All posts by Peter Murray

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/.

CSE Issuer Stories, Magazine

XPhyto Therapeutics: Unique assets and a focus on Germany’s medical cannabis market set this opportunity apart

The art of successful investing is not about what is happening now, but rather figuring out what is on the horizon and set to emerge as the next big thing. Positioning oneself to make the most of that development is what gives competitors in any aspect of the business world an edge – the famed early-mover advantage.

Hugh Rogers and his team embraced this concept wholeheartedly when putting together XPhyto Therapeutics (CSE:XPHY), the company Rogers now leads as Chief Executive Officer, two years ago.

Armed with a legal background focused on corporate restructurings, plus experience in molecular biology from research work at the University of Toronto, Rogers agreed with his business partners that they wanted to participate in the burgeoning cannabis industry, yet not in the way everyone else seemed to be doing it.

Large-scale growing operations in the US and Canada did not interest the group. So, what was it that others were overlooking, something with greater potential than was to be found in the increasingly crowded North American arena?

“The vision for XPhyto was to foresee where the industry would be in two, four, and six years, and then position the company accordingly,” explains Rogers. “In the end, we decided that medical formulations and clinical validation in emerging European cannabis markets was the best place for us to be.”

That best place, to be precise, is Germany, where cannabis is legal for medical use and, according to XPhyto, not subject to the same stigma the drug suffers in North America and many other parts of the world.

“It’s a very open market in the sense that, in our experience, regulators at every level of government, and I would also say the medical community – physicians and pharmacists – are open to cannabis products,” says Rogers. “There is a history of botanical medicine in Germany where they are eager to learn but at the same time are looking for clinical validation.”

And no other entity, quite literally, is positioned in the German market the way XPhyto is to help cannabis achieve the level of formal validation that consumers expect of widely used pharmaceutical products. The company’s 100% owned German subsidiary, Bunker Pflanzenextrakte GmbH, possesses a German cannabis cultivation and extraction licence for scientific purposes issued by the German Federal Institute for Drugs and Medical Devices. To XPhyto’s knowledge, it is the only one in existence.

“We’re setting ourselves up to work with the government on the scientific side,” explains Rogers. “That means cultivation, extraction, remediation of oils, seed banks, tissue banks, clinical trials – all of the scientific knowledge.”

The XPhyto team has done an admirable job of building a company with top clinical talent both at the German operations and in Canada, including its recently announced cannabis research and development agreement with the Department of Biochemistry at the Technical University of Munich.

Soon to follow in Germany is a 10,000 square foot facility, half of which will house small-scale cultivation rooms, with the other half being for storage, manufacturing, and distribution. The company estimates it will be up and running with plants under cultivation in the first quarter of 2020.

Expect security levels to be high, given the structure that aptly named Bunker is renovating was once a military command centre. Bunker founder, and now XPhyto Vice President of European Corporate Development, Robert Barth will oversee the renovations. It was also Barth who brought the Technical University of Munich into the fold.

The German research bandwidth is augmented by two exclusive five-year engagements XPhyto has with the Faculty of Pharmacy at the University of Alberta. “Our primary goal in Canada is to focus on clinical validation,” says Rogers. “We have an ISO-certified clean room for our new extraction equipment for production of cannabinoid extracts and isolates. I think the first formula we’ll clinically study will be for topical dermatology followed by oncology pain management. Our expertise at the university is drug delivery and we have some unique applications for cannabis products.”

Clearly, the company’s main objective is clinical testing, and ultimately clinical trials, designed to provide the medical community with the same standard of product understanding and trust that many other prescribed treatments currently enjoy. In this way, doctors will know exactly what type of cannabis, or cannabis-derived product, to prescribe for a given condition, in what dose and for how long.

But investors and others new to the company shouldn’t conclude that the validation theme at the core of XPhyto’s model means that cash flow is something far off in the future. The supply/demand balance in Germany’s medical cannabis market features more of the latter than the former, and XPhyto is positioned to help.

“The German market is large and domestic production expected to come online in 2020 will meet only a small fraction of total demand. There is a deficit that will be made up through imports and that is an opportunity we are rapidly pursuing,” remarks Rogers.

“We are working to secure supply of ultra-premium flower in Canada,” he says in beginning to explain the import strategy. “The best premium growers are in Canada and the US. We are focused on Canada and are working with a number of great growers to source product.”

The XPhyto team believes that providing the best experience for patients must embrace testing for pesticides, heavy metals, and offering products in optimal packaging. If everything goes according to plan, product will be ready for shipping by Q1 2020.

Advancing this strategy on multiple fronts is the acquisition, announced in late August, of Vektor Pharma TF GmbH, which holds permits for cannabis importation and narcotics product manufacturing, among others. And in a possible sign of things to come, Vektor also has established itself in the research and manufacturing of thin-film strips for drug delivery, including transdermal patches and oral strips.

Said Rogers at the time of the acquisition’s announcement, “We believe that Vektor will add significant long-term value at every level of our business, from clinical trial expertise and drug manufacturing capability to their German cannabis and narcotics import licences and strong relationships with the German health authority.”

XPhyto’s strengthening German presence will be a source of many things, boots-on-the-ground intelligence being one that should enable the company to smoothly blend into the German supply scene with the long term in mind.

As an example, Rogers explains that if XPhyto has a certain volume of cannabis ready to sell it won’t necessarily put it all on the market as fast as possible. “What we want to do is build our distribution and demand through consistent supply so the physician knows when they prescribe our product that there is availability for three to six months. We would rather build our patient base slowly and steadily than flood the market – here is a whole bunch of supply and then, oops, it is not available next month. The end result when you take that approach is that physicians are less likely to prescribe your product.”

Having only made its trading debut on the Canadian Securities Exchange in August, XPhyto is a newcomer to the public markets. But asked why investors should be interested, Rogers is clear as to what sets the XPhyto opportunity apart. “It is important to understand that the cannabis industry is here to stay,” he concludes. “But at the same time, you must carefully consider where to allocate your investments. We have gone 100% into opportunities that were on the sidelines for a long time, and I think you are going to see medical applications, clinical validation, and European opportunities come to the forefront over the next two years. And that is exactly where XPhyto is positioned.”

This story was featured in the Public Entrepreneur magazine.

Learn more about Xphyto Therapeutics at https://www.xphyto.com/.

CSE Issuer Stories, Magazine

Harvest Health & Recreation turns modest investment into largest cannabis footprint in US

It isn’t often that one looks at a company and it’s as though they have thought of everything, with no obvious gaps to fill, no apparent weaknesses. That’s the impression one gets speaking with Steve White, Chief Executive Officer of Harvest Health & Recreation (CSE:HARV). A lawyer before making the leap into running a cannabis company some eight years ago, White is adept at navigating challenging regulatory environments, and communicates with the tone of a professional who knows he’s at the top of his game.

A commitment from a single investor last month to fund the company with up to US$500 million is just the latest sign that Harvest has not only a great track record, but also the vision and ability to execute that separates winners from also-rans in any industry. Public Entrepreneur spoke with White recently about his philosophy on building a successful business in the cannabis sector, and a recent acquisition that will give Harvest the largest presence in the United States cannabis industry.

We’ll get into your recently announced acquisition of Verano Holdings with our second question, but so we have some context, tell us how Harvest got started and some of the key milestones in your development to date.  And where do you stand now in the industry vis-à-vis other companies with similar business models?

We started in Arizona in 2011, so we were really early in the cannabis industry compared to many others in the space today. In terms of key milestones, in 2012 we won two licenses in Arizona.  Those were vertically integrated licenses. What’s important here is Arizona became a helpful training ground for us. We had to get good at cultivating, manufacturing and retailing cannabis – seed to sale. It was completely by happenstance that it was a teaching moment for the future of our growth and ability to master the various aspects of the industry.

