business I enter is to be the dumbest guy in the room, so to speak. I want to surround myself with very, very bright people.

I have a couple of strengths and one of them is executing plans.  When everything was collapsing in the public companies I’d become involved with, I took over as CEO and spent several years rebuilding them. Business doesn’t change. Business is business, whether you’re running a restaurant or a magazine, or whatever you are running. The fundamentals are the same. It’s a matter of assembling very smart people who are good at what they do.

I’ve been a CEO, a chairman; I’ve been on boards. To be honest, I’ve met some not so great people in the public company realm, which is something I wasn’t used to in my private business life, but I’ve also met some very good people and developed some meaningful relationships, and they are who I work with.

We will get into your projects in a moment, but first, take us through the concept behind Blue Lagoon. What is the strategy for building the company and creating value for shareholders? What makes Blue Lagoon different?

A couple of years ago, once I’d cleaned up the companies I was involved with, I decided to start fresh. I was very fortunate the last couple of years and brought two of the largest cannabis deals to market. I did a company called Curaleaf, taking them public, and it was the largest cannabis raise in history, at $520 million. I also did Harvest Health & Recreation, which at $300 million was the third largest.

I then had to consider what to do next, and cannabis was retracting.  I’ve had nothing but bad experiences in mining since I started in this business. But it has to come back at some point. I concluded that gold has to be the one, the safest place to start. And I launched an exploration company, and that’s Blue Lagoon.

I’m not a geologist or a mining engineer. First and foremost, always bring together real experts in their fields. Then, go out and find undervalued assets, something where I have the opportunity to add value, because that’s how you build value for your shareholders.

We listed Blue Lagoon on July 4th of 2019 at a little over $1 million in market cap, and here we are, seven months later, trading at over $50 million in market cap.

You have a deal with Mag One Products, whereby Blue Lagoon can earn as much as 70 percent in a joint venture by investing $5.25 million in stages. It is an interesting business and an interesting deal structure. Tell us more about how it benefits Blue Lagoon’s value creation effort.

Mag One has great technology that they can rapidly advance. All they need is the money. It is an attractive value proposition for me and my shareholders.

Why magnesium? People have pointed out that we are a gold company, so what are we doing in magnesium?  Well, that is the entrepreneur in me. I’m not necessarily trying to build a gold company. I am trying to build a mining exploration company and advance shareholder value. My first and foremost job as a CEO is to create value and make my shareholders happy, because they are coming along for the ride with me.

Magnesium is a great metal. It’s 35 percent lighter than aluminum and over 70 percent lighter than steel. With Tesla and all these electric cars, they want to get lighter. Same thing with planes.

The issue is that magnesium can’t compete with aluminum on price.  Enter Mag One. Their technology will compete with aluminum, and even more important is the environmental side. Right now, over 90 percent of the magnesium in the world is produced in China from something called the “Pidgeon process,” which is highly pollutive.  But Mag One is zero-emission. All that’s missing is the capital, and $5 million is not a lot of money. If we can supply them with that, it will advance the project.

I believe gold is going to do really well this year, but if it isn’t quite ready to break out yet, then I have this incredible technology that we can help advance. This company has access to 110 million tons of tailings with 23 percent magnesium, so there is no drilling involved. All we need to do is help them advance the science, and we could potentially change the world.

Gordon Lake is a property you optioned in the Northwest Territories. High-grade gold was found over significant widths by previous owners, and you recently announced steps toward conducting your own drilling. Tell us more about the plans and the timeline.

The reason we like the Gordon Lake property so much is that it is in an area known for gold production. The Discovery Mine did over 1 million ounces, the Con Mine did about 5 million ounces, and the Giant Mine did about 7 million ounces.

Being an entrepreneur, the deal is great. It made sense to acquire that to balance our portfolio for summer as well as winter. As for when we are going to start, we have already engaged local experts in the area, Aurora Geosciences. When it freezes, it gives you access to ice roads, which makes it very economical, as you don’t need helicopters. We hope to get started there later in February or early March.

A 43-101 report was released on your Pellaire project in December. There is no resource yet, but there was historical production in the area. Why do you like this one so much and what is the game plan?

Pellaire is a beautiful property a couple of hours southwest of Williams Lake, also in an area known for gold. It has 10 high-grade veins identified. The owners have been at it for years and circumstances brought it available for sale.

We took JDS Engineering, one of the best in what they do, and had them fly up with us and do some analysis.

One of the things that really attracted me to Pellaire is that there is 25,000 tons of crushed rock sitting right by the Number 3 vein. I had JDS help me with a back-of-the-envelope estimation and we believe there is significant value to be had from that, just by trucking it out. That, along with drilling, presents a great upside opportunity.

The precious metals sector has made a measured but undeniable comeback in the last few quarters. What is your outlook for the metals, and what are you hearing that those outside the business don’t know?

I don’t know if there is anything I hear other than what everyone is talking about. Many of these countries are in trouble and there’s currency problems. We know that, at some stage, gold is always the safe haven that people turn to.

If you look at the Indian community, it is a big consumer of gold.  I am Indian, and I can tell you that in India, a village will pool its money to buy a gram of gold – not an ounce but a gram. My point is that even the poorest of the poor must somehow acquire gold. That tells me something. It gives me insight about a very large country and its desire to own the metal. That has to come into play at some point, as these deposits are becoming harder and harder to find.

Blue Lagoon closed a financing last year at $1.00, and you just completed another at $1.50 in January.  A lot of CEOs would like to be in your shoes. What is the financing environment like for exploration companies? And have you had any feedback from existing or new shareholders that stands out in your mind?

The financing environment is still very tough. I was fortunate to be coming off of two big deals with a solid following of people who believe in me. People believe I have the ability to find the right projects and the right professionals to advance those projects.

We announced $1 million at $1.00 per share and closed $1.1 million – $300,000 of it from me, to show that I am right alongside everyone. The January financing was for $1 million as well, at $1.50.

I never want to be in a position where I am waiting to look for money. I wanted to make sure we had the money secured to advance our projects. We are sitting around $1.5 million in cash.

I also never want to be in a position where my geologist is looking at me and asking if I am going to advance the money to the drillers or not. Being an entrepreneur, one of my principles is that you must always pay your bills. My word is my bond. You can take it to the bank. If I don’t have the money in the bank, I am not going to contract you. I think that is one reason, actually, that I have a good following. Even if things are bad, it is not going to get better if I lie to you.

Let’s close with one of the indispensable lessons you’ve learned in your business career.

It is extremely important to look at who you are investing with.  You must believe that person has the ability to take your hard-earned money and grow it. I think you significantly reduce your risk if you sit with the person you are banking on. There are lots of people around the world with great ideas, but we never hear about them because they don’t have the ability to execute. I have the ability to listen, understand, and use my business skills to advance any project. If you are looking at a company to invest in, Blue Lagoon was one of the best performing companies in 2019 and we should at least be on your radar. I believe we have a lot of runway to execute what we are working on now, and what we may acquire in the future.

This story was featured in the Public Entrepreneur magazine.

Learn more about Blue Lagoon Resources at https://www.bluelagoonresources.com/.