All posts by Peter Murray

CSE Issuer Stories, Magazine

Phivida Holdings: Outstanding team with a vision for international CBD leadership

It was insights earned from years of hard work and dedication that led Phivida’s senior management team to choose a greater vision.

Founded in 2014, Phivida has shifted its focus from a pure-play wholesaler of CBD (cannabidiol) hemp-oil extracts into a premium portfolio of CBD-infused clinical and consumer brands, offered in a variety of formats, and formulated to serve the needs of patients, practitioners, professional athletes, and active professionals.

President and Executive Chairman of Phivida Holdings Inc. (CSE: VIDA) John Belfontaine has moved as fast as anyone to take advantage of the growing interest in all things hemp/cannabis, as legalization efforts – and greater acceptance of the plant’s medicinal properties – continue to progress in North America, and around the globe.

Belfontaine, working with key advisors, first saw the opportunity, brought it to the capital markets and quickly found himself fully capitalized, with an all-star line up of experienced executives.

Fast-forward to Q2 2018 and the company has a flush treasury and a newly evolved senior management team with proven success in taking products through regulatory labyrinths – plus a vision to build a CBD brand which appears destined for success.

The Phivida executive team now includes Chief Executive Officer Jim Bailey who, with his team, built the energy drink category in Canada from scratch, taking Red Bull Canada to over $150 million in annual sales. Energy drinks such as Red Bull were not even approved for sale in Canada when Bailey agreed to head the Canadian operations of what is now a household name.  There are clear parallels to his success in that role with the quickly evolving regulatory environment within the global CBD hemp and cannabis industry.

Bailey is new to the team, having joined Phivida in mid-March, following the appointment of Michael Cornwell as Chief Marketing Officer.  Cornwell’s vast experience in brand marketing and sales for top CPG (Consumer Packaged Goods) companies includes his former role as Business Unit Director for Red Bull.

The most recent addition to the executive team is another top Red Bull alumni, former Red Bull USA Director of Sales Doug Campbell. Campbell joined the team in early May in the role of Chief Commercial Officer, now overseeing international distribution and sales.

Clearly, Bailey and his new teammates qualify as star power for a company of virtually any size but for one at Phivida’s growth stage their leadership is truly remarkable.  Their decision to join was based on a clear potential to grow the company into a leading brand in a product category in which they all share a common passion: functional foods, beverages and natural health products infused with CBD from medicinal hemp.

The Phivida product line currently encompasses CBD capsules and tinctures both for consumer and clinical markets, as well an appealing selection of CBD-infused beverage innovations. Phivida’s CBD beverages use encapsulation technologies which make the CBD oils faster acting, longer lasting, and soluble in a fluid format. Perfect for CBD beverages, higher than average consumption rates, and a USA health and wellness market that tends to place a premium on price and convenience.

The company is continuing to innovate on new CBD-infused beverage brands and formulations, and the finer details of its marketing strategy, ahead of a USA roll out.

As a first order from the new chief executive, the creative vision for the future of the brand is now led by award-winning creative agency Sid Lee. This is the same creative agency that assisted Red Bull’s launch in Canada, as well as other notable names in their portfolio, such as North Face and Grey Goose. Phivida has also engaged world-renowned brand designer Brian Schmitt to act as a creative director in the evolution of the brand, with a portfolio of work that includes global brand juggernauts like Nike and Apple.

“The consumer beverage side of the business is what we are really going to focus on,” says Bailey.  “We are going to start with a launch in the United States in four major metropolitan areas: Seattle, Portland, San Francisco and San Diego.  We’ll begin with a targeted approach and then look to broaden distribution nationally.”

Bailey came to believe in the potential of cannabinoid-infused products during his recovery from a cycling accident several years ago.  The hospital that performed his surgery had him on opiates while under its care, but even before being discharged he was looking for natural alternatives.

“I did a lot of research on cannabinoids and their potential for helping with pain management,” Bailey explains. “Knowing Phivida was in the CBD-hemp space really intrigued me.  In food and beverage, distribution and retail are both looking for natural alternatives right now.  People are more aware of what they are putting in their bodies and are seeking healthier choices, so for me this sector is ripe for growth.  I know we have the potential to equal the success we had with Red Bull.”

Both Belfontaine and Campbell share similar stories, and one that many relate to.

Bailey says the only way to beat competitors in the current environment is to “out-market them and out-professionalize them.” He explains regional distributors are forced to operate in somewhat of a wild west environment for the time being, often turning to manufacturers making small batches and selling product on the fly.

“They see that we are very different, the investment we are making in the consumer, and the investment we are making on the creative side,” notes Bailey.  “And working with top quality ingredient suppliers that bring authenticity for each product is important.  Everything we use is premium quality, professionally manufactured, and thoroughly tested for purity, safety and function, putting Phivida in a class above.”

Ensuring reliable supply of high-quality ingredients and at the same time opening a new potential market in Canada is par for the course for Phivida. However, the company’s biggest move to date is one the capital markets have, arguably, yet to fully appreciate.