Some of the bigger milestones have to do with expansion, and there have been so many that it is hard to isolate any. But one to note is on July 1 of 2017, we merged with a company called Modern Flower, led by a gentleman named Jason Vedadi. That was a moment that really helped to accelerate our growth as an organization.

From there I would have to say the next big milestone was the announcement of our agreement to acquire Verano Holdings, headquartered out of Illinois. That acquisition made us the largest cannabis company in the United States by ability to open revenue-generating facilities, subject to regulatory approval. We’ll have more licenses and licenses to open more facilities than any other cannabis company in the country.

That helps to answer your second question, which is what makes us different relative to our peers. Beyond the ability to win licenses organically and make strategic and accretive acquisitions, I would say the second thing is we have been consistently profitable as a company for many years. The only other multistate operator I knew of that was also consistently profitable happened to be Verano.

The Verano transaction brings two very successful companies together to make you the biggest multistate operator in the US.  Why is Verano such a good strategic fit for Harvest’s existing assets?

It was a perfect fit on three fronts. First, the Verano leadership team and their employees are people who are very easy to integrate into Harvest’s culture because they are a lot like us. And I think most importantly, we like them and vice versa. They are just great human beings with mindsets and focuses that are very similar to ours. So, the human capital in that acquisition was really important.

Second, the assets that we acquired pair perfectly with what we were hoping to put together in the near future. The acquisition has brought us into Illinois, Nevada and New Jersey in a very meaningful way. That represented our list of markets that we really wanted to enter in the near term.

And lastly, they have some great brands that do not overlap with some of the brands we are already producing. For example, in Illinois they represent about a quarter of the wholesale business, and their emphasis is in areas that we don’t have a big emphasis in yet, like edibles.

There is a “landgrab” taking place in the US cannabis industry, playing out partly in a large number of acquisitions. Harvest is growing both organically and through acquisitions. What is your competitive edge versus other well-funded companies in the space?

First, I would say that we can acquire market access organically, meaning we can win licenses when states issue them. Second, we have found that people we look to acquire are believers in Harvest’s stock. With a lot of these acquisitions, the sellers have to decide whose stock they want to hold, and we have a reputation in the industry that allows us, in some instances, to acquire people for less than what they would charge other potential acquirers. And we have seen that in a couple of instances, so that is very helpful for us.

It is difficult to say when federal legalization might take place in the US, but what is Harvest’s industry outlook?  You must have some vision of the industry of the future as you formulate corporate strategy.

Long term, you are going to see a shift away from cultivation.  Phase 2 will be about retail, and Phase 3 will be about brand development. We are planning in everything we do to take advantage of, and create, the infrastructure necessary to capitalize on that evolution of the market.

It’s really interesting in that each individual market evolves separately. So, while you might have a very mature market like California that is, in our minds, almost purely a brand game, there will be other states that just recently came online, and new states where you can see tremendous returns in cultivation. But those new states will eventually become mature states, and so we gear our business to take advantage of cultivation opportunities when we are early and one of few. But generally speaking, our emphasis is on developing a large wholesale and retail footprint.

Harvest recently announced completion of the first tranche of a US$500 million convertible debenture financing. Can you talk about two things: first, the use of proceeds, and second, what convinced the investor to back Harvest to the magnitude, potentially, of half a billion dollars?

First, that half a billion dollars is solely dedicated to growth.  That is acquisition capital and rocket fuel. It allows us, in conversations with acquisition targets, to use more cash. In times when we don’t think our stock is trading appropriately, we can add more cash, so we can keep more of the stock if we think it’s too cheap.

The reason that financier was interested in Harvest was because they are a believer in the long-term outlook of the company. They saw that as an easy transaction for them, and one where they did it on terms that they haven’t done for other people previously.

On a personal level, you are one of the more experienced executives in the industry, and as Harvest’s leader you are pushing the company to grow faster than everyone else. Talk a bit about your background and how that has positioned you to drive the company’s success.

It’s been helpful to be a lawyer in my previous life. The way you plan a case in the law is you evaluate the facts available to you early on, and then you plan a strategy, or a path, to victory. In this case with cannabis, what we were doing is we were evaluating an ever-changing landscape and we were developing a path toward long-term significant profitability.

Your biggest obstacles are regulatory in nature, and as a result the ability to navigate regulatory hurdles – laws, in other words – is really helpful, because you can interpret things in a creative way to give you advantages over competitors, when appropriate, and you are looking toward the end goal, which is long-term, sustainable, and significant profitability.

Any student of markets will know that inefficiency is often a good place to search for opportunity. Given how the federal laws in the US differ with those of the states, and then from state to state, does this fragmented regulatory environment present opportunity?

It presents obstacles, and with any obstacle there is opportunity.  It presents obstacles to people who are not well-capitalized and who don’t have the experience to overcome those obstacles. But for those who are determined and well-capitalized, it presents opportunities to reap benefits that are sometimes better than a normal market would yield, particularly in limited-license markets.

Is it fair to assume that being one of the more high-profile companies in the cannabis industry, opportunities often find their way to you?

Unfortunately, we are constantly scanning for them. The great opportunities don’t find you; you have to find the great opportunities. The opportunities that find you are the opportunities that find everybody, and we pride ourselves on finding opportunities that others don’t. And that requires just good old-fashioned hard work and thinking outside the box.

Is there anything we have missed – any important points to get across that we have not touched on?

One of the things that’s most significant about Harvest is that at the time we went public we had very little access to capital. We developed one of the largest footprints in the country by deploying less than $18 million in total invested capital. So, at that time we were a $1.5 billion company with that small of an investment. We have a history of doing a lot with less, and the lessons we have learned that have allowed us to do that are things we deploy each and every day.

A big part of that is a demonstrated ability to execute. Whether that is winning a license or creating a profitable business with very little capital, we have demonstrated time and time again that we are able to do that, and there are not a lot of people who can say the same thing.

This story was originally published at www.proactiveinvestors.com on June 24, 2019 and featured in the Public Entrepreneur magazine.

Learn more about Harvest Health & Recreation at https://www.harvestinc.com/.

CSE Issuer Stories, Magazine

Irving Resources: Steady progress on gold projects in Japan serving investors in this explorer well

When the Canadian Securities Exchange featured Irving Resources (CSE:IRV) in its quarterly magazine two years ago, the company had assembled a portfolio of attractive projects in Japan and done some early groundwork.

At the time, President and Chief Executive Officer Akiko Levinson and director (and chief geologist on Irving’s projects) Quinton Hennigh spoke of a commitment to exploring methodically and at a measured pace. It was as if they knew they had something special. No need to rush.

Fast-forward to the first quarter of 2019 and their thesis is proving right. With samples up to 480 grams per ton gold and 9,660 grams per ton silver, permits in hand and targets ready for drill-testing, progress to date shows that not only are there excellent projects in Japan, but that exploration can indeed be conducted in an efficient manner.

The market clearly agrees, having boosted Irving’s share price in the past two years by over 100%. This increase in valuation is even more impressive given that many precious metals exploration companies have seen their share prices implode during that period.

Public Entrepreneur spoke with Levinson and Hennigh in February 2019 to get the latest on achievements to date and what investors can look forward to over the balance of the year.

Why did you choose Japan as the focus for Irving’s exploration work? What initially attracted you and why is Japan a good place to explore?

AL: The idea of exploring in Japan began making sense when Quinton and I went there in 2012 and visited the Hishikari mine, which is one of the richest gold mines in the world.  Quinton said, “Look, there can’t be just one of these.” So, we started looking for a way of exploring in the country ourselves. That opportunity came in 2015.

QH: Japan has not had any exploration conducted for perhaps 30 years.  The last major discovery was the Hishikari mine Akiko just mentioned.

Japan has been perceived as a country that is difficult to explore in, but when we looked into it we found the situation to be the opposite.  Japan is actually quite straightforward to explore in, and now here we are, looking for the country’s next high-grade gold deposit.

Talk to us about the regulatory environment. What is the permitting process like? How does it differ from that in countries such as Canada or the US?

QH: I would say that the regulatory framework is actually not all that different from in Canada, the US or Australia.  It is fairly predictable in terms of the expectations placed on companies. It is straightforward to get permits and so forth.

I think the biggest challenge was that some of the people overseeing the permitting process had not really encountered much in the way of mineral exploration for many years, so there was somewhat of a learning curve as they worked on our permits because they simply were not familiar with some of the processes involved. But I think we are past that now and the whole structure is working quite well.

AL: When we started this three years ago, this was new to everybody – to METI (Ministry of Economy, Trade and Industry), to Irving, and to the people who help move us through the permitting process.

But Quinton says all the time that there really are no surprises.  It is very predictable if you go through the process and if you do it diligently.  I think that because of Irving and others who are trying to do similar work in Japan, the regulatory system has a better understanding of this process. It is becoming faster.

Japan is a highly seismic area – explain how this influences the types of deposits found in the country and how it influences your exploration strategy.

QH: The seismic activity is related to the fact that Japan sits on the Ring of Fire. It is part of the Circum-Pacific Belt associated with volcanism and earthquakes as the plates collide.  You have the Oceanic Plate under the Pacific Ocean, and the Continental Plates. In this case you have the Eurasian Plate. As those two converge, you generate quite a bit of magma down deep that then rises to the surface and can produce volcanoes – there are numerous volcanoes up and down the Japanese archipelago. That volcanism is actually what leads to the formation of a lot of these gold deposits. The heat associated with the process is very near surface and heats the groundwaters. Those waters carry minerals, including gold, and redeposit them as they come to surface and emerge as hot springs.

Japan is well endowed with this environment – there are hot springs from one end to the other. This has been the case for many millions of years. So, Japan has seen a long history of hot spring formation, and we are looking for paleo hot springs – basically old hot springs that would have carried gold up to surface.

As a result, deposits in Japan are relatively shallow. Usually when you find an old hot spring, at surface what you see is a terrace of silica, a silica sinter. It is kind of a flat body of silica deposited by the hot springs. From the feeder below, cracks in the ground fed the hot spring water through, and that’s where the gold forms. These deposits are present within a couple of hundred meters of the surface.

We’re interested to know about your top projects and why you chose them as the focus of your exploration.

QH: The Omu Project is in northern Hokkaido.  Omu is centered on a volcanic system that was active about 12 million years ago.  We have a history on the property of not only volcanism but extensive hot springs.  There are at least three major centers where hot spring waters have surfaced. One of them is at the Omui mine, which is an historic mine that produced maybe a ton of gold in the 1920s.  It was very high grade and has seen little, if any, exploration since.

The second area we are focused on is the Omu sinter.  This is a new discovery that we made a few kilometers due north of the Omui mine. The system is intact, basically preserved in its entirety. The silica sinter is on top and we believe there is potential to find high-grade veins underneath like we see at the Omui mine. It has never been drilled or tested and is thus a brand new exploration target.

The third area is in the western part of the Omu property.  It is called Hokuryu. Like Omui, it is an historic mine and produced a few tons of gold. It was shut down during the Second World War, well before its resources were mined out. We are a little deeper into the system, as the sinter has weathered away – we are down into the vein system beneath it. There are pieces of vein at surface with an average grade of 50 grams per ton gold and 500 grams per ton silver. It is a very rich and promising new target.

I love the story you told once about finding a project after noticing interesting rocks in a local garden. Can you each share with us a favorite story about your exploration work in Japan?

AL: Those rocks were actually being used at a kindergarten in an ornamental fence.  Our team went to the school and asked where they’d found them. They guided us to the location and that is how we located the sinter.  The town wanted to get rid of the rocks because they planned to build something else. They put up a poster saying, “Anyone who wants these, please take them.”  We said, ”Yes, we’ll take them!” And now some of them are in our office. They were just going to throw them away.

QH: I usually judge geologists by comparing what they talk about to what you see in the field.  In other words, if they say, “This is the biggest thing since Ben Hur,” and then you get into the field and it’s disappointing, you know they embellish.  Then there are geologists who are low key. They’ll say, “Oh, there is something kind of interesting,” but then you get out in the field and it’s the biggest thing ever.

One of our advisors is a gentleman by the name of Hidetoshi Takaoka.  Two years ago, we went to Sado Island to visit a historic mine. The mine has a tourist shop in front with a box of rocks you can buy as souvenirs.  I picked one up and Mr. Takaoka said, “We can find one better than that. There is a creek near the mine and pieces of ore have washed down the hill over the years.”  We crawled down this steep valley just in front of the mine, and after about five minutes at the creek, Mr. Takaoka reaches down and picks a rock out. We crack it open and it is literally full of gold.  I knew then that he tends to understate things. It is one of the nicest specimens of epithermal vein I have ever seen.

You have tremendous partners in Japan. Tell us about them and how they have contributed to your success.

AL: How Irving started was that Quinton and I worked for a company called Gold Canyon and that merged with another company. What was left in Gold Canyon was a joint venture in Africa with the Japanese government mineral agency called JOGMEC. We worked in Africa with Mitsui Mineral Development Engineering Co. (MINDECO). They are probably the top engineers in Japan for mining and exploration. We had already worked together for about 10 years, and when Quinton and I asked MINDECO engineers if they could help us if we did work in Japan, they said they’d assist in any way they could. It has been amazing to have a built-in team from the beginning that is likely the best in Japan.

And previously Quinton mentioned Hidetoshi Takaoka. He is the one who recommended we look into the Omu project. He was chief geologist for Sumitomo Metal Mining and found the Pogo mine in Alaska for Sumitomo.

If Irving puts projects into production, your plan is not to build a mill or facility onsite yourself, but rather to supply smelters, is that correct?

QH: The rock is rich in silica, and silica is needed by smelters as an agent called flux.  Flux is added to copper, zinc or other concentrates and it helps retain heat in the furnace – it acts as an insulator to keep heat in the molten material.  It also extracts some of the nastier elements – it takes out iron and other things. So, silica is very important to the smelting process.

In Japan, they use perhaps a couple of million tons per year. Traditionally, Japanese gold mines have supplied the sinter for smelters, but as gold mines have diminished in Japan, this has become less and less so.

When the ore is added to the furnace as flux, gold and silver come straight out into the copper matte, and they recover them through further refining in the smelter – they are a byproduct of the smelting process.

We thus saw a huge opportunity.  If we find a high-grade deposit we feel it is easy for us to integrate into the smelter flux market in Japan. It saves us from building a mill, which is capital intensive and requires more permitting.

AL: When Omui was in production they shipped ore to the Kosaka smelter back in the 1920s.  Kosaka remains a large smelter today in full operation. When we spoke to them two years ago, they said that if we were to make a discovery they would welcome our supply.

You have a busy 2019 planned – tell us about the first half of the year and how it sets up the activity in the second half.

QH: For this year, we are working on getting our drill program lined up in Omu. We brought a drill rig from Canada and a drilling company we worked with in the past is seeking visas for some of its drillers.  Once we get those, we can start drilling, I suspect some time in March. The drill program should last most of the year, say from March to October. We will probably test the Omu sinter first and the Omui mine second.

We are also going to conduct trenching and bulk sampling at the Omui mine site. We plan to open up some of the veins with excavators and not only study the geology but extract a bulk sample, say up to 1,500 tons.  The plan is to ship the material to the Kushikino mine and smelting complex in Kyushu. They are prepared to handle our material and we are planning on selling it to them directly.