Phivida’s prospective foray into the Canadian cannabis market is through a joint venture agreement with licensed cannabis producer WeedMD (TSXV:WMD) in what would be a co-owned company called Cannabis Beverages Inc., or “CanBev”.

WeedMD is fast becoming a major cannabis producer under Canada’s ACMPR (Access to Cannabis for Medical Purposes Regulations), with a 26,000 sq. ft. facility operating with annual production capacity of 1,500 kg of high-quality cannabis.

Their second facility has an estimated 33,000 kg of capacity with an option that could take it over 50,000 kg. This 14 acre (609,000 sq. ft.) expansion project in Strathroy Ontario boasts world class genetics, top-tier management and the infrastructure to support large-scale growth, with a low cost of production, by using state-of-the-art greenhouse technologies, yet maintaining premium quality production standards.

WeedMD also recently announced a merger agreement with Hiku Brands (CSE:HIKU) which may add recreational THC brands to the CanBev project, as well as west coast licensed production with their ownership of DOJA, and a national network of retail locations for cannabinoid infused products through their ownership in Tokyo Smoke.

“Our joint venture with WeedMD is designed to build and operate the first ever federally legal cannabis-infused beverage production facility in Canada,” explains Belfontaine.

The CanBev joint venture also enables Phivida to bring their products home to Canada by navigating an important aspect of the Canadian regulatory environment.

“Industrial hemp is not an option for us in Canada,” explains Belfontaine in discussing legal sources for the oil Phivida needs to make its products.  “The WeedMD partnership provides sufficient supply of high-grade CBD from a legal source. We are partnering with an ACMPR licensed producer to source cannabidiol in Canada, and we are thrilled to joint venture with what we consider to be the ideal partner in the Canadian market.

In the US, Phivida products use full spectrum hemp oil extract, with 0% THC, “for all of the health and none of the high,” Belfontaine says. To date, Phivida has focused on the medicinal CBD market and the Phivida brand in Canada will remain true to this ethos.

As a complementary partnership, the WeedMD-Hiku collaboration also opens a whole new market to the CanBev project in the adult-use recreational side of the sector.

“Phivida will maintain CBD-only, THC-free products under our brand labels,” says Belfontaine.  “But with a Red Bull pedigree at the helm, and a solid operations team, we will also be assisting in the manufacturing, marketing and retail distribution of THC products with WeedMD/Hiku under their premium adult-use brands, and labels.”

Looking to ensure every possible base is covered, Phivida has its eye on a launch across North America, while preparing for expansion to new and emerging markets overseas.

“We have secured distribution partnerships across the western United States, as well as in Japan through Asayake,” says Belfontaine, adding that a deal with Namaste Technologies provides exposure to UK, German and Australian markets via online sales.

Phivida has completed two major financings in the past five months, including its long form prospectus IPO in December 2017.  The appreciation in share price out of the gate resulted in the company having almost $7 million worth of warrants exercised. In April, they completed another prospectus offering in bought deal which grossed $8 million.

“As of May, Phivida has just over 60 million shares outstanding with over $16 million in the treasury,” points out Belfontaine. “We now have expert management, a solid structure, tier-one supply and manufacturing partners, and the capital we need to execute our plan. There is now very little standing in the way of the Phivida brand becoming synonymous with leadership in the CBD sector internationally.”

CSE Issuer Stories, Magazine

International Cobalt strategy takes shape following $10mln financing

International Cobalt Corp. (CSE:CO) focuses on primary cobalt projects, and while it has a couple of good land packages under its control in Idaho, a recently closed $10 million financing means the company now has the wherewithal to consider additions to its portfolio as well.  Chief Executive Officer Tim Johnson explains the outlook for cobalt, why supply constraints are here to stay, and how International Cobalt is positioning itself to take advantage of the favourable supply/demand environment.

What outlook for the cobalt market do you hold at International Cobalt and how does that shape your strategy in terms of project acquisition and allocating human and capital resources?

We think prices will remain strong both near term and long term.  Basically, we just cannot see anything on the horizon that’s really going to change the amount of cobalt coming on line.  In December 2017, Glencore announced it was going to double their production in the DRC (Democratic Republic of the Congo) and there was no effect on the market whatsoever.  As long as the battery space stays strong, we think cobalt will stay strong.

This environment really puts us into acquisition mode – we are actively looking for new projects in the space.  Exploration in the cobalt space is not very mature at all, and there are going to be a lot of discoveries and news releases from various companies over the next few years.  We want to be right in the middle of the mix.

Walk us through the components of your project portfolio.  What has you the most excited and what work is upcoming?

We’ve got two projects in the Idaho Cobalt Belt and we bracket eCobalt Solutions’ advanced project.  Although there has been a fair amount of historic work done on our landholdings, the majority of it by Noranda in the 1980s, our team has not really had boots on the ground yet except for a site visit.

We anticipate doing a full geological work-up on both projects, to include extensive soiling and mapping.  I’d say half of our Blackbird project has not been mapped geologically.

So, we are excited to get to work on the projects and because there are many companies in the belt, including us, there is going to be a lot more exploration.  It is a world class belt as far as cobalt goes, so you are going to see lots of news coming out of it.

You mentioned that you are in acquisition mode.  What types of additional projects would appeal to you, and how do you assess them?

We are looking for primary cobalt.  We are not as interested in nickel secondary cobalt or silver secondary cobalt.  Primary cobalt projects are few and far between and we are doing a lot of digging to find good ones, looking mostly in North America.  We have feelers out in Africa as well, but any acquisitions we make in the near term are likely to be North American.

Cobalt really is an underexplored mineral.  It is not like the molybdenum days of the early 2000s, when once moly started to rise in price everyone had a near-term moly mine.  A lot of work will be needed to bring supply on line.

Does that mean most of the projects are early stage?

Right now, most of the cobalt supply is from secondary sources such as nickel and copper.  There hasn’t really been a focus on looking for primary cobalt projects, so anything you find is quite early stage.  It is not like you are going to find something that was almost a mine and didn’t make it because of prices and now it is coming back up.  And if you do find that it is most likely in the DRC.  You know anything you get into is going to be a long-term project and you’ll have to structure your efforts to support that.

The financial markets are supporting mining exploration companies once again.  What observations do you have on the current health of the market, and particularly with regard to the cobalt space?

Cobalt is definitely popular.  There are a lot of financial professionals we have talked to who would like to get in on the space, but there are limited opportunities to do so.  It has to do with the maturity of the exploration cycle – there really aren’t a lot of high-quality projects out there and the price of cobalt does not seem to be going down.  Any decent projects have high valuations, and those are the projects the money is looking for.

What kind of timeline are you giving interested parties in terms of the work you have planned.  And are you only interested in projects you can own 100%?

We are open to looking at other opportunities, whether it be joint ventures or strategic investment.  Because we are an early entrant into the Idaho space you kind of wait to see how things shake out.  I think the belt will potentially see consolidation, as there are some smaller players getting good results but there are no majors there yet.  Once some of the juniors have more success the majors will come knocking.

Cobalt is hot and there are lots of entities jockeying for position.  Are they mostly Canadian companies or are some from other jurisdictions?

There are a few Australian companies in the space, and money is coming out of Australia as well.  We got some backing out of Australia and other companies we have seen did as well.  Some groups that had success in the DRC are starting to look for safer jurisdictions.

How are you going to pay for the acquisitions and work on the project portfolio?

We recently closed a $10mln financing.  Our plan is that the new capital would support at least two years of exploration.  We are talking all of our ground proofing this summer, a potential initial drill program in the fall, followed by another drill program in 2019.  That is the plan with our existing assets, so things could change, of course, if we completed acquisitions.

International cobalt has enjoyed a good start to 2018 in the markets and on the corporate front.  Is there anything else you’d like to comment on?

Just that we are very happy with our land position in the Idaho Cobalt Belt.  The historic data we are turning up is proving our theory right.  There are new reports being made available by the Idaho Geological Survey all the time and each time we find one we get excited again.  Most of the work is by Noranda so we have high confidence in its quality and really want to get boots on the ground and follow up on everything.

This story was originally published at www.proactiveinvestors.com on March 2, 2018 and featured in The Public Entrepreneur.

Learn more about International Cobalt Corp. at http://internationalcobalt.com/ and on the CSE website at http://thecse.com/en/listings/mining/international-cobalt-corp.

CSE Issuer Stories, Magazine

Bunker Hill Mining: One of America’s most historic mines is ready for a comeback

Mining investment is back in a big way if the first quarter of 2018 is any indication, and it’s helping set the stage for one of the largest and most storied mines in the United States to finally come back onstream – the Bunker Hill Mine in Idaho’s Coeur d’Alene Mining District.

Seasoned mining industry observers won’t be surprised to learn that the man behind the project is Bruce Reid, Chief Executive Officer of Bunker Hill Mining (CSE:BNKR). Reid has acquired, worked on and sold six mines in his career, five of which are currently in production (number six is slated to begin producing in 2020 or 2021). Bunker Hill will make seven and mark the culmination of an effort ongoing for over two decades.

“I tried twice in the last 20 years to get Bunker Hill but wasn’t able,” Reid explains. “When the largest shareholder of what has become Bunker Hill Mining asked me to lead his company, I told him, ‘Go get the Bunker.’”

Sure enough, he got it, although the deal originally agreed with the heirs of the long-time owner was re-written in August 2017, shortly after Bunker Hill Mining began trading on the CSE.

The Bunker Hill mine went into production in the mid-1880s and remained in operation until 1981. For many years early in its life it was said to be one of the largest mines in the world.

“Bunker Hill leads the way as one of the most important mines ever in American history,” says Reid. “It produced over 35 million tons of high-grade lead-zinc, about 8.5% lead, 4.5% zinc and 2 to 3 ounces of silver. When it closed it had resources and reserves of over 60 million tons, or almost twice what had been mined.

“Collectively, it has about 9 million tons of 5.5% to 6% zinc, 2% lead and a little more than an ounce of silver left in stopes that are already open and not flooded.”

That is a major amount of rock waiting to be harvested, and the cost of getting the mine back up and running is far from astronomical. Just US$15mln would re-launch operations at 1,000 tons per day, and scaling up to 3,000 tons per day, as plans call for within two years, could make Bunker Hill the largest lead-zinc-silver mine in the United States outside of the gigantic Red Dog mine in Alaska, according to Reid.