Other than that, our focus will be earlier-stage exploration on Hokuryu, which is on the Omu property, and we are also going to undertake greenfield prospecting and mapping on our other projects in Hokkaido.

Is there anything we have missed?

QH: We are one of a handful of exploration companies that have waded into Japan recently, but I would put us at the head of the pack because we have very good relations with the entire Japanese mining community – government, the mining companies, regulators, the towns.  We built this company purely to operate in Japan. We have a good Japanese team. I think we are in the best position to make a discovery in Japan.

This story was originally published at www.proactiveinvestors.com on March 3, 2019 and featured in the Public Entrepreneur magazine.

Learn more about Irving Resources at https://www.irvresources.com/.

CSE Issuer Stories, Magazine

Nerds On Site: Clever solution for small business computing needs drives fast growth in highly fractured market

In today’s global connected environment, with laptops, servers, mobile devices, and other digital equipment collectively running millions of different software applications, in-house IT and network security work is no joke. A single IT professional cannot cover all aspects of this vast technological universe and be up to date on every topic, as things change every day.

In recent years, network intrusion, ransomware attacks and other black-hat activity has reached such proportions that it’s no longer random bad luck when it hits someone. Internet vulnerability is day-to-day reality for companies of all sizes.

If you work at a large company, you’re in luck relatively speaking, as there is likely in-house help to lean on if you have an issue.

For small companies, however, external support is often the only place to turn. There goes the rest of the day, for starters.

Nerds On Site (CSE:NERD) is a practical solution for small and medium-sized enterprises to consider. The company has a large team of carefully chosen technology specialists ready to visit your home or place of work to diagnose problems on the spot and offer ongoing managed solutions to prevent problems occurring in the first place.

Oftentimes, a fix will be at hand and the team member will be able to find and implement solutions before leaving. If software, parts, or a security installation is required, Nerds On Site works closely with suppliers to get things fast and at fair prices.

When it comes to software, Nerds On Site also has the ability to develop unique, state-of-the-art solutions through third-party developers. Examples include electronic records processing and security applications. It’s kind of like having your own IT department without needing to be a large company.

Eugene Konaryev is a director at Nerds On Site and did much of the necessary financial work leading up to the listing of the company on the Canadian Securities Exchange in late November. Sporting a computer science degree from the University of Toronto, he immediately understood Nerds On Site’s capabilities and the concept of addressing its large market when he first met CEO (Capability Expansion Orchestrator) Charlie Regan in 2014.

“What the company does is mobile IT services to small and medium-sized business,” says Konaryev. “We still have a small portion of residential customers, but what we really do is enable SMEs to enjoy high-quality IT service and support without the need for high-priced contracts.”

It is not just hardware and software the company helps with, mind you. Once hired, Nerds On Site provides round the clock network and device monitoring options, on-site and remote support, IT asset management and much more. “We take care of pretty much everything there is in SME IT,” says Konaryev.

Nerds On Site was founded in 1996 and has established a solid presence in 10 major cities across Canada. One way to explain its scale is to refer to the number of Nerds in the network. At present, there are 125, the largest concentration being in Ontario, and specifically Toronto.

Clients include a large number of Canadian Tire locations, with a broader corporate relationship in the works.  Importantly, Nerds on Site has also been named an Apple mobility partner.

When entering a new city, the game plan is to have at least five Nerds, and preferably 10. For example, the planned expansion into 10 US cities entails 100 Nerds – 10 in each city. The company uses a subcontractor model and is starting to use franchising as well in the United States.

“When you enter a new urban market, a sophisticated Nerd force makes a difference,” says Konaryev. “Talent is very important. They call one another ‘enterprise nerds’ in a positive way.” He explains that set-up expenses for the company when it enters a new urban market are around $250,000 for a 10-person team, a pittance compared to almost any other type of business with 10 highly motivated employees serving an entire city.

Underlying the growth opportunity for Nerds On Site is that it operates in a highly fragmented market with the majority of companies in the space being small and short-lived, according to Konaryev. The big IT service companies focus on large enterprises and charge such high fees to their well-heeled corporate clients that catering to the SME market does not make sense for them.

Even though the SME market is largely there for the taking, no company has established itself as the segment leader on a national scale, although there are good local and regional players both in the US and Canada. Nerds On Site sees them as potential M&A opportunities.

“When someone asks who our biggest competitor is, I can’t even give them a name,” says Konaryev. “There are small IT shops in cities and often when you need help, there is nobody available to answer the phone, or you call and they have gone out of business.  That’s why this is such a great opportunity.”

The strategy for the coming year involves an aggressive rollout into the 10 fastest-growing cities in the US, most of them in Arizona and Florida. The plan is to launch in the first 10 US cities in 12-16 months.

“We have the capital to launch Nerdmobiles in these cities thanks to the funds raised during the IPO,” says Konaryev. “And then it’s all about finding talent, and fortunately, talent is in abundance if you know where to look. For example, we did a small campaign about six weeks ago to attract prospective Nerds in Florida and in one week we received over 400 applications.”

The follow-on expansion phase is slated at 50 cities, after which would come a 100-city expansion, the ultimate goal being to offer national coverage in the US. Continued expansion in Canada is also part of the plan.

When it comes to choosing Nerds, applicants need not only IT education and appropriate practical experience, but also the self-starter attitude that all successful entrepreneurs possess. The initial telephone interview has a pass rate of only about 50%, with those making the first cut moving on to a video interview, and then an interview in person with a local team leader.

Qualified applicants get about a month of training at Nerds on Site headquarters in London, Ontario. For US Nerds, training would take place on site in Florida.

Typically, for every 10 applicants, only one or two make it through the process. Once qualified, Nerds get access to competitively priced lease or buy options for a Nerdmobile, a network of other Nerds that is always there to help, a local customer database, low-cost inventory, and any other support they might need from the broader Nerds on Site team.

“We promote a collegial network where knowledge is shared and if someone does not know something, they can reach out to a colleague through IAAN (the company’s ‘I am A Nerd’ tablet-based control system), and the helper can share in the revenue because of their contribution,” Konaryev says.

Nerds On Site raised $4.7 million through its IPO.  Revenue in fiscal 2017 was around $8.3 million. Fees related to the listing are weighing on earnings, but the company would have been profitable had those one-time fees not been incurred, says Konaryev. The 10-city US rollout will use a significant portion of the capital but once that is complete Konaryev says the company anticipates being in the black.

Konaryev recalls that when Charlie Regan joined the company and the team considered how best to scale, they called as many IT specialists as they could identify and found that 80% did not answer. “From our experience, about 95% of SMEs are massively underserviced,” says Konaryev. Slowly but surely, Nerds On Site seeks to make this a problem of the past.

This story was originally published at www.proactiveinvestors.com on January 30, 2019 and featured in the Public Entrepreneur magazine.

Learn more about Nerds On Site at https://www.nerdsonsite.com/.

CSE Issuer Stories, Magazine

VirtualArmour International: Keeping the bad guys at bay with customized network security solutions

Every week, it seems, brings another concerning story about hackers infiltrating a commercial or government network and making off with highly sensitive information.  One would think that with the threat having been clear for so long, entities with significant exposure would have devoted appropriate resources to figuring out how to protect themselves properly. Alas, all too often this seems not to be the case.

VirtualArmour International (CSE:VAI) has a solution to this problem, or to put it more accurately, a tailored solution that precisely fits each customer’s risk profile and particular set of network vulnerabilities. Boasting a 100% retention rate across a very broad customer base, the company is obviously doing something right.

Public Entrepreneur spoke recently with VirtualArmour chief executive officer Russ Armbrust about the state of cybersecurity and what his company does to help organizations stay ahead of the curve.