Why, then, if all that ore is just sitting there has the mine remained inactive for so long? The owner at the time proved hard to convince and the US Environmental Protection Agency (EPA) was heavily involved as well, running a wastewater treatment facility onsite to deal with acidic effluent. While the Mine itself was not involved, the associated lead-zinc smelter caused significant pollution in the entire Silver Valley and the district was the site of a billion dollar cleanup through the EPA Superfund. That is mostly completed now as the Valley is in much better condition.

The deal now in place with the mine owners is a 24-month lease under which the project can be purchased for US$25mln over 10 years. Another US$20mln would go to the EPA, this amount a partial acknowledgement of costs accumulated for clean-up over the years. An operating Bunker Hill Mine would also pay the EPA $1 million per year to continue operating the wastewater plant.

“The EPA has proven to be a good partner — they are reasonable,” says Reid. “People want to see the mine back in production for a number of reasons, one of them being jobs. But also, this mine, if left alone, will only get more troublesome as parts internally break and water starts leaking from different areas. If it’s in production, however, we’d have the cash flow and earnings to build up the closure bond, and to take care of many longer term problematic areas.

Reid is not only a formally trained geologist, but also a former analyst and successful investment banker. He thus has detailed insight into the metals markets Bunker Hill would once again serve.

“Zinc is in a deficit in terms of the raw metal,” Reid explains. “We are still losing production even with the price being up, and some mines that have been dragged back into production are running out of ore. The zinc concentrate market is even tighter – it looks like concentrate could be in deficit for another three years.”

And while one might think the omnipresent talk about future battery technologies would undermine the lead market, Reid says it is “amazing” how tight the lead concentrate market is right now.

Details regarding the path to production for Bunker Hill are still to be decided but could entail initially toll milling (utilising another entity’s mill), although ultimately the company will want to build its own mill plant.

“My estimate is that starting the mine utilising a toll milling arrangement is estimated to be about $10 million including working capital,” explains Reid. “I’m in active discussions with a number of financiers and toll milling partners and we hope to be in production in 2018. The longer term goal, though, is to build our own expandable process plant right on site, which is also part of the Patented Land package involving the entire Bunker Hill Mine site.”

It is an amazingly near-term timeline for a small company that began trading less than a year ago, but given the Bunker Hill Mine’s size, grade and favourable jurisdiction, plus the strength of Reid and his team of local professionals, the market is buying in, having taken the company’s share price as high as $3.15 since its debut.

Also amazing to observers who know how the financial markets work is that Reid, his team and that the one large shareholder have put their shares into a voting trust and none of the shares can be sold until there is a change of control, which is another way to say that Reid must sell the entire company for the insiders to ever realise on their share positions. We’re talking approximately 15 million shares out of the company’s 33 million outstanding.

That lock-up suits Reid just fine. He knows he has a monster by the tail and his track record suggests that few people could be better at finding a buyer when the time comes.

“This is one of the most important lead-zinc resources in the Americas that is not producing currently,” Reid concludes. “And then once we put it into production we’ll follow up with a drill programme to beef up reserves and resources. Bunker Hill is a big one. It will outlast us all.”

This story was originally published at www.proactiveinvestors.com on March 5, 2018 and featured in The Public Entrepreneur.

Learn more about Bunker Hill Mining Corp. at http://www.bunkerhillmining.com/ and on the CSE website at http://thecse.com/en/listings/mining/bunker-hill-mining-corp.

CSE Issuer Stories, CSE Quarterly

DOJA Cannabis building value quickly with artisanal quality, expert branding

If there is one thing that Trent Kitsch ingrained in himself while building SAXX Underwear into a multi-million-dollar company, it was the value of a brand.

SAXX entered the men’s underwear market with an innovative line of undergarments sold online at higher than average prices and margins.  The premium quality appealed to plenty of men who were willing to pay a little extra to take care of their bodies, with clothing they felt was made with more care and attention than they could find elsewhere.

It is precisely this approach that Kitsch and his team at DOJA Cannabis Co. (CSE:DOJA) intend to follow in building their newest venture: a collection of cannabis and lifestyle products created with  meticulous care.

“Our background is building brands in the fashion and wine worlds,” says the DOJA CEO, who founded not only SAXX Underwear but also award-winning Kitsch Wines.

“DOJA is a brand built around the uncompromising quality of its product.  We do things differently than most of our peers in how we cultivate, hand-trim and cure the cannabis we grow.”

Kitsch explains that hand-trimming retains the look of the flower better than the more popular approach of machine-trimming, while keeping more of the terpenoids and other desirable components machines tend to rustle off.  Rather than removing buds from plants the moment harvesting begins, DOJA hang-dries and cures its product on the stalk.  “You get a better finish that way,” says Kitsch.  “It brings out superior flavors, trichomes and aromas.”

DOJA is headquartered in British Columbia’s picturesque Okanagan Valley.  With 2mln visitors that come to the region each year, the company plans on leveraging the vibrant tourism market to build a far-reaching brand.

The company also believes it will soon have the opportunity to show the rest of Canada the difference its artisanal approach makes.

DOJA received its license to cultivate under Canada’s ACMPR (Access to Cannabis for Medical Purposes Regulations) framework on June 16 of this year.

Soon after the first harvests, a request to Health Canada for a Pre-Sales License Inspection was submitted.  The inspection is the final step ahead of the government issuing DOJA a Sales License under the ACMPR.

With license in hand, DOJA’s primary distribution channel would be online sales direct to the customer.

“Channel two will depend on how the provincial governments announce their planned sales structures,” says Kitsch, alluding to the expected legalization of cannabis in 2018.  “We are hoping some of the provinces see opportunities similar to those in the wine industry or agriculture tourism and that some of those channels open up to us.”

DOJA is planning for its products to be very popular, having already invested in a second growing facility that will expand its overall production capacity by more than 700% to just over 5,000kg of dried cannabis per year.  The new 22,580 sq. ft. Future Lab facility, located close to the Kelowna International Airport and the University of British Columbia’s Okanagan Campus, will be home to DOJA’s research into new and unique cannabis strains, processing, as well as exploration of the edible and oil extract markets.

The proximity of the Future Lab to the airport will not only reduce both cost and time required for delivery but the 60,000 travelers who traverse the road in front of the facility each day will be exposed to the DOJA brand on their commute.  Estimates around permitting and construction time have DOJA intending to open the Future Lab in the summer of 2018.

There is one other DOJA initiative helping to create awareness around the brand and the various aspects of cannabis. The DOJA Culture Café in downtown Kelowna will act as a hub for cannabis information within the community.  Here, customers can have a coffee or a meal, while also learning how to access and use cannabis safely, depending on their particular needs.

DOJA, whose shares began trading on the CSE on August 9 of this year, is well capitalized to execute on the first phase build-out of the Future Lab.  Plans also call for borrowing against their newly acquired facility to further bolster the company’s working capital position.

When asked about the outlook for DOJA, Kitsch responded, “The sky is the limit.  Our brands and unique advantages will differentiate us from the pack, and in one to three years I could see us being acquired by a larger company who wants to have a B.C. footprint and a premium lifestyle brand in their portfolio.”

Near term, though, Kitsch believes the investment community would do well to keep some potential share price catalysts in mind.

“Once we receive our sales license I would say we’d be quite undervalued at our current share price and there would be a strong investment thesis for DOJA on a relative valuation basis,” says Kitsch.  “Ahead of legalization, I think positive sentiment will continue to pick up and an increasing number of people will start to see cannabis as a viable investment opportunity.”

This story was originally published at www.proactiveinvestors.com on December 6, 2017 and featured in The CSE Quarterly.

Learn more about DOJA Cannabis Company Limited at https://doja.life/ and on the CSE website at http://thecse.com/en/listings/life-sciences/doja-cannabis-company-limited.

CSE Issuer Stories, CSE Quarterly

Ortho Regenerative looks to prevent surgery by turbocharging joint recovery process

Innovation is oftentimes the result of people approaching a problem from an angle that others haven’t considered.  That’s precisely what the team at Ortho Regenerative Technologies (CSE:ORTH) is doing as it tackles some of the world’s most common surgeries – tendon, meniscus and cartilage repairs in shoulders, knees and other joints.

Chief Executive Officer Brent Norton explains that the long-term result of removing damaged cartilage or meniscus is about the same as not having any procedure performed at all.  Similarly, studies show that shoulder tendon repairs fail at an alarming rate.  Missing its natural elasticity and shock absorber, a joint can deteriorate to the point that arthritis sets in, and if things get bad enough movement is very limited and full joint replacement often becomes necessary.

Ortho’s technology is all about leaving these soft tissues in place and treating them so they repair themselves.

“Long term, if we can treat injury versus treating the complications of the injury, that’s the better way,” says Norton.  “The opportunity is to heal the soft tissues, and the result is that we no longer treat complications such as pain and arthritis, have people miss work and be inactive, nor have to bear the expense of introducing an artificial joint.”

Tendons, cartilage and meniscus are close to the last in line to receive blood supply in our bodies and are relatively avascular, meaning they have few blood vessels. The bottom line is that because blood gets little chance to bring revitalization to these body parts, they do not heal well and thus need assistance.

There are medicines that promote healing in tendons and meniscus but they have to remain in contact with them for a meaningful period of time.  Not only do joints naturally involve internal motion, they also contain lubricants, which usher medicines away from the locations that need them.

Ortho’s solution is to apply what in industry parlance is called a scaffold to hold the medicine in place long enough for it to work.  Essentially, it is a special compound made from a naturally occurring protein that a surgical team mixes with a patient’s blood to ensure efficient delivery.

The scaffold will remain in place for several weeks before naturally dissolving, but in the meantime it ensures the medicine is hard at work on the body part that needs to heal.

“Years ago, when we took pills we took them several times a day,” says Norton in drawing an analogy.  “Then someone invented the sustained release formulation, which allowed you to take a pill only once or twice a day because it was sustained release.  It is a similar principle.”