Cyberattacks make the news regularly and the loss of confidence a compromised company suffers can be quite serious. Can you give us your view on the state both of attempts to infiltrate corporate and other networks, and the quality and consistency of efforts being made to counter them?

There are constantly new tactics and techniques being developed to compromise IT assets for valuable information. Considering these tactics are continuously evolving, we make it a point to partner with what we consider the best-in-class technology providers who have proven track records of constantly improving their solutions to stay ahead of this evolution.

The response landscape of cyberattacks has shifted to a proactive approach, looking for behaviour-based activity as opposed to the signature-based approach. Utilizing emerging technologies like artificial intelligence to maintain a proactive stance against hackers will continue to improve and aid in keeping pace with the way we respond to these threats.

As far as the quality and consistency of counterefforts, I would say that 90% of companies are very immature at this right now. That is the reason for the growth of our company. Most of the companies we talk to don’t know what they don’t know. It is a comprehensive process with each of the companies to get them up to the cyber posture they need.

Let’s look several years down the road – what do you project as far as the evolution of network security is concerned?

The traditional model of network security is being challenged and new technologies are becoming commonplace. Everything soon will be connected to the Internet in some way or another, be it wireless, cellular, Bluetooth or something new. We see that each and every day in commercial advertisements. Now your refrigerator is connected, your oven is connected. With nearly everything expected to be connected, this will produce new attack vectors and require constant development of defense mechanisms and techniques, both proactive and reactive.

Walk us through VirtualArmour’s approach to the problem.  What are your competitive advantages – what makes you better? And how does the company keep pace with the constantly changing cybersecurity landscape?

We focus on customer experience. Everyone’s cyber posture is unique, so our goal is to understand the potential cyber gaps of each customer.  We focus on becoming a true partnership and acting as an extension of their team. In today’s world, the new modern MSSP (Managed Security Service Provider) should help a customer solve problems, not just send alerts. And that is our true differentiator.

As to how we keep pace, we believe that we have hired some of the best engineers in the business. With such a broad range of customers in so many industries, as well as interacting with our customers’ highly skilled engineers, it enables our engineers to constantly evaluate and stay on top of this ever-changing cyber landscape.

Where do you find the majority of cyberattacks are coming from? Are they just people seeing if they can penetrate networks for the challenge of it, or is it cybercriminals seeing if they can enter networks to obtain information and use that to generate profit in some way? Who is who in the zoo out there attacking these networks?

It is all across the board. We see attacks coming from the outside to gather information, and we see attacks coming from inside of corporations. It is literally all across the board in terms of how people are trying to penetrate networks.

What types of companies choose VirtualArmour to protect them?

They don’t necessarily come from any specific industry, but they do have common traits. They typically are highly regulated and lack the proper resources or skillset to deliver what is required on any security practice.

We have customers in health care, retail, financial, oil and gas, mining and many others. With the customer service we provide we have been able to maintain a 100% retention rate to date with our customer base. And what is really exciting about that is our typical contract ranges anywhere from one to three years.

Our business is built solely around services. Professional services are helping with architecture and projects. And then managed services is where we are the eyes and ears to a company’s network and security. We are monitoring 24/7. We are not just alerting but we are helping with a customer’s entire network.

Where you do stand right now in terms of revenue and what is the outlook?

As of our reported results for Q2 2018, our managed and professional services increased 78% to a record US$1.2 million versus the same year-ago quarter, and total revenue increased 50% to a record US$4 million. And with our current growth, we are well on track to continue at this tremendous pace.

Looking at our margins, you can see our business continues to grow and a favorable shift to our higher margin, managed and professional services business.

Are there any industry dynamics people are unaware of right now that you think have the potential to drive more business to VirtualArmour in the long term?

Cybercrime is expected to hit US$6 trillion annually by 2021.  Due to these numbers they are also expecting cybersecurity jobs to more than triple. This talent pool will remain flat, which is going to create a shortage of talent and make it more difficult for customers to maintain their existing talent. And that will drive customers to sign with companies like VirtualArmour to deliver on all these services.

And to wrap things up, how about some client feedback or observations from your team on making sure the companies you serve want to continue working with VirtualArmour. What’s the secret there?

I’d point out that we typically come across the same competitors when we compete for an opportunity. What’s really been exciting for us is that we have been coming out on top and it is due to the customer service experience.

When we win a new client, I always like to ask them why they chose VirtualArmour and we get the same answer over and over. We truly do take a different approach. We are more customer-focused. We provide playbooks around their business needs rather than telling them they have to do things a certain way. When they meet our engineers during the sales cycle, they come to believe they are some of the best in the business and that makes them comfortable about the services they are going to receive.

This story was originally published at proactiveinvestors.com on January 3, 2019 and featured in the Public Entrepreneur magazine.

Learn more about VirtualArmour International at https://www.virtualarmour.com/.

CSE Issuer Stories, Magazine

NameSilo Technologies: Achieving superior investment returns requires looking where others do not

Mention the name Paul Andreola in Canadian financial circles and those in the know require no further explanation, given his outstanding track record as a stock picker in non-resource microcaps. Taking the methodology that has served him so well as a private investor, Andreola has painstakingly created a portfolio of investments in small companies for NameSilo Technologies (CSE:URL) (note: NameSilo Technologies began trading under its current name and symbol on December 6, 2018. The company previously traded as Brisio Innovations).

NameSilo shares have more than doubled in value over the past year and Andreola credits this in part to a shift in strategy that will see the company take larger percentage positions in its portfolio holdings going forward. Diversification that sees everything from drug research to truss manufacturing included in the portfolio is a big help as well.

The other key to delivering strong returns to shareholders is a fascinating private-public arbitrage concept that requires experience and a broad, deep network to achieve.

Andreola shared the NameSilo approach to generating superior investment returns with Public Entrepreneur during a mid-November discussion in Vancouver.

NameSilo Technologies has some similarities to a classic investment fund, but plenty of differences as well. Can you explain the NameSilo concept and business model to get us started?

The company is run by investors first and foremost. We use a model we think is quite rare, especially in the microcap space. We look for companies that are more advanced than pure start-ups. Companies that we think have significantly less risk than the typical business entity that gets listed publicly but with as much, if not more, upside. We are looking for situations that have that perfect risk-reward scenario that allows us to feel comfortable putting in a significant amount of money. We take a private equity model and put it inside a public vehicle.

We are looking for high-growth companies. We want to invest in companies that have proven there is a viable model and, in most cases, viable products and services that they are offering. And we want to catch them just as they are getting that explosive, hockey stick-style growth.

The model itself is something that we have been doing personally for years, and we have now put it into a vehicle such that we can take advantage of the scale that goes with being a public company.

Tell us about the boss. Who is Paul Andreola and what led you to build NameSilo?

I have worn a lot of hats over the many years I have been at this. I used to be a stockbroker and spent roughly 10 years in the investment industry. I have seen a lot of deals and most of them are not good. The key is to try to say “No” as many times as you can and find that one little gem that comes along every now and then.

I’ve also started two technology companies. One we took public and it did extremely well, and then the other one actually did not do so well. And we learned as much from that one as we did from the one that was successful. So, I’ve got the start-up and the go-public experience and that helps us when we look at new opportunities.

Thirdly, I have an investment newsletter and a network of investors who all have the same mentality. We all want to find these little gems that are obscure and undiscovered. And we want to try to bring these companies everything they need to be successful. It’s a model that we have proven works.

My other director is Colin Bowkett. He comes from a much purer venture capital background and has been in the markets for over 10 years. Compared to me he was a lot more involved in the speculative side of the business and is more of a people person than I am. The thing about investing is there are a lot of personalities involved and having someone with good people skills enables you to figure things out that you wouldn’t have been able to without the right skills.