The technology was borne of studies conducted by two of the world’s most prominent researchers in soft tissue repair: PhDs Michael Buschmann and Caroline Hoeman.  Their initial scaffold for joints had promise, but it took 30 or more minutes to prepare for use when the patient was in the operating room, a factor reducing efficiency and contributing to it being cost-prohibitive.

Norton is a medical doctor himself who practiced largely in the field of sports medicine.  Early on, though, he knew that he wanted to mix actual practice with directing innovation to have the greatest impact.  “I decided to do an MBA at Western University because I wanted to be a driver of technology rather than a clinician seeing one patient at a time,” he says.

Norton’s career path would lead him to be that driver in several corporate settings, including with Novadaq Technologies, a medical imaging solutions company acquired in 2017 by Stryker Corp.

“With Novadaq, at times I felt like I was the coach, and was a founding director,” says Norton. “I helped with strategy, building the shareholder base, the board, hiring a professional CEO, recruiting the investment banks to take it public, and ultimately helping to lay down the strategy to get third-party validation and revenues.  We created multiple partnerships, got FDA approval and a TSX listing and then it went on to have a Nasdaq listing and was sold to Stryker for C$900 million.”

All of which, including the chance to return to his career starting point in Montreal, would seem to make Norton a good fit at Ortho.  “When I took this role, I got messages from friends and colleagues saying ‘right back to your roots’.  It is more than coincidental, it’s optimal,” he observes.

Ortho’s product performed well in pre-clinical studies and is now in the final stages of animal studies, with expectations that it will move to human trials in 2018.

Given that Ortho’s product is in the biologic category, the first step with human studies requires the company to prove that it is safe to use, something Norton expects the product to achieve with ease.

The second study in a biologic is the main study, or pivotal trial, which regulatory bodies use as the basis for their effectiveness assessment.  The pivotal trial would likely begin within two years from now.  After that the company would apply for FDA (US Federal Drug Administration) approval.

But that timeline hardly means investors will be left without milestones to cheer on in the near future.  When asked, Norton lays out a pretty full slate.

“This is the first fully patented product of its type in the world and we have an evolving patent family for it,” Norton explains.  “Over the next year we expect to see patents issued around much of the world for this product.”

“Key studies have also been accepted for publication in multiple scientific peer reviewed journals.”  Norton says this means that some of the images and information on the product will take center stage in the related scientific community.

“In my experience, having five papers in the queue to be published is something I have never heard of,” he says.  “In the next short while we will have multiple papers and studies published, and we can anticipate our approval to begin human studies, which typically drives a lot of corporate value.”

Norton emphasizes that it is up to the researchers to assess whether a product works, whereas management’s role at a biotech company is to minimize other risks and drive the strategy.  He points to responsibilities such as making use of capable intellectual property firms, bringing in skilled accountants and hiring an experienced management team.

“In Ortho’s case, the risk profile of getting through to a pivotal trial is nominal,” Norton concludes.  “You can never guarantee biology or the ultimate results, but our goal is to optimize the process in the most cost-effective manner to get through to an FDA approval in the next three to four years.  We are managing the company to reduce the risk of everything else, so that the only thing we are betting on is the results.”

This story was originally published at www.proactiveinvestors.com on December 7, 2017 and featured in The CSE Quarterly.

Learn more about Ortho Regenerative Technologies Inc. at http://www.orthorti.com/ and on the CSE website at http://thecse.com/en/listings/life-sciences/ortho-regenerative-technologies-inc.

CSE Issuer Stories

Interview with Tom Rossiter, Chief Executive Officer, RESAAS Services Inc.

In late July, Peter Murray of Kiyoi Communications sat down with Tom Rossiter, Chief Executive Officer of CSE-listed RESAAS Services Inc. (CSE:RSS) to discuss his perspective on opportunities in the real estate sector and RESAAS’s unique platform. Below is the transcript of their discussion.

Peter Murray (PM) RESAAS offers unique services to the residential real estate industry, a massive market if there ever was one.  Can you begin by walking us through what the company does at a high level, and given all the pivots that seem to take place at technology companies, has your mission changed along the way?

Tom Rossiter (TR) Our mission hasn’t changed along the way, it has evolved.  If we rewind to the beginning of RESAAS (Real Estate Software as a Service), we set out to create an online platform that aids the existing practices of the real estate industry.  We all know that real estate agents are social professionals – maybe the most social group of professionals that exist.  When you are together with them in real life it is amazing to see the knowledge sharing, the education, the tips and tricks, and the deals that get done.

We thought that should be supplemented digitally so the value of a professional circle could transcend a local market and put an agent or organization on the map not just locally but nationally, and maybe even overseas.  You can think of RESAAS as an online destination for real estate professionals to act as they do in real life.

Eventually, the networking effect kicked in, which means the bigger the network, the greater the value to those in it.  Word got out about all the great content, and data, and deals, and leads, and listings that were happening inside RESAAS amongst the agents using it.  Leading organizations with extensive footprints in terms of agent count and office locations began to catch wind of what was going on and thought, “Wow, we have this large physical presence.  What would happen if we embraced this RESAAS model to be our digital complement?”