The third key person is Kristaps Ronka. He is an IT specialist who has worked for several tech companies, but his real claim to fame is that he and his partner started a tech company from scratch and took it from zero in sales to a run rate of around $100 million before it got bought out. He took some of the funds from his sale and has invested in a collection of other businesses.

The NameSilo website states that there are lots of good investment opportunities, but NameSilo is looking for great ones. What makes a great investment opportunity?

We take a GARP approach – Growth at a Reasonable Price. There are a lot of cases where you find a great company but it is priced for perfection, and that is not what we are looking for. We are trying to find situations where there is a great company at a great price. And we don’t just look at the public markets. We have managed to find several high-growth, low-priced public companies and have done it on the private side, too. That is where it gets really exciting because we think there is a very strong pricing arbitrage where you can find a company that might sell privately for 3 or 4 times earnings and the public comparables trade at 10 or 15 times earnings, so immediately there is a lift just by taking these companies public.

How do you find these companies?

We turn over a lot of rocks and are constantly looking. As far as public companies, we are numbers guys and we read every single SEDAR filing in Canada. There are very few companies we haven’t got at least a cursory understanding of. We have a formula we are looking for and if a company doesn’t meet that formula it gets crossed off.  We literally go through thousands of them – to find even one you have to go through a lot.

The private ones are a little bit harder to find. We have a network of people who know what we are looking for and typically the network brings us private deals to assess. A lot of them are companies not necessarily looking for money, but they may be looking for an exit. Great little businesses, run well, not necessarily needing money, so we don’t have the risk of financing them, but they just want a partial exit or something. We take them public and achieve that partial exit for them.

Let’s look at your portfolio and how a company fits into the greater whole and creates value for shareholders. Perhaps begin with the latest acquisition, which also brought the company a new name.

NameSilo is actually an anomaly. Until now, all of the companies we became involved with, we took no more than a high single-digit percentage ownership position. We’d find companies where in the process of going public we had the opportunity to purchase shares and then when it went public we would get that lift on our 5% or so.

NameSilo is a company we have actually purchased 100% of, though we have carved out a percentage for the management team running it. But here is an opportunity where we think we are going to get 100% of the lift through that private-to-pubic arbitrage. That is likely to be the way we will perform going forward, taking a much larger stake in each company.

NameSilo’s stock price has been doing well of late. It has doubled since the beginning of the year. What is driving that and what feedback do you get from shareholders?

The biggest driver is the biggest part of our portfolio, which is NameSilo. We think it is outstanding. NameSilo is a domain registrar similar to GoDaddy or Tucows, but it is arguably one of the three fastest growing in the world. The company has been able to automate itself to be able to drive prices down to where nobody can compete on price with our core product. We are growing much faster than GoDaddy on a percentage basis.

We think we bought it extremely cheap in comparison to the other publicly listed companies. We trade at a fraction of the metrics they trade at and we are growing anywhere between 80% and 90% organically, whereas GoDaddy is growing at about 15%. What is driving the NameSilo share price, I believe, is that people are beginning to recognize the undervalued nature of our major asset.

Investing involves looking into the future and making certain assumptions. What do you see around the corner in some of the industries your companies are involved in?

We are always looking for trends but not trends as you typically see in the venture capital market. We want to see established trends. We didn’t invest in the cannabis space. We didn’t invest in the blockchain space. We want to see trends that actually show up in financials.

For example, one of our investments is a company called ImmunoPrecise. They’re a contract research organization for major pharmaceutical companies. What that means is major pharma companies don’t do a lot of the R&D in house but will contract it out to a company such as ImmunoPrecise. That is a major tailwind that a lot of people don’t recognize but that we are seeing in the numbers. We want to see high growth in the businesses we are investing in, because that is a sign the business is working.

The other major trend to be aware of is the topic of passive versus active investing. The FAANG stocks – Facebook and Amazon and those names – there is a massive amount of money going into opportunities that have to be big enough for institutional funds to participate. The old active investor has given way to investing in ETFs or big funds that mirror the indexes or just buy a basket of the biggest stocks.

I think we will see the pendulum swing back to the active investor who is a good stock picker. In the microcap space, liquidity has dried up and institutions have gone upmarket. In the long run what that does is open up a lot more opportunities for investors like me to go after these great little deals without the competition you would usually see. It also opens up a lot of opportunities for bigger companies to buy the smaller companies on the cheap.

Any words of advice for up and coming entrepreneurs from your years in the business?

The model that we have in Canada in the public markets really is second to none. As entrepreneurs, people should be aware that this tool is there for them. Especially if you have some degree of success. If you have a real business that is generating revenue, and in some cases profits, the ability to take advantage of the model here and some of the valuations you ultimately get, and the options that being public give you, is something entrepreneurs should seriously look at.

This story was originally published at www.proactiveinvestors.com on January 2, 2019 and featured in the Public Entrepreneur magazine.

Learn more about NameSilo Technologies at http://brisio.com/namesilo-technologies-corp/.

CSE Issuer Stories, Magazine

The CSE Year In Review

It is clear from speaking with people both inside the Canadian Securities Exchange and around the broader financial community that 2018 is going to be remembered as perhaps the most transformational year in the CSE’s history.

Huge financings, billion-dollar market caps, a steady stream of international listings, and financial institutions investing in CSE issuers like never before are only some of the talking points. Fast-growing, well-capitalized companies and strong investor interest in them have elevated the exchange to a new level.

Total capital raised by CSE issuers looks set to increase by over 500% compared to 2017, with a chance at topping the $5 billion mark.  Curaleaf Holdings certainly played its part, raising $520 million during its listing transaction in October. The company stated in a related news release that over 100 financial institutions had supported its financing.

Rapid expansion of market capitalization
“Clearly, standout events have been taking place over the last few months, with the number of very large US-based cannabis issuers that have joined the exchange,” remarks Richard Carleton, CSE Chief Executive Officer, during a discussion in late November. “We are seeing the most rapid expansion of market capitalization and impact on the exchange since our inception.”

Climbing 13.25% year-to-date, the total market capitalization of CSE listed is growing appreciably thanks to the contributions of several larger entrants to the marketplace. And while Curaleaf leads the way with its $2+ billion valuation, there are plenty of other issuers that qualify as solid mid-caps in the Canadian market. Microcaps still constitute the majority of listings, but bigger companies are finding the exchange to be a suitable home as well.

It’s no secret that the CSE is the go-to exchange for listing cannabis companies with operations in the United States. The CSE never shied away from the cannabis industry in Canada, and when considering how to manage prospective issuers from south of the border, exchange officials spent time with regulators and professional services providers to confirm there was a high degree of comfort with the industry’s risk profile. One of the advantages of investing in public companies, after all, is strict disclosure standards designed to ensure that investment risk can be accurately assessed.

The next development in the cannabis sector at the CSE, beyond more large listings almost ready to debut, is the development of cannabis index products in 2019. “The CSE is the only location globally where you see as heavy a concentration of US cannabis issuers, so we are the logical place for such an index to be calculated and disseminated,” notes Carleton. Could related ETFs be far behind?

Whilst cannabis stocks may be dominating the headlines, the CSE has also welcomed a strong contingent of new mining companies in 2018, a total of 57 through the end of November.

“We have in fact seen a significant number – and in absolute numbers almost a record – of mining companies get onto the exchange and receive funding this year,” says Carleton. “My sense is that some of the profits from trading in the cannabis space over the last couple of years are being applied to the mining sector.”

Tech listings have been increasing as well, even though appetite for everything blockchain has slowed compared to the enthusiasm of late 2017. Interestingly, the industry enthusiasm for cannabis might just dovetail with ongoing international outreach initiatives by the CSE to put new funding alternatives on the table in the tech space.