A big part of our business now is working with these larger brands and organizations and supplying our technology and services to their networks.  We provide a white-labeled platform so they can give their agents a way to interact digitally, and ultimately do more business.

(PM) 2. What tools are you providing and what makes them unique?

(TR) The tools are really just an extension of what the agents are already doing.  Every agent either has listings or wants to find listings for buyers, so we provide an easy system for listing sharing amongst agents.

Buyer needs is a particularly important aspect.  In hot markets, there is less inventory and more demand.  Where listings are scarce we provide a buyer needs experience so that agents can signal they have a buyer and detail that buyer’s requirements.  While RESAAS works very well across buyer’s markets, seller’s markets and neutral markets, we’ve become particularly popular in seller’s markets, where there is that supply issue.  What we have been able to do is to create a new way for the industry at large to organize and visualize listings.

The way the industry works is that it can take up to five days between the time an agent signs a listing agreement and the time a property is listed on the MLS with pictures and other information.  During that period, agents might communicate the listing to others and transactions can thus occur pre-market.  And those that do are outside of the MLS.

For local organizations charged with governing their respective local real estate markets, this is a big problem because they need to know everything about the market so their database, their analytics and their comparables are accurate.

Last year in the US about 22% of properties that sold never got to the point of having an MLS listing.  And in hot markets, that can reach 40%.  To bring that back to RESAAS, we have created a way to capture listing data pre-market that is structured, organized, clear and compliant.  Agents love it because it levels the playing field.  But even more important is that our clients, the local real estate associations and boards, can finally visualize and track activity in its pre-MLS phase.

Because of varying regulations and bylaws in individual markets, RESAAS sometimes has data for days, or even weeks, before any other destination online has it.  Ours is the first platform of its kind and has been termed extremely disruptive.  We are marching out across the US and activating different markets every week.

(PM) 3. Would you say that locating senior management and most of the technology team in Canada has been the right decision for RESAAS?

(TR) We are fortunate to be based in Vancouver, which has become what I consider to be the Silicon Valley of the north.  It is a thriving destination for technology companies to base an office in or establish their headquarters.  I have been here for 10 years and watched the city transform from a technology reception standpoint such that there is now an understanding of how a company like ours needs to be supported, financed and communicated.

There is an amazing community in Vancouver amongst technology companies.  Even though companies might compete with each other, there is collaboration and innovation.  And given the variety of companies that exists here – private, public, start-up, emerging, well-established, large and small – there are so many industries serviced by them that the thought-leadership and mentorship opportunities are tremendous.

Importantly, Vancouver has a buoyant investor scene that supports and understands technology companies.  As a public technology company on the CSE, we could not be more grateful to be in such a dynamic environment.

(PM) 4. Take us inside the RESAAS strategy.  How did you develop your game plan, and what are the keys to executing effectively?

(TR) RESAAS started as a freemium platform.  We opened the gates to a network we had built and did so without putting up a paywall.  We wanted to minimize the barriers for busy professionals to use and believe in our platform.

The strategy all along was to build a critical mass of users and analyze what they did – what they talked about, what they wanted and how they used what we had created.  We didn’t put a timeline on it.  Our approach was to launch the platform and once we felt we had enough information, analytics and patterns to understand the behavior, then we’d be informed enough to build solutions that we could sell.

As a result, everything we are doing now and everything we have created is based on industry activity and demand.

Really, it is consistent execution of the game plan.  Run something for free, analyze the patterns and data, build solutions that represent what people are crying out for, then monetize it at scale to an industry in need.  We are now in the last phase of that four-pronged strategy.  By spending time up front to understand exactly what different facets of the industry require, when we build a solution and take it to market the reception is fantastic from the get-go.  We are not finding our way or having to pivot on the fly because we have gone to market with a polished solution we know is in high demand.

(PM) 5. Some technology companies become profitable early on but others achieve very high valuations with hardly any revenue at all.  What is your take on this, and where is RESAAS on the earnings versus valuation continuum?

(TR) We view RESAAS as similar to a Silicon Valley company mentality.  By that I mean that the process is to assemble a team and raise capital, build a product and run it for free, and then based on the data you subsequently monetize it.  We have chosen to do that in Canada, we have chosen to use the CSE as our vehicle to raise our capital, and we have spent time, capital and resources to build something that has longevity and scalability.  And the product is in high demand now that we are selling it.

During the early days, people got excited because when you assemble a brilliant team trying to tackle a problem in an industry as large as real estate, it is natural for people to dream big.  During the development/pre-revenue phase, people get excited and imagined the blue sky.  But when you turn on the revenue, that aspect of the business is beginning from a cold start.

What can happen is that people start to look at you from a current revenue standpoint and forget about the blue sky.  It happens to a lot of companies in Silicon Valley, too.  We are in that phase where we must push revenue growth month-after-month, quarter-after-quarter, geared around a recurring revenue model.  We know where we are going with this, we know how big the market is, we know how many customer types there are, and we have created a model that enables us to monetize a single agent multiple times.  That, combined with the intrinsic value of the data we are gathering, puts us in a strong position for robust valuation in the near term.

(PM) 6. Tell us about the technology and user base you have built to date.  What comes next?  How does it grow in new ways and monetize from here?

(TR) RESAAS attracted almost half a million agents in the first 24 months of operations.  From that we learned, through analytics and behavioral analysis, what we felt different groups in the industry needed and would buy, and we built those solutions.

We started taking our solutions to market in 2016 and are already working with some of the biggest brands in the space.  The top two global real estate franchises are RESAAS customers and run on our technology.

In 2017, we judged that the role of the free network for real estate agents had played its part.  As I’ve already mentioned, the years we spent gathering data and analyzing behavior formed the basis for the products we subsequently created.

We have thus decided to add a paywall to RESAAS, which means the free version is no longer available.  Going forward, all users will be paid for either by the brokerage they belong to, their local association, or by themselves.  It will mean a reduction in the number of users we have but the revenue per user will increase dramatically.  This is a tactical part of our strategy that we began executing this year and we are very happy with the early conversion numbers.

(PM) 7. You have raised over $30 million since debuting on the CSE in February 2011.  What types of investors back a company like RESAAS and what can you tell us about your relationship with shareholders?

(TR) RESAAS is fortunate to have an enlightened, supportive and loyal group of shareholders who have invested from our IPO in 2011 all the way up to our most recent financing.  That is a tremendous asset for our company and something we are very grateful for.  It has allowed us the time, bandwidth and resources to build the company we envisioned, to take the time to professionally execute on our vision, and to take our strategic plan to market in exactly the way we wanted.

The result is that we have come to market with a product and set of services the industry has never seen before and clients are calling out for.  The entire process has been made a lot easier by being listed on an exchange like the CSE.  It provided a tremendous amount of assets, tools, resources and connections outside the network we have within our own company.  The CSE has proven to be a fantastic capital markets partner and facilitated the timeframe we needed to build a world class technology company here in Vancouver.

(PM) 8. Looking at life in the public markets, what are some of the positives, and what has been your biggest challenge?

(TR) RESAAS has found the public markets, on balance, to be extremely advantageous for our company’s growth.  They provided a vehicle to raise a tremendous amount of capital.  They provided us an avenue through which to meet influential, informed and intelligent investors across Canada, and they furnished our company with enough capital to execute our vision.  We have been able to build a better business because of this.

Going public pre-product is somewhat unconventional in North America and definitely made us refine our communication style.  We communicate corporate updates clearly and more regularly than is perhaps the norm, to give investors insight into the direction the company is heading.

Typically, a company would be private and build something and would go to market.  They would have all the right components in terms of revenue growth and then they would IPO.  RESAAS chose to IPO early and use that time to build a product from nothing, but having spent the hours and airmiles to understand industry needs.

We were fortunate enough to have a shareholder base that believed in our vision and supported our direction.  And here we are six years after our IPO in a position where all of our early shareholders are still supporting the company.  They are extremely happy with what we’ve created, and they are over the moon with the opportunity before us.  We could not be happier or more fortunate to have such a supportive group of investors behind the company.

(PM) 9. What would you tell the next generation of growth companies about going public?

(TR) As an emerging tech company, a listing on the public markets provides a proven platform to raise capital, whilst retaining more control than perhaps the alternative of remaining private would allow.  In addition to the financial benefits that a public listing can bring there is greater awareness, credibility, investor confidence and use as a sales tool.  I have to say that the public markets have been fantastic.

(PM) 10. Finally, can you speak about the achievements investors can look forward to in the coming 12 months.  Why should people be excited about RESAAS?

(TR) Well, I would say that 2017 is RESAAS’s breakout year.  It’s the year we finally recognize the effort our company has put in over the last six years to monetize our solutions.  We already work with national brokerages and franchises.  We already work with major and progressive real estate associations and boards across North America.  And most excitingly for this year, we launch our newest solution aimed at the brokerage network, targeting over 120,000 independent brokerage firms across North America with a solution we spent more than a year building based solely on input from the people who run those brokerages.

This is the year that RESAAS becomes “SAAS-ified” and we could not be more excited about the direction the company is heading, our growth potential, and ensuring that we remain number one in this industry from a B-to-B technology standpoint.

CSE Issuer Stories, CSE Quarterly

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

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

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

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

On the verge of turning a profit

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

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

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

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

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

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

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

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

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

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

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

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

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

First we conquer Canada, then we take Berlin

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

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

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

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

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

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

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

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

CSE Issuer Stories, CSE Quarterly

The Canadian Bioceutical Corporation profits from shift to US cannabis market

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

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

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

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

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

Unlike Canada, the US cannabis cultivation market is fragmented

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

CSE Issuer Stories, CSE Quarterly

CannaRoyalty charting own course in North America’s cannabis marketplace

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

CSE Issuer Stories, Listed Issuers

Interview with John Fowler, President and CEO of Supreme Pharmaceuticals

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

1.

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

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

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

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

2.

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

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

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

3.

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

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

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

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

4.

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

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


5.

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

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

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

6.

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

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

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

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

7.

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

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

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

8.

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

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

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

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

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

9.

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

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

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

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

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