Canadian public equity markets a viable alternative for
US companies
Smaller companies in the US and other international markets are finding it increasingly difficult to obtain private funding as private equity funds increase in size and need to make larger investments in portfolio components. A primary Canadian listing on the CSE would be worth considering for many young growth companies.

“We are being exposed to advisors in the United States who are beginning to understand that the Canadian public equity markets are in fact a viable alternative for US companies looking for growth capital,” says Carleton. “We’ve had conversations with a number of these professionals about taking what we have learned from the capitalization efforts in the US cannabis space and applying that to companies from other sectors that perhaps have not been that well served by the venture capital and provide equity models that are the principal source of growth capital for early stage US companies.”

Speaking of tech, the CSE has an ongoing project of its own in the form of a blockchain-enabled clearing and settlement facility. The project team is in the late stages of quality assurance and plans call for moving to external testing with dealers and other interested parties before the end of 2018.

“Dealers continue to be extremely eager to get their hands on it,” Carleton explains. “They understand the business case and the client service benefits, as well as the number of companies that would like to use security tokens as a means of securing capital.  We continue to be very excited about this facility and it is going to be one of the things on the agenda for 2019.”

Continually working to improve the issuer experience is an important part of the CSE’s culture, and that’s reflected in exchange staff organizing or participating in over 80 events during 2018.

New Toronto office
The CSE seeks to make that part of its business even stronger in 2019 with relocation to a new office, the highest office floor in Toronto, no less – 72 stories up at First Canadian Place. “This was really brought on by the anticipated growth in our staffing levels, particularly in the listings regulation area,” says Carleton. “It is important that we continue to maintain high service levels for our issuers and deploy our regulatory responsibilities as an exchange.”

A full-blown market opening centre is in the works and it will be just one of several first-day activities designed to ensure that a new issuer’s launch into the public markets gets off to a good start. “The new First Canadian Place location will provide the space and a spectacular backdrop to have exactly that kind of experience.”

New issuers will be pleased to learn that they are joining an exchange that again set full-year records for trading volume, trading value, and other measures of investor participation.

Trading volume up
In the first 11 months of the year, trading volume was already 54.97% higher than the total for all of 2017, topping 27.05Bn shares. Most measures of investor activity had actually surpassed last year’s record levels by mid-summer. And with the listing application pipeline exceptionally healthy as we head into year-end, look for 2019 to be another blockbuster.

Granted, capital markets in Canada are having a better year in general, but the CSE’s pace of growth in 2018 is validation of a business model that puts the needs of issuers first.  Fund managers from around the world confirm this, sophisticated management teams who choose the CSE over multiple alternatives confirm this, and investors trading tens of millions of shares per day in individual companies confirm this.

Carleton and his team see it first-hand and fully anticipate 2019 to be another year of growth and progress in many forms. Be it cannabis and tech businesses listing from the US, Israeli companies following up on the CSE’s multiyear effort there to introduce the listing concept, or new investors learning about the many opportunities presented by CSE issuers, the outlook could hardly be brighter.

“Things are going well but we need to keep our foot on the accelerator,” Carleton concludes. “Top-quality service for our issuers, a fair and well-regulated trading environment, and continued innovation in the exchange’s technology and business practices. It has worked so far, and we are going to keep at it.”

This story was originally published at www.proactiveinvestors.com on December 31, 2018 and featured in The Public Entrepreneur magazine.

Learn more about the Canadian Securities Exchange at https://www.thecse.com/.

CSE Issuer Stories, Magazine

The World According to Victory Square: Global tech making a difference on multiple fronts

Technology is changing the lives of every living thing on our planet and at a speed difficult to grasp.  Then there is the question of direction – where is the tech world taking us, and to what end?

To begin understanding these issues, it helps to have insight from someone who lives and breathes technology, but at the same time is not so consumed by it that they lose touch with everyday realities.  Someone driven by the outcome of their efforts for human beings, rather than the pursuit of technology for its own sake.

Shafin Diamond Tejani, CEO of Victory Square Technologies (CSE:VST), is firmly in the former group.  With a vision for his company built around clear opinions on future trends, he speaks sincerely about both increasing shareholder value and the positive influence he and his team can have on local communities…and those not so local.  At the end of the day, Tejani believes the benefits are there for all of us to share.

Public Entrepreneur visited Victory Square headquarters in Vancouver recently for an in-depth discussion of Tejani’s philosophies and thoughts on where technology is headed.  Investors and entrepreneurs alike could learn much from one of the city’s leading lights in technology investing and helping entrepreneurs realize their business and personal goals.

Victory Square invests in companies that are shaping the future, and that means you have some precise views on where technology, and the world in general, is going.  Can you share that outlook with us?  What are you focused on and what do you see for the future that some people might not?

Human nature is very predictable, and history is very cyclical.  If you look at the past few decades you see very clear patterns.  Our focus recently has been on new emerging technologies, which are disrupting established technology and creating completely new industries.  We are seeing things like decentralization, artificial intelligence, Internet of Things, and virtual and augmented reality being the next big movements.

I started my first company during the early dotcom boom of the mid-1990s.  The Internet and the Web democratized access to information and connected people from all over the world.  We have seen that impact every walk of our lives on a global scale, and it accelerated further with the explosion of mobile phones and smartphones.  We can now say that humankind is almost entirely connected.

Humans generally want to do the same things.  On the Internet they want to access information, purchase things, play games and watch movies.  They also use social media to connect and communicate with one another.  But for the last 25 years, most of these activities have taken place on centralized servers.  Facebook allows you and I to communicate but it’s a centralized platform.  We input the information, but they own that input, and they monetize it to third-party advertisers without us getting a cut of the money.

The impact of global platforms like Google, Twitter, and Facebook leads to problems ranging from the threat of government-ordered censorship to more subtle, algorithmic biases in the curation of material that users consume. These platforms which host and inform our connected public perspectives are unelected, unaccountable, and often difficult to oversee or audit.

We are now living through a new movement to create technologies and services to address these issues. Decentralized technologies that are open source, enabling peer-to-peer interactions in lieu of mediated centralized platforms are the remedy to our current global landscape.

In a centralized system, everything is kept in the same place and can be hacked.  In a decentralized network there may still be a Facebook that can create the network, but we all own our own information and we all participate and benefit from how successful that network becomes.  People will want to do the same things, but the underlying architecture is going to be different.

From an innovation standpoint, Victory Square focuses on things we know.  We like verticals that are commercial and virtually recession-proof.  Sports betting is a good example.

Let’s vector in a little closer.  How do you choose companies to invest in based on your broader view for the future of the world?

Given that we begin by focusing on verticals we know well, the next thing we do is identify a large customer with a pain point.  Then we look at some 80 accelerators we have relationships with around the world to see what problems talented people are trying to solve.  We can bring teams to Canada to evaluate them if they are overseas.  The evaluation will take place over anywhere from three to six months, and by bringing entrepreneurs to Canada there are a number of programs we can take advantage of that help to mitigate our risk.

We focus on verticals that we have a strong track record and experience in, identify a large customer in that vertical, look wide globally to find the best talent, bring it to Canada to give it all of the advantages of being based in Canada, and then we are able to evaluate the tech and the team as they validate with that large customer we have brought them to.

Tech has been commoditized, so it’s your ability to have an operator who can execute efficiently.  Execution becomes the real key.  We look for strong teams and leaders who have built a product that customers are willing to pay for.  And given that commoditization, you need differentiating factors – someone who can speak well and articulate what they are really doing, and then there is that work ethic and hustle that we also look for in an operator.

Give us an example of an investment and the impact it stands to have on the future.

There are 19 companies in our portfolio doing exceptional things.  One of those is FansUnite, which was founded by an accountant and a lawyer who are very passionate about sports betting.  We acquired the company about 18 months ago for $2 million, worked with them to build a unique product, and they just oversubscribed a financing of $4.45 million at a pre-money valuation of $13 million.  FansUnite is aiming to go public in early 2019.

In the sports betting industry, all bettors are generally betting against the house.  You are trusting the house to manage the lines appropriately, trusting them to put the player funds in escrow, and then to pay you out accordingly when the time comes.  Paying exorbitant fees and trusting a centralized third party with your funds was what led to FansUnite incorporating blockchain into their business.

A main pain point is that the house is using a third party to process payments, which means they must charge a fee, and it can be as high as 10%.  That means if you bet $100, only $90 is actually going into the pool, so you have to win 54% of the time just to break even.  They realized that decentralization and blockchain could address this and built their own protocol and currency. FansUnite will become one of the first companies to build the infrastructure that allows any operator to build a blockchain based sports betting application on the protocol.  FansUnite is building the first decentralized application which will be a low-margin sportsbook, taking the fees per bet down to an industry low 1% margin for the book.  There are many other efficiency benefits as FansUnite aims to change the landscape of the sports betting industry.

Your company materials suggest giving back to the community is important to Victory Square.  How does investing in things that make the world a better place fit into the structure of a capitalist enterprise?

My family is from East Africa, and in the early 1970s there was a military coup and we ended up in Canada.  We basically won the lottery by landing in Canada, where we had access to good education, stable government, safety and security.  The advantage we had in Canada and the thankfulness is tied into a responsibility I have always felt, and it has trickled down to our portfolio companies in the form of something we call TKM: Time, Knowledge and Money.

There are some in our team who might not have financial resources to give, but they have time and knowledge.  A graphic designer might donate design services to a philanthropic organization in need of that skill.  Lawyers or accountants can provide legal advice or business planning for charities.

Our focus at Victory Square is on vulnerable children and making sure they have the basics, which means access to nutritious food, education, safe environments, love and support.  We found that not only do we have the time and capacity to do it as a capitalist enterprise, but if often benefits us because it aligns us with the interests of other socially minded entrepreneurs.  There is no negative impact – it is only positive.

There is no typical day for you, but how about a typical week or month?  Give us a look inside the world of a manager at the top of an investment organization.  What are your biggest challenges and how do you keep on top of all the moving parts?

I am fortunate to have an amazing team and we divide and conquer.  If we take September as an example, we are hosting a conference in London called the World Blockchain Forum, where investors, thought leaders and emerging tech companies from all over the world will be gathering, including some of our own.  We’ll be connecting with investors and accessing deal flow in the UK.

Right after that we head to Asia, where we have some portfolio companies.  We will be stopping in China, Hong Kong, South Korea, Japan, and then we end in Singapore.

Thankfully, Asia is a day ahead because we come straight back to Vancouver for conferences, one of which is Cambridge House’s Extraordinary Future, which we sponsor and are actively involved in, and then the AR/VR Global Summit.  At the end of September, we are in Malta for the Malta Blockchain Summit.

Portfolio companies are global, events we host and speak at are global, our talent pool and investors are global, so we are spread out.  And alongside all of that, we are managing our portfolio companies and day to day responsibilities, so we have to ensure we have a really organized team, but also a really deep and hard-working team so we can successfully execute on everything.

And there are also lots of activities we run on the philanthropic side – educational programs, food drives, golf tournaments, galas and other events.  That initiative is important to us and we have a team that makes sure we devote appropriate time.

Victory Square must have a shareholder group a little different than that of the average public company.  Can you discuss the type of investor that backs you?

We attract a wide variety because we are in many different verticals.  We have exposure to artificial intelligence and machine learning, to VR/AR and blockchain, as well as mobile games and film.  They fall into three categories: institutional investors who have a longer vision, retail investors who don’t fully understand the sector but want exposure, and then there is a big group of investors who support our portfolio companies from the global crypto community.  Given that tech is borderless, we are seeing investor interest from all over the world.

If you could convey just one lesson to a talented, budding entrepreneur, what would you tell them?

There are lots of things I think are key, but forced to make a shortlist, I’d offer an analogy.  If we needed to go to Florida we could get in a car and start driving, but we might not have enough food or money or gas.  We might eventually make it to Florida, but it would not be the most efficient way.

A well considered plan is one of the biggest things.  You need a roadmap for where you want to go.  But you also have to realize that the direction you initially started out on might not work, so you have to be flexible and adjust.  The entrepreneurial journey does not always look like a hockey-stick curve.  It can be very volatile, and having that plan enables you to be better prepared to face the challenges and difficult periods and be persistent and determined to get past it, rather than become frazzled and quitting early.

You also need the right attributes, such as strong work ethic, leadership skills, passion and determination.  If you put enough smart people together with a good idea or opportunity, you are going to figure it out.

This story was originally published at www.proactiveinvestors.com on September 19, 2018 and featured in The Public Entrepreneur magazine.

Learn more about Victory Square at http://www.victorysquare.com and on the CSE website at https://thecse.com/en/listings/technology/victory-square-technologies-inc.

Service Providers

Going Public? Put a Communications Upgrade Near the Top of Your To-do List

Congratulations on taking your company public on the Canadian Securities Exchange.  You have made a wise decision that will benefit you, your team and your company in many ways.

With your new status, however, comes responsibility to an expanded base of shareholders and a duty to maximize the value of your company in a manner different than when you were private.  Now, the value of your organization is reassessed by the investment community every second of the business day.

Build it and they will come?  Don’t believe it for a moment.  There are thousands of listed companies in North America vying for the attention of the investors you seek, and the companies that attract them are the ones who combine business success with marketing savvy to ensure they are at the front of the line when investors scout around for ideas.

Unless you know every shareholder in your company and have a good portion of the financial community in your digital rolodex, you will need assistance with communications.

How much assistance?  A typical IR budget for a microcap stock is in the range of $100,000 per year.  This includes travel to meet investors and investment professionals, participation in a handful of carefully chosen events, digital outreach to keep the story live 24 hours a day, and perhaps an external IR firm to bring an instant base of interested parties.  If you are sufficiently mature as a corporation, an internal IR manager might be a consideration.  And…we’re already closing in on $200,000.

A lot of money, right?  Well, if a $200,000 outlay adds to your market capitalization by $3 million (6 cents per share assuming 50 million shares outstanding), few will argue the money was not well spent.  Especially if you plan to raise equity capital anytime soon.

Add in satisfied investors and better sleep at night, and it really is a prudent decision.

You’ll need people you can trust to guide you in putting your strategy together.  There are plenty of hands who will take your money – ask around to make sure you team up with the ones who follow through with the promised effort.  And while a company needs to be connecting with existing and prospective shareholders regularly, only spend money on a full suite of resources when you have the corporate developments to really leverage them.

A prevented sell has the same value as a buy.  Inform your existing shareholders with regular written updates, media interviews, and an increasingly popular tool — video.  Complement important press releases with a brief video explaining your latest results, how your process works, or what your new facility looks like inside.  Let shareholders look the CEO in the eye online and take his or her measure.

A favorite related story involves a company whose stock was stuck between $0.50 and $0.80.  Management put tremendous effort into investor relations, but no matter how hard they tried they could not break through $0.80.

One day, on meeting number 200+, the company met an analyst who got the story right away and encouraged their trading desk to begin buying the stock in size.

It was not long before the stock broke through $0.80…on its way to more than $3.00.

The point is that if you have a good company, there are investors out there who will see what you see, adopt your vision and back you with money.  But connecting with them is a numbers game.  Reach out to a few dozen people and you will have to be very lucky to find backers.  Reach out to a thousand and your odds can start to look pretty good.

This story was written by Peter Murray  and featured in Service Providers magazine